Credit card rewards: What are they and how do they work?

Credit card rewards allow cardholders to earn cash back, miles or points when they make purchases. How those rewards are earned and redeemed depends on the type of credit card, the card issuer and the cardholder’s spending habits.

Learn more about credit card rewards, how to redeem them and how to maximize their value.

What you’ll learn:

• Cardholders can earn rewards by using their rewards credit card.

• Credit card rewards typically come in the form of cash back, miles or points.

• Choosing a card that fits your lifestyle and spending habits may make earning rewards more convenient.

• Ways to redeem rewards vary depending on your rewards card and the card issuer.

Credit card rewards are typically offered in the form of cash back, miles or points. They can be earned by using a rewards credit card to make purchases. 

Learning about how different types of rewards programs work could help you use your card to your advantage. That means understanding the perks available to you and looking for ways to maximize your rewards with things like early spend bonuses.

A cash back card allows you to earn a percentage of your purchase back as cash. Generally, there are three categories of cash back cards: flat rate, tiered and rotating. Take a closer look at each:

With a flat-rate cash back card, you earn the same percentage rate on every eligible purchase you make with your card. That rate applies to gas, groceries and a whole host of other purchases. 

Capital One Quicksilver and QuicksilverOne cards are examples of flat-rate cash back cards. Both offer unlimited 1.5% cash back on every purchase, every day.

A tiered-category card allows you to earn different levels of cash back for different spending categories. Tiered-rewards categories might include dining and entertainment.  

For example, Savor from Capital One lets cardholders earn unlimited 3% cash back at grocery stores and on dining, entertainment and popular streaming services, plus 1% cash back on all other purchases.¹

Rotating cash back cards offer rewards for purchases in a variety of spending categories during the year. In some cases, you can pick the categories. In other cases, the credit card issuer does. 

Some rotating cash back cards allow you to earn bonus rewards in certain purchase categories. Bonus categories typically offer a higher rate than other purchases do and may be rewarded with a flat cash back rate. You may want to remember to activate your bonus categories each time they change in order to maximize the rewards you earn. How often bonus categories change is up to the card issuer.

Credit cards that earn miles or travel points are generally known as travel rewards cards. With a travel rewards card, you typically earn rewards for every dollar you spend. Capital One VentureOne, Venture and Venture X cards are examples of travel rewards cards.

Miles-earning cards typically offer flexibility on where and how you can redeem your rewards. Cards associated with a particular airline or hotel might be another option, but they may offer more limited redemption options. 

Keep in mind that the term “miles” doesn’t have anything to do with the actual distance you’ve traveled. The value of a mile and what you can do with it depends on the credit card issuer and the specifics of the rewards program it offers.

Some rewards cards offer “points” based on every dollar a cardholder spends. The value of those points may differ based on the kinds of purchases the cardholder makes. 

How you earn or redeem points varies based on your card.

Some points-rewards card issuers use what’s known as a fixed-point system. That typically means you’ll consistently earn the same amount of points for making a purchase in a particular spending category. Others may offer tiers with different earning levels for different spending categories. And others may rotate spending categories to reward certain types of purchases more than others. In that case, keeping track of the rotating categories may help you earn the highest rewards for your spending.

In many cases, you can redeem credit card rewards as a statement credit or for cash.² But there may be other ways to redeem credit card rewards, depending on your rewards card and the card issuer, such as:

• Redeeming for travel: When you redeem rewards for travel, you typically use miles or points you’ve earned to make travel-related bookings like flights, hotels and rental cars.

• Covering your purchases: Rewards cards may also let you cover recent purchases. For travel cards, that might mean a recent travel-related expense. But cash back and some points cards might offer other ways to redeem. 

• Getting gift cards: Some issuers let you redeem your rewards for gift cards to use at your favorite retailers.³

• Shopping with online retailers: Capital One lets cardholders use rewards to shop at Amazon.com and through PayPal Pay with Rewards.⁴

To maximize your credit card rewards, consider choosing a card that matches your lifestyle and spending habits. Whether you’re a globe-trotting adventurer, an avid foodie or someone who wants to be rewarded for everyday purchases, there may be a Capital One rewards card for you. 

Compare Capital One rewards credit cards today.

Whether your idea of a good time is getting out on the town, traveling the world or staying in, Capital One has a rewards card that may fit your lifestyle.

• See if you’re pre-approved for rewards cards, with no harm to your credit. 

• Explore travel and miles rewards credit cards with unlimited miles you can actually use. 

• Earn unlimited 1.5% cash back on every purchase, every day, with a cash rewards credit card.

• Earn unlimited cash back whether you’re going out or staying in, with a dining and entertainment credit card.