Types Of Rewards Credit Cards
This mini-guide is part of our Beginner’s Guide Series, see the full Beginner’s Guide guide here.
What Are Credit Card Rewards?
Many credit card companies offer reward programs with the goal of encouraging potential cardholders to sign up, and actively use, their cards.
Cardholders can accrue rewards in the form of a large initial sign up bonus — which many cards offer to get users to initially sign up, and tends to be the most lucrative perk of a travel rewards card — or by actively making purchases with the credit card. For example, a credit card may reward a cardholder with one point for every dollar they spend.
Rewards come in many shapes and sizes, including general-use points, airline miles, hotel points, hotel nights, and monetary sums. It’s worth considering the varying value of all reward types when planning your strategy for a trip or evaluating which credit card to get.
Types Of Rewards Credit Cards
General-use point credit cards generally provide the most flexibility of all rewards cards. They allow the cardholder to use the points earned in a variety of ways, including for travel, shopping, and even cash.
General travel credit cards also have flexibility, but their benefits are skewed in favor of travel rewards. This category is great for travelers who have no loyalty to a specific airline or hotel group, and instead prefer maximum choice when redeeming travel rewards.
Airline-specific credit cards are typically associated with one airline. These cards are ideal for travelers loyal to a particular airline, as the cards tend to offer perks like additional points for purchasing tickets with that airline, priority boarding access, and waived baggage fees. Miles can be redeemed for free flights on the airline and its partners, including first class seats and round the world flights if the cardholder has accrued the necessary rewards balance.
Hotel-specific credit cards are usually tied to one hotel group. These cards are perfect for travelers who prefer a particular hotel brand, as they often grant the cardholder a level of hotel status. Additionally, the cards tend to offer perks like bonus points for purchasing nights at their hotels, room upgrades, and various other benefits. Rewards can be redeemed for free nights at hotels, including luxury 5-star hotels and extended stays if the cardholder has accrued the necessary rewards balance.
Cash-back cards reward cardholders with cash for every purchase they make. For each dollar spent on the card, the cardholder gets back a percentage as a cash reward — normally between 1% — 2%. Depending on the card, there might also be a higher reward rate for specific categories (purchases made on gas, for example) or for higher spend usage on the card. Sign-up bonuses, for cash-back cards that offer them, tend to come in form of a cash reward. While cash-back cards can provide nice benefits, particularly for small business owners, they are less valuable for travel than other cards.
Retail cards are best for the active shopper. The cards are co-branded with a specific large retailer (such as Macy’s), and reward cardholders with points for making purchases. The main value of retail cards is that cardholders can earn multiple points per dollar for purchases made at the co-branded retailer. These cards are great for shopaholics who love, and regularly shop at, a particular retailer. Point redemptions for retail cards are limited to only the products / services that the retailer offers, making them of little value to travelers.
At FreePassengers, we’ll focus specifically on the rewards and credit cards that can make your travel dreams come true. You’ll find that some of the cards we’ll review charge an annual fee (although many waive that fee for the first 12 months), but you’ll also realize that the benefits and value of the rewards the cards offer will far outweigh the fees. For example, the Marriott Rewards® Premier Credit Card has an $85 annual fee, but the 80,000 bonus points you receive when signing up could be redeemed for 6 free nights at the Courtyard Boca Raton — that’s a $1,140 value for just $85! There are endless opportunities to find great deals like that, and we’ll show how to find them and plan your trip for just a few cents on the dollar.
Visit FreePassengers.com for guides and tips on how to get the most out of credit card points and travel rewards!
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Editorial Disclaimer: The opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities. Neither the editorial content nor the comments on this site are provided by the companies whose products are featured.