How to decide on a card that suits your needs

A concept image of credit cards fanned out to pick one.
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If you’re signed up for a gas rewards card, but you don’t currently own a car or you aren't driving much, it’s not going to do you much good. So before you can start calculating how much you can get back from your credit cards, it’s important to make sure you’re set up with a rewards system that suits your lifestyle.

For example, coffee lovers will perk up when they hear about the benefits of a Starbucks Rewards Visa Credit Card, which earns you extra rewards towards free drinks at the coffee shop every time you use it or use it to load up your Starbucks card.

Meanwhile, Verizon customers will want to learn how to apply for a Verizon Visa Card, to earn Verizon Dollars every time they use it, which can be redeemed for things available at the wireless retailer. They’ll even get discounts on their wireless bills — all at no annual fee.

If your rewards dreams are less specific, you can compare some of the best rewards card offers. Some offer you more points for different purchases like groceries or meals out. You can comb through the list and find a card that will reward you for how you spend your money.

Tell me more about the money back

Person typing in numbers into mobile credit card machine
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Once you’ve found your glass slipper of rewards cards, now you can get down to the business of collecting rewards.

How can you earn back nearly $1,000 in rewards? Well, the average American has a balance of $5,313 on their credit cards, according to the Experian 2020 Consumer Credit Review.

On average, if you spent $2,500 over the course of a year on both of the rewards cards we mentioned above, you could receive $955 worth of points.

  • $855 worth of points at Starbucks when you use your Starbucks Rewards Visa Credit Card for your daily caffeine fix (not to mention the 8 free food or beverage items you’ll get on top of that).
  • $100 worth of points if you used your Verizon Visa Card for your dining and gas purchases (along with 2% off your monthly wireless bill and $10 each month off each eligible line for up to 10 lines).

Are those rewards programs not up your alley? That’s OK; compare the best rewards card offers to find your perfect fit.

Make sure you use your points correctly

Credit Cards on Bank Statements
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Once you’ve accrued enough points to enjoy your rewards, it’s time to start spending.

But just as you strategically used your cards to maximize your point gains, you’ll want to think carefully about how you use them.

Some rewards cards offer you different options to redeem your points, but not all options are created equally.

While you’ve accrued thousands of dollars worth of points, their value when you redeem them is significantly less. And different redemption offers will give you more bang for your buck — it just takes some simple math to compare redemption rates.

Let’s go over the best and worst ways to use your points.

Don’t shop with points

Some points-based credit cards will allow you to “shop with points” and exchange your rewards points for merchandise, like electronics, home goods or even appliances.

You need a new toaster, so why wouldn’t you want to redeem your points this way? This issue is the math with this option doesn’t work in your favor.

Let’s say a nice new toaster retails on Amazon for $40. Hypothetically, if you need to use 60,000 points to purchase it with your rewards, each of your points is only worth 7/100 cent in this transaction.

Same goes for credits on your statement

Rewards cards will often allow you to pay down your balance with your points. Like buying merchandise, this isn’t a practical use of your points.

In this scenario, we’ll say 50,000 points would pay down $100 worth of your balance. In this case, your points are only worth 1/5 cent each.

Go for gift cards

Most rewards cards will give you a point for every penny in redemption. So to get a $50 gift card, you’ll only need to redeem 5,000 points. That’s by far the best exchange rate of the options we’ve listed.

So if you want that new toaster, go ahead and get a gift card to Amazon and order it yourself. And you can put that $40 towards paying down the balance on your credit card — we call that a win-win-win.

About the Author

Sigrid Forberg

Sigrid Forberg

Staff Writer

Sigrid is a staff writer with MoneyWise. A graduate of Carleton University's journalism program, she spent the better part of the last six years writing about business and retail. In her spare time, she enjoys reading, baking and riding her bicycle.

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