Glossary Terms

Business Credit Card
A business credit card is a credit card issued by a financial institution to a business so that it may borrow funds when making purchases. <a href='/glossary/what-is-business-credit-card' title='See the full definition of Business Credit Card'>read more</a>
Credit
The right granted by a creditor to pay in the future in order to buy or borrow in the present; also, a sum of money owed to a person or business. <a href='/glossary/what-is-credit' title='See the full definition of Credit'>read more</a>
Credit Card
Any card used from time to time to borrow money or buy goods or services on credit. <a href='/glossary/what-is-credit-card' title='See the full definition of Credit Card'>read more</a>

Rewards credit cards are extremely popular, and it's not difficult to see why that's the case. If used responsibly, it's possible to profit from these cards. Using a card responsibly means that when the bill arrives, it's always paid in full by the due date. It's never a good idea anyway to carry a balance because then interest expense is incurred. Since rewards cards tend to have higher interest rates, revolving a balance can rack up the interest – and increase your balance – in a hurry. In addition, paying interest can wipe out the rewards you earned.

To really benefit from rewards credit cards, it's important to choose the right type of rewards. For instance, if you fly frequently, then an airline miles card might be appropriate. If you have a large family and spend a lot on groceries, then a cash back card with extra grocery rewards might be the best choice. So before you start researching cards, think carefully about the type of rewards you would benefit from the most.

Some rewards credit cards also have annual fees, so be sure to consider that when determining which cards to apply for. Many rewards cards also offer sign-up bonuses that consumers can earn by spending a certain amount over a specific period of time.

Here are a few more things you should know before you start researching rewards credit cards.

Rewards Card Programs

Credit card rewards programs:: The details for a rewards program can range from straightforward to quite complex, depending on the specific credit card involved. Keep in mind that each credit card has its own set of rules. It really isn't possible to take advantage of the rewards without a good understanding of how the program works and what the limitations are. Reading all the fine print carefully is an important part of the research process.

Travel Rewards Cards

Travel Rewards: There are general travel rewards credit cards that offer a variety of redemption options. With these cards, rewards are earned as airline miles or as points. These cards are a good choice for someone who flies frequently, but who wants the flexibility to choose the airline when booking flights.

Airline Miles Cards

Airline-branded cards: These cards are best for those who are loyal to a specific airline. With some of these cards, it's possible to redeem miles or points and use them to fly with a partner airline. But in general, consumers who choose miles reward cards tend to book most of their flights with a specific airline. Redemption options vary by card, but here are a few examples: first-class upgrades, discounts on in-flight meals, airport lounge access, free checked bags, and priority boarding.

Is a miles reward card for you?

YES:  If you are a frequent flyer, these rewards cards can get you free flights all over the world. Signing up for an airlines rewards card almost always will land you some bonus miles! Even though some of these cards charge an annual fee, you may be able to get it back in points and free flights.

NO: If you are not a frequent flyer, then this card is not for you. It takes quite a while to rack up points, and if you don't fly much, then it will take a long time.

Hotel-branded Cards

Hotel-branded cards: Similar to airline-branded cards, consumers who choose these cards tend to stay within a specific hotel group. And many of these cards offer a wide range of hotels, from very affordable to luxurious options. The redemption options vary by card, but here are some examples: free award nights, special check-in/check-out times, and anniversary bonuses.

Gas Rewards Cards

Gas rewards cards: There are gas rewards cards that reward your loyalty to certain gas brands, and there are other cards that combine gas rewards with other rewards like groceries. Rewards range from three to five percent.

Is a gas card for you?

YES: If your lifestyle involves frequent driving, and you want to receive a larger percentage on your spending, then a gas rewards card is for you.

NO: If you rarely drive or drive a highly fuel efficient car, then your fuel consumption is probably very low, making a gas rewards card hardly worth it. Choose one of the other rewards cards to get more value.

Cash Back Rewards Cards

Cash back cards: Cash rewards cards appeal to those who want to save money on everyday expenses. There are several different types of cash back rewards cards within this category. There are cards that offer a base percent on all purchases, plus a five percent bonus cash back on rotating categories.

Other cash back cards might offer more cash back on one or two categories, such as groceries or gas purchases, as well as a base rate on all other items purchased. There are sometimes caps (or limits) on specific categories, so be sure to read the program details carefully.

Is a cash back card for you?

YES: If you do most of your spending with a credit card, and you aren't interested in racking up miles, hotel stays, or gas rewards, then a cash back card is probably a good fit for you. If you have good to excellent credit, you're more likely to qualify for some of the better cash back rewards.

NO: Many other rewards cards provide you with more benefits and return on your money than standard cash back cards, but they limit how you can spend the money. If you don't have good to excellent credit, you may not qualify for some of the better cash back rewards cards.

Business Rewards Cards

Business credit cards: These cards are similar to consumer cards, but there are a few differences. Many business rewards credit cards have excellent management reporting features, the ability to track expenses on cards that employees are using, and tax reporting. These cards also tend to offer categories that are business-oriented, such as cash back on cellular service and office supplies.

The small business owner can use these cards to earn airline miles, cash back, or points. Just as with consumer cards, it's important to determine what type of rewards would be most beneficial considering the expenses of the business.

Student Rewards Cards

Student cards: As the name suggests, these cards are designed specifically for students. Student rewards credit cards have lower standards for approval, but with most of these cards, you have to prove you're enrolled in college to be eligible. These cards offer a variety of rewards, including cash back rewards or points that can be redeemed for travel, gift cards, merchandise, and more.

It's never a good idea to increase spending just to get a reward or buy something you wouldn't normally just to get some points. That's why rewards cards should be carefully chosen – to maximize what you get for purchasing things you normally buy.