There are three main types of credit card rewards. The first two are cash back and miles. The third is what is known as credit card reward points. With these rewards, credit cardholders earn points from financial transactions, including spending thresholds and making everyday purchases.
Most rewards credit cards earn a minimum of one point per dollar spent. Many cards offer more for certain categories of spending, either as a tier or in rotating categories. Common tiers may be tied to purchases made at specific vendors. For example, an airline reward card may offer higher points for purchases made at the airline. You may also receive more points per dollar with gas and grocery purchases than with other retail. The rewards program may offer higher rewards temporarily for a quarter. In a year’s third quarter, you may receive more points for educational expenses.
Credit card rewards points can be redeemed for a number of options, including travel, products, gift cards or cash back. Some credit card issuers allow you to donate to charitable organizations or attend exclusive events. How, and for how much your points are redeemed is determined by each credit card issuer. They may be applied differently to different redemption options. For example, a point may be valued at 1 cent for travel, but half a cent for cash back.