Understanding Credit Card Rewards
Learn how to earn valuable rewards with your credit cards and make your spending work for you
Credit card rewards are free money the bank gives you for using their card. It's their way of encouraging you to use their card instead of a competitor's. Think of it as getting paid to spend money you were already going to spend!
Average annual value from optimized rewards strategy
Typical return on spending depending on category and card
Real example: Spending $3,000/month on the right cards can earn you $600-1,200/year in cash back, or enough points for free flights worth $2,000+!
Understanding the three main reward types
Cash Back
Simple, straightforward value
Get a percentage of your spending back as cash. The simplest and most flexible reward type.
How it works:
Example: You spend $1,000 at a grocery store with a 3% cash back card. You earn $30 cash back!
Best for: People who want simple, predictable value without complicated redemptions
Points
Flexible rewards with transfer options
Earn points that can be used for travel, cash back, gift cards, or transferred to airline/hotel partners for even more value.
How it works:
Example: Chase Ultimate Rewards - 100k points can be worth $1,000 cash back, $1,250 in Chase travel portal, or $2,000+ when transferred to airline partners for flights!
Best for: People willing to learn transfer partners to maximize value for travel
Airline Miles / Hotel Points
Tied to specific brands
Earn miles or points directly with a specific airline or hotel chain. These are locked to that brand but often offer premium perks.
How it works:
Example: Delta SkyMiles Platinum Amex - Earn miles for Delta flights, get free checked bags, priority boarding, and elite status benefits.
Best for: People loyal to one airline/hotel who travel frequently with that brand
Understanding earning rates and bonus categories
Most credit cards earn rewards in two ways: base earning (everything) and bonus categories (specific spending types).
Base Earning Rate
What you earn on all purchases that don't fall into bonus categories.
Most common baseline rate
Premium flat-rate cards
Bonus Categories
Extra rewards for specific types of purchases. This is where you can really maximize value!
Real-World Example
Monthly spending breakdown:
How much are your rewards actually worth?
Not all rewards are created equal! The same number of points can be worth vastly different amounts depending on how you redeem them.
Cents Per Point (CPP)
This is how we measure point value. For example, if 10,000 points can buy a $100 flight, each point is worth 1¢ (10,000 points = $100 = 1¢ per point).
Lowest value redemption
Poor value, not recommended
Good baseline value, easy to use
Best value! Can be 5-10x more valuable than cash
Real Example: 100,000 Points
Same points, 4x more value by learning how to transfer!
Different ways to use your hard-earned rewards
Statement Credit
Apply rewards directly to your credit card balance. Simple but often lowest value.
Travel Portal
Book flights/hotels through the card's travel portal for 1-1.5¢ per point value.
Direct Bookings
Use airline/hotel points directly on their websites for award flights and free nights.
Transfer Partners
Best value! Transfer points to airline/hotel partners for premium redemptions.
Pro tip: Don't rush to redeem! Points don't expire as long as you keep the card. Save them for high-value redemptions like international business class flights or luxury hotels.
Three main reward types: cash back (simple), points (flexible), miles (brand-specific)
Bonus categories (3-5x) earn much more than base spending (1-2x)
Points can be worth 0.5-10¢+ depending on how you redeem them
Transferring to airline/hotel partners usually offers the best value (1.5-10¢ per point)
Optimized strategy can earn $2,400+/year in value from normal spending
Ready to Get Started?
Learn how to choose your first rewards card and build a strategy to maximize your earnings