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Which Rewards Credit Card is Right for Me?

What you'll learn: How to choose a rewards card to fit your needs


Even if you don’t already have a rewards credit card, you’ve probably heard about them. Many financial institutions offer rewards credit cards that are designed for travel, everyday purchases, and more. The options are overwhelming. We’ll help you figure out which rewards card is best for you. 

What Are Rewards Credit Cards?

Rewards cards are credit cards that offer rewards in the form of points, cash back, or airline miles for each dollar you spend. You can also sometimes earn bonus rewards by doing the following:

  • You may be eligible for bonus rewards when you first get the card
  • Upgrading your current card to a higher tie
  • Transferring your balance to a new card
  • Signing up for special programs or products like credit monitoring
In general, except for the bonus rewards, the value of your rewards ends up being a certain percentage of your purchases, generally ranging from 1% to 3%.

While a standard credit card can be used to help you pay bills or make purchases when funds are tight, the right rewards card can be a tool to help you reach your financial goals. However, there are several types of rewards cards, so it’s important to choose the one that best suits your spending habits.

How Your Spending Habits Help You Choose the Right Credit Card

Do you generally pay off your credit card every month? If so, you are a great candidate for a rewards card. If not, and one of your goals is to save money, you may want to wait until you’ve caught up on your bills and debts before applying for one.

The amount of interest you have to pay on your credit card purchases depends on the amount of time you carry a balance. For example, if you carry a balance on a card with a 15% APR for one month past the end of the grace period, the interest applied to your balance will be 15%/12 = 1.25%. So, if your rewards percentage or points value is less than 1.25% of the amount that you spend, you would end up losing out because your interest charge would be more than the amount of the rewards you earn.

On the other hand, certain rewards cards offer a higher percentage or point value for certain categories of purchases. Some, for example, offer up to 5% cash back on specific or revolving categories of purchases (such as groceries, dining, gas).

If your APR is low enough, then that 5% cash back might more than offset your accrued interest on a balance that you carry for a few months, but probably not much longer. To come out on top with such an offer, you would need to make sure to keep careful track of whether your purchases qualify for the offer, and how long you let your card balance build before paying off the entire amount.

How the Different Types of Rewards Credit Cards Fit Your Spending Habits

Points Rewards Credit Card

How this card works: This type of card awards you points for purchases, such as one point for every dollar you spend. You can then use your rewards to buy goods and gift cards from a predetermined group of businesses.

With this type of card, the number of points needed to purchase an item that costs $100 could be around 10,000 points, which would mean your points are worth about 100/10000 = 1% of your purchase amount. For greater purchasing power, look at cards that offer 2, 3, or even more points for every dollar you spend.

Choose this card if: You can benefit from a points rewards card if you frequently make purchases from businesses that participate in the card’s rewards program. Especially if there are frequent discounts in categories that match your spending habits. For example, a restaurant that you regularly dine at may offer 25% off gift cards purchased with your credit card rewards points.

See how many points you can earn with a PenFed Platinum Rewards Visa Signature® Card.

Travel Rewards Credit Card

How this card works: Travel rewards earnings are often structured similarly as those for points cards, except you earn “miles” instead of points. You can use the miles you earn to pay for travel-related expenses, such as flights, hotels, vacation packages, cruises, rental cars, and baggage fees. Some cards even offer additional perks, such as free or discounted WiFi or entertainment with flights paid for with rewards miles.

Choose this card if: If you travel frequently, for business, pleasure, or both, this type of card could be a great fit for you. Look for a card that offers bonus miles up front, greater than a 1-to-1 miles-to-dollars match in at least one category, and discounts or two-for-one deals on travel-related costs.

Earn more everywhere you go with a PenFed Pathfinder® Rewards Visa Signature® Card.

Cash Back Rewards Credit Cards

How this card works: These are the most flexible of rewards cards, and their structure is often the most straightforward. They offer a certain percentage of purchases as cash back that can be applied to your credit card balance or future purchases, or even deposited in your bank account.

Choose this card if: This type of card may be right for you if you want to effectively save money every time you make a purchase (as long as you pay off your balance every month). If you’re a saver or investor, look for a card that automatically deposits your “cash back” into a savings or investment account so you can build future wealth just by making everyday purchases.

Start earning cash back on all your everyday purchases with a PenFed Power Cash Rewards Visa Signature® Card.

What to Know Before Choosing a Rewards Credit Card

As you research the different rewards card options, let’s recap what to know before you choose a credit card.

First, remember to think about your financial habits. Consider how often and what you buy, whether you pay off your credit cards every billing cycle, and how good you are at tracking and using your rewards and bonus offers.

Next, understand which cards you qualify for based on your credit score and, in some cases, your standing with the financial institution that is offering the card. Then take a look at the fees, benefits, rewards structure, and restrictions, and choose the one that best aligns with your habits and goals.

If you follow these steps, you’ll find the perfect rewards credit card for you.

Find the Right Credit Card for You

See the card options and rewards you could earn with PenFed.