Points, Miles, And Cash Back: The LV Guide To Credit Card Rewards

At LearnVest, we believe that you should always make money on your money, from beginning to end: You should earn interest in a savings account before you spend and then credit card rewards once you do spend. In order to help you make the most of your money, we bring you the 9 rules you must read for rewards cards.

We also bring you a chart with the best rewards credit cards, grouped by type—cash back, points, and travel—courtesy of Dr. Mary Ann Campbell, a certified financial planner who works at IndexCreditCards.com. These top picks are for cards with no annual fees, because we don’t think you should ever pay for your card:

Here’s what you need to know in order to choose the very best card for you:

1. Know What “Up To” A Certain Percent Means

“When it comes to credit cards, what might be best on the surface might not actually be best,” says Gaurav Gupta, director of the New York consulting firm Novantas LLC, which consults for credit card issuers. For example, the fine print of a credit card may say that you’ll get “up to 1%” cash back, meaning that some rewards may actually give back less than 1%. Know what you’re getting into.

2. Study Your Categories

The fine print can also limit the categories that count for rewards (like hotels vs. restaurants vs. gas stations). For some cards, your ability to get cash back on gas may even depend on whether you buy inside from the clerk or at the pump. Pay attention to these rules before signing up.

3. Don’t Believe The Hype

Credit card marketing materials might brag about giving a 10% reward on purchases, but the fine print might state that you can only get that kind of percentage on the first $200 in purchases, Gupta said.

4. Weigh The Rewards Collectively

One card might give back 5% to 10% on gas, but only a 0.5% on everything else—that might not be as good as a card that gives a smaller percentage on gas, but 1% on everything else.

5. If You’re Dealing With Points, Find The Ones That Go The Furthest

“Some gift cards like American Express will give you a $100 gift card for 1,000 points – a penny for a point, which is a pretty good ratio,” said Henry Helgeson, co-CEO of a company that processes credit card payments.

6. Plan Multiple Cards Wisely

LearnVest suggests that you use one main card for the vast majority of your purchases but have a second emergency card in case you lose your wallet. To make the most of credit card rewards, plan these strategically: “For some consumers, their primary card is their cash back card,” Helgeson said. But, for instance, “They may also have a secondary card so they can save up points to redeem a free hotel night.” Make your emergency card count, too.

7. Choose The Rewards Program That Best Fits Your Lifestyle

That’s the advice of Dr. Mary Ann Campbell, a certified financial planner and spokeswoman for IndexCreditCards.com. It also may behoove you to get a cards that distributes rewards multiple ways by letting you choose between points, cash back, and airline miles.

8. Specifics Change All The Time, So Know The Best Info Sources

We like IndexCreditCards.com, which features an index of over 1,200 cards. CardRatings.com is another site with card ratings written by consumers throughout the country. For even more card details, check out CreditRatings.com, which provides links to various additional ratings sites.

9. Most Important Tip Of All: Pay Your Bill On Time

“There really aren’t going to be very many rewards if you don’t pay your credit card in full monthly, because you are going to negate your rewards with fees and interest,” Campbell said.

  • LearnVest Fan

    Thanks LearnVest

  • kodemonki

    Love it! I make soooo much money off my Chase Freedom card. I also have a Chase BP card which I use for all my gas (and only my gas or other purchases at BP).

  • http://www.nerdwallet.com/ Tim

    As we mentioned in our email to you, be careful about promoting the Chase Freedom and Discover Miles cards on the same page that you describe issues to be aware of with rewards cards.nnBoth of these cards have “up to” language, limited rewards categories, “hype” where the 5% rewards only apply to a small amount of total spending ($300-500 per month), and rewards programs that pay 5% on a couple categories, and only 0.25-1% on everything else.nnJust so that users are aware, saying things like “Get 5% on rotating categories and 1% elsewhere” is a bit oversimplified and misleading (which is exactly how Discover and Chase like it).

    • Anonymous

      Thanks Tim. This is great comment and much appreciated. We are looking into and will be back to you with a response post.

  • MAC

    You are right, Mr. Gibson. Discover More Card is u201cup to 1%,u201d and not a full 1% on all else. It is definitely tiered. I apologize for the error. As I understand it, Chase Freedom Visa does offer a full 1% on all else. rnThere are also limitations on total spending for the 5% rebate. Discover offers a program calendar online which reveals categories and spending maximums that qualify each quarter. One nice feature with Discover that was not mentioned is their 5-20% Cashback bonus through their online shopping mall. And, the rewards can be cash, gift cards, or go to charity. Chase also offers a 5% bonus category calendar on up to $1,500 spent annually along with many reward options. rnYour points are well taken that anyone applying for any bonus cards should read all terms and conditions in the disclosure statement for each card before signing up. Understanding the fine print prevents disappointments. While the general perks are attractive for the above recommended cards, each card has different detailed rules. Knowing exactly how each program works is advised.rnCongratulations, Mr. Gibson, on a fine site at NerdWallet.com. Your tool for personal credit card selection is nifty. rn

  • LearnVest Editorial Team

    The diligent folks over at Nerdwallet (a great site with a name that makes us smile) are our guardian angels. They contacted us to let us know that this piece needed some clarification. So, we reconvened with our source, Mary Ann Campbell, the spokeswoman for http://www.IndexCreditCards.com who is also on the University of Central Arkansas Faculty, teaching personal and family finance. Dr. Mary Ann Campbell, CFPu00ae, was named by Money magazine as one of America’s 200 best Certified Financial Planneru00ae Practioners. Dr. Campbell also weighed in in the comments (under the commenter name MAC) with an explanation. We have since amended the article to clarify. nnThanks to Nerdwallet for bringing this to our attention. Please keep reading.nnBest,nLearnVest Editorial Team

  • Jessica

    Some of this info appears wrong.  I was excited to find a travel card with no annual fee (last sentence of the intro: “These top picks are for cards with no annual fees, because we don’t think you should ever pay for your card”).  Imagine my disappointment when I looked up the Capital One Venture card and discovered it comes with an annual fee of $59 after the first year!  :-(  First time I’ve ever been disappointed by a LearnVest post.

    • Jessica

      Oh – but I did just see somehting about a Capital One VentureOne card that skips the annual fee (it’s a gold-colored card, not blue like the Venture card which is pictured).  It boasts 1.25mi/$1 spent and 0% APR until June 2013).  Now that I’m thinking of it, maybe this is an old post and the cards have changed – maybe the Venture used to have no annual fee.  It would be cool if LearnVest could write a new post on the best cards in 2012!  (BTW – all your recent travel posts have been AWESOME!  truly enjoying them…)  

      • amkade

        Hi Jessica,

        Thanks for writing in — I’m glad you found this post and enjoyed it, but you’re quite right. This was published in 2010, so things have almost certainly changed since then. 

        I’m also glad you’ve been enjoying our travel stories! If you didn’t see it, we just came out with a new one today! http://www.learnvest.com/2012/06/the-ultimate-travel-checklist-27-free-apps-and-websites-for-stress-free-vacations