Credit cards are everywhere, tempting us with their intro offers, rewards programs, and other perks. But getting the best bang for your buck takes some research. To make the most of rewards credit cards, consider a few things: the type of perks and rewards you’d like, where you spend, and, crucially, how much time and interest you have in tracking accumulated points and miles.
There are a lot of options to consider but taking the time to choose a rewards credit card that works with your lifestyle could help you make the most of it. Some credit cardholders may end up missing out if the rewards don’t make sense for them. A survey found that 23% of cardholders didn’t redeem their rewards in 2024.1
Here are 6 tips for making the most of credit card rewards—and how credit cards could even help you on the way to your financial goals.
What are rewards credit cards?
Rewards credit cards offer perks for spending on the card. Generally, the rewards are awarded in the form of points or miles, or cash back on purchases.
But it can get more complicated. Some rewards cards are free and some charge an annual fee. Those specialized—and sometimes expensive—rewards cards could help cardholders get access to events, restaurants, airport lounges, or complimentary upgrades.
It can be a lot to consider but choosing cards that fit your lifestyle is key. For example, cards that offer travel perks and airline miles may not matter that much to someone who rarely travels.
How do rewards credit cards work?
Rewards credit cards pay a fixed or variable amount of cash, points, or miles per dollar spent. It can take a little strategizing to decide which approach works for you and your interests.
Types of rewards credit cards
There are 3 types of rewards credit cards—cash-back, points, and miles. Generally, spending on the card is the most direct way to earn rewards—but some cards may offer big sign-up bonuses or low introductory annual percentage rates (APRs).
1. Cash-back rewards cards
Cash-back rewards cards let you earn money as you spend. Because the redemption options are limited, cash-back cards can be a low-fuss way to join the rewards game.
Some cash-back rewards cards offer a flat percentage on all eligible purchases. For example, a card offering 1% cash back would give you $1 for $100 spent. Other cards boost the rewards for spending at specific places or websites. For example, your card may earn 1% on general purchases and 5% on groceries. Or some cards rotate bonus categories regularly.
Fidelity’s rewards credit card offers 2% cash back when deposited into an eligible Fidelity account. There are other ways to redeem rewards as well, but the redemption value may be different. Fidelity’s credit card offers a simple cash-back structure that allows you to reinvest in a variety of different accounts like 529s, retirement accounts, health savings accounts, and even charitable giving accounts, depending on your financial goals.2,3
2. Points
Points can be earned through spending on a rewards credit card. The number of points you get per purchase may depend on the spending categories. Like cash-back cards, credit cards that reward with points may incentivize bonus categories over general spending. For instance, you could earn extra points for spending on home improvement or groceries in some cases.Points can pay off for cardholders who want to put a little more effort into trying to make the most of rewards. But the value of points can vary based on how they are redeemed. Your points may go further, for instance, when they’re redeemed for a specific incentive—like restaurants or deposited into an investment account.
You may also be able to transfer your points. For example, 10,000 points redeemed to book a flight through your card issuer’s website may only be worth $100. But you may be able to transfer those 10,000 points to an eligible airline transfer partner where they’re worth $150.
3. Miles
Miles are very similar to points. Miles can be earned by spending on a rewards credit card that might partner with an airline. Like points, it can make sense to pay attention to conversion rates and redemption options.
Read Fidelity Smart Money: A beginner’s guide to travel credit cards
Could a cash-back reward card help my financial plan?
Here’s a hypothetical example of how a cash-back reward card could help strengthen your financial plan—if you play your cards right.
.png "For example, $2,000 eligible spending each month x 2% equals $40 that could be deposited into an investment account each month. That could equal $480 per year. If that was invested at an assumed rate of 7%, after 5 years the total could be $2,880, just from spending.")
How to use a rewards credit card
- Understand your card’s cash conversion rate for points or miles. Many cards allow you to redeem points for various travel expenses, but the value of your points or their redemption value isn't always a one-for-one exchange. Online calculators are one way to check whether a specific rewards deal is a good one.
- Explore all redemption options. Read through your card issuer’s offerings, find out if there are certain platforms (like your card issuer’s travel portal, a sister company, points transfer programs, etc.) where your points can be redeemed for the most value. Online communities for travel rewards points may be a helpful resource for decoding the points value for your specific program and getting info about how other travelers have used their points.
- Remember your bonus categories. Take advantage of bonus rewards in specific spending areas.
- Keep an eye on fees. Credit card fees can add up if you’re not aware of them so it’s a good idea to read details before signing up for a card.
- Avoid carrying a balance from month-to-month if possible. Paying interest could defeat the purpose if you’re trying to get maximum rewards value.
- Understand the interest-free grace period offered by your card. Most credit cards have an interest-free grace period of around 21 to 25 days. Credit cards aren’t legally required to include a grace period, but if they do, the minimum is 21 days. It starts on the day your monthly statement is generated and ends on the day your payment is due.
How to apply for a rewards credit card
A top-notch credit score can greatly increase your chances of being approved for premium rewards credit cards. But it may take more than a great score to get the best deals. Credit card issuers also consider income, the length of your credit history, and debt-to-income ratios.
Read Fidelity Smart Money: What is a good credit score?
That’s why it can make sense to check out your credit score before applying for a rewards credit card. Do also consider checking your full credit reports from the 3 credit bureaus, Experian, TransUnion, and Equifax. You can get a free copy of a credit report every 12 months from each of the 3 credit bureaus at Annualcreditreport.com.
Make sure that your personal and financial information is being reported correctly—and that you find no traces of fraud or identity theft.
Once you have a sense for how lenders may view your application, shop around for cards that fit your budget and your lifestyle. In some cases, you may be able to get paid or go on vacation by spending strategically and playing the rewards game.