Rewards credit cards are becoming increasingly popular and in today’s market there are too many to choose from so we put together a brief summary of the top five types to help you decide which is the best for you.
Cash back credit cards
The more you use this type of card, the more cash back you receive. Cash back credit cards are sometimes broken out into categories where the cardholder will receive tiered cashback rates based on the purchase. For example, some credit cards will pay back a rate of 2-3% for restaurant purchases while others may offer 5% back on grocery purchases.
Hotel points credit cards
These types of cards yield hotel rewards, such as upgrades at certain hotel chains or even free nights stay. Most hotel points cards charge an annual fee but it usually pays for itself if you are a frequent traveler. It should be noted that most hotel reward credit cards are specific to their own brands, so a Hyatt reward card will not be the same as a Hilton card. Ensure there are enough hotel locations to maximize the reward opportunities.
Gas rewards credit cards
There are two types of gas rewards cards: brand-specific, which gives you rewards for purchasing gas with that brand and general, which gives you rewards no matter the gas station you use. A brand-specific gas card is a popular choice but if you frequently take long road trips, a generic gas card may be your best bet. It should be noted that gas specific credit cards can be slightly more risky due to the nature of the card, to prevent yourself from falling into a debt trap read our “5 Myths About Credit Cards” article.
Retail rewards credit cards
Retail rewards credit cards are co-branded with a specific retailer and while they usually give you rewards for everyday purchases, you will earn the most points by making purchases from that specific retailer. These points can then be used to buy products or services from that same retailer.
Airline miles credit cards
These cards allow you to earn points when you purchase flights and over time, you can potentially earn free flights. Airline miles cards generally have a high annual fee so they are only recommended if you travel a lot every year. Much like hotel reward cards, these brand specific cards should be used exclusively with the same carrier as you won’t receive the benefits with other brands. Businesses who send their employees on trips frequently tend to use airline reward cards as the complimentary flights add up quickly. Check out these successful start up businesses that were funded by credit cards, here.