Types of Credit Card Rewards
From cash back to shopping portals, there are many types of credit card rewards. Knowing the the basics will help you maximize your earnings.
Of all the reasons to use a credit card, earning rewards is among the most compelling – after all, who doesn’t want extra cash? But not all credit card rewards are the same. In this post, we review the most common types of credit card rewards.
Table of Contents
The most common type of rewards is base rewards. These are the rewards that the cardholder earns on (nearly) every purchase*. While reward currencies vary, the value of base rewards is typically in the range of 1-2 percent of the purchase value. For more on reward currencies (e.g. cash back, points, miles), check out this post.
*in some uncommon cases, there are spending and/or purchase size limits for base rewards
Some cards offer higher reward rates for purchases in specific categories – these are category rewards. For cards with category rewards, purchases in specified categories earn rewards at a higher rate, typically in the 2-5 percent range. Common categories include travel, grocery stores, and dining. Retailers and networks work together to determine how determine how purchases are categorized (via Merchant Category Codes). Spending limits are also somewhat common for category rewards.
Rotating Category Rewards
Most category rewards do not change over time, or at least change rarely. However, an exception is rotating category rewards. A subset of category rewards, rotating category rewards apply to categories that change over time (usually quarterly). For example, a rotating reward card may offer 5% cash back on travel purchases from January to March, and then 5% cash back on dining from April to June, and so on. Reward rates for rotating category rewards are typically on the high side of the 2-5% range, but spending limits are also common and activation is usually required each reward period.
Offers and Promotions
Some cards also have retailer-specific offers or promotions. These offers require activation and can be user-specific, but the reward rates can be quite high — 10-20 percent is common, but they can be even higher.
Several of the major issuers also have their own shopping portals. Shopping portals contain lists of retailers at which you can earn extra rewards. To activate these benefits, you must navigate to the retailer’s website through the portal – this means first going to the the portal and finding the retailer at which you wish to shop. Only by navigating to the retailer through the portal will you earn the extra rewards – if you go directly to the retailer’s website, you won’t earn the extra benefits. Because this extra step is required to activate the benefit, shopping portals are one of the most often-overlooked types of credit card rewards.
Note that benefits of shopping portals come in two flavors: extra rewards earned for purchases made through the portal, or a percentage discount when shopping with your rewards balance. For more on shopping portals, see this post.
Finally, many cards offer introductory rewards for new cardholders. This can be a reward multiplier or a bonus category for a period of time after account opening. For example, the rewards you earn in the first year may be doubled at the end of the year, or you may earn 5% cash back on purchases at grocery stores in the first 6 months after opening your account. Introductory reward offers also change frequently, so be sure to check the issuer’s website for the latest.
While these are the most common types of credit card rewards, they aren’t the only rewards that credit cards can offer. Additionally, many cards offer several of the reward types discussed above, so be sure to review your card’s reward program details carefully.
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