Rewards Credit Cards
Rewards cards can help you save money on the purchases you’re already making. But to earn the most, you’ll need to choose a card that matches your spending habits. Try to find cards that have low annual fees, welcome bonuses you can afford and high rewards rates in the categories that matter most to you.
Before you choose a rewards card, it’s important to do your research. Rewards cards often have higher APRs than regular credit cards because they offer so many valuable benefits, but you can still find a card with a reasonable APR and competitive rewards by shopping around and comparing rates. To guide you in your search for the best value, here’s a list of the best rewards credit cards of 2020.
Best Rewards Credit Cards of 2020
- Wells Fargo Propel American Express®: Best for no annual fee
- Chase Sapphire Preferred®: Best for travel rewards
- Bank of America® Cash Rewards Credit Card: Best for airline miles
- Capital One® Venture® Rewards Credit Card: Best for earning miles
- Capital One® Savor® Cash Rewards Credit Card: Best for dining and entertainment
Wells Fargo Propel American Express® — Best for no annual fee
- APR: 14.99% to 26.99% variable (0% intro APR for the first 12 months on purchases and balance transfers)
- Annual fee: $0
- Primary feature: 3X points on dining out, ordering in, streaming services, hotels, homestays and transit (including flights, gas, car rentals and rideshares); 1X points on everything else
- Introductory bonus offer: 20,000 points when you spend $1,000 in the first three months
Chase Sapphire Preferred® — Best for travel rewards
- APR: 17.49% to 24.49% variable
- Annual fee: $95
- Primary feature: 5X points on Lyft through March 2022; 2X points on travel and dining; 1X points on everything else
- Introductory bonus offer: 60,000 points when you spent $4,000 in the first three months
Bank of America® Cash Rewards Credit Card — Best for airline miles
- APR: 15.49% to 25.49% variable (0% intro APR for 15 billing cycles)
- Annual fee: $0
- Primary feature: 3% cash back on category of your choice (online shopping, dining, gas, travel, home improvement or drugstores) and 2% cash back at wholesale clubs and grocery stores, up to $2,500 each quarter, then 1%; unlimited 1% cash back on everything else
- Introductory bonus offer: $200 bonus when you spend $1,000 within 90 days of account opening
Capital One® Venture® Rewards Credit Card — Best for earning miles
- APR: 17.24% to 24.49% variable
- Annual fee: $0 for the first year, then $95
- Primary feature: Unlimited 2X miles on all purchases
- Introductory bonus offer: 50,000 miles when you spend $3,000 in the first three months
Capital One® Savor® Cash Rewards Credit Card — Best for dining and entertainment
- APR: 15.99% to 24.99% variable
- Annual fee: $0 for the first year, then $95
- Primary feature: 4% cash back on entertainment and dining, 2% back at grocery stores and 1% on everything else
- Introductory bonus offer: $300 when you spend $3,000 in the first three months
|Card||0% Purchase APR||Regular APR||Annual Fee|
|Wells Fargo Propel American Express®||12 months||14.99-26.99% variable||$0|
|Chase Sapphire Preferred®||N/A||17.49-24.49%||$95|
|Bank of America® Cash Rewards credit card||15 months||15.49-25.49%||$0|
|Capital One® Venture® Rewards Credit Card||N/A||17.24-24.49%||$0 first year, then $95|
|Capital One® Savor® Cash Rewards Credit Card||N/A||15.99-24.99%||$0 first year, then $9|
How do rewards credit cards work?
Rewards cards allow you to earn cash back, points or miles on your purchases, depending on the type of card you have. Whenever you make an eligible purchase, the reward automatically adds to your account. Points and miles cards are pretty straight-forward. The card will have a program that awards you with a certain number of points or miles for each type of purchase. However, cash back cards come in two types: rotating cash back and flat cash back.
Rotating cash back cards offer rewards in certain spending categories that change each quarter. One quarter you may be able to earn 5% cash back on gas and groceries, while the next, you’ll earn 5% on office supplies and streaming subscriptions. These cards also usually have limits on the higher-tier rewards you can earn each quarter, for example, 5% on up to $1,500 in purchases. After you hit the spending cap, your rewards rate will often drop down to 1%.
If keeping track of rotating spending categories sounds like too much work, then you should consider getting a flat-rate cash back card instead. These cards allow you to earn the same cash back rate on all of your purchases.
Cash back cards are best if you prefer cold hard cash in your pocket. On the other hand, point and mile programs can be a good fit if you want to spend your rewards on the specific redemption program a card offers. For example, if you travel frequently and want perks like free access to airport lounges, companion flights and discounts on airline tickets, a card that allows you to earn miles along with those benefits would be a good fit.
Are credit card rewards worth it?
Many rewards cards offer valuable perks that can justify their costs. They can not only help you earn on the purchases you’re already making but can offer additional value through extra benefits like travel accident insurance, hotel upgrades and credit monitoring.
However, if you choose the wrong card or use it irresponsibly, it may end up costing you in the long run. Many rewards cards have annual fees, which can range from $25 up to $550. If you don’t spend enough money on your card each year, the annual fee may cost you more than you earn in rewards. So before you sign up for a card, run the math and make sure you’ll earn enough from the rewards to offset the costs.
Another thing that can cut into your earnings is credit card debt. Rewards cards tend to have higher interest rates than regular credit cards. So if you carry a balance from month to month and rack up interest charges, you may negate any rewards you’ve earned from the card. Even when you’re trying to earn a welcome bonus or max out a spending category, it’s best if you don’t charge more than you can afford to pay back right away.
How to accumulate credit card rewards faster
There are a number of strategies that you can use to earn rewards faster, including:
- Analyzing your purchasing habits: Before you sign up for a card, figure out which categories you spend the most on. If you have a large family and buy a lot of groceries, for example, consider cards that offer high rewards rates at the grocery store. You can also sign up for multiple cards that offer high rewards rates in different categories to maximize your rewards.
- Using your card often: You shouldn’t go into debt or stretch your budget to earn points, but if you’re going to make a purchase anyway, put it on your card to earn rewards and save money.
- Earning the welcome bonus: Most cards have a welcome bonus you can earn by spending a certain amount of money within the first few months of opening the account. Choose a card that has a welcome bonus with a spending threshold you can comfortably afford, and then do your best to earn it.
How do you redeem credit card rewards?
Most credit card providers allow you to redeem your rewards for travel, gift cards, cash back and merchandise through an online portal or app.
It’s worth noting that some redemption options will get you more value for your points than others. For example, Chase cardholders can get more value from their points by redeeming them for cash back instead of Amazon merchandise. When redeemed for cash back, 10,000 points are worth approximately $100. But when used at Amazon, their cash value decreases to just $80.
So before you cash in your points, make sure you consider the redemption options carefully to determine which ones will get you the most bang for your buck. Additionally, look out for expiration dates and minimum amount requirements for redemption.
What is a good APR for a rewards credit card?
If you carry a balance from time to time, you’ll want to find a rewards card with a competitive interest rate. According to the Federal Reserve, the average APR for credit cards is 14.87%. Rewards cards tend to have higher interest rates than other types of credit cards, so you probably won’t be able to find one with a lower APR than the national average. However, try to get as close to that as you can. Also note that some rewards cards offer a 0% introductory APR for the first year, which can help make up for the higher-than-average interest rates.
The final word
Since rewards cards tend to have higher interest rates, you’ll also need to use your card responsibly and avoid debt to maximize your rewards. If you stick to your budget and pay off your balance in full each month, though, keeping a rewards card in your wallet is a smart financial decision that can help you achieve goals like traveling and growing your savings.