Picking a rewards credit card is a big deal, and the market can be difficult to decipher – with hundreds of offers available, numerous rewards currencies to choose from and various restrictions to watch out for. However, carefully comparing your options prior to submitting an application can be the difference between earning enough for a plane ticket versus a low-value gift card.
CardHub has therefore undertaken the task of reviewing the consumer credit-card rewards market for you. We analyzed every non-cobranded rewards credit card offered by the 15 largest issuers and devised a grading rubric to quantify issuers’ policies and provide a basis for consumer comparison. To check out our findings and get tips for choosing a rewards card, read on below.
Best & Worst Overall: Capital One offers the best credit card rewards program (for the second consecutive year), scoring 49% higher than TD Bank’s last-place program.
Yield Potential: The best rewards card yields $812.69 more than the worst rewards card over the first two years.
Strategic Redemption: Redeeming for travel is the best deal, yielding 54% more value than redeeming for merchandise, the worst option.
Earning Policies: Capital One has the most advantageous earning policies, scoring 51% higher than the category loser, U.S. Bank.
Redemption Policies: Discover has the most consumer-friendly redemption policies, scoring 107% higher than the most-restrictive issuer, Fifth Third Bank.
Eligibility & Transparency Standards: Navy Federal Credit Union and American Express set the clearest expectations, scoring 100% higher than TD Bank and First National Bank.
What’s the best rewards credit card each bank has to offer? CardHub determined the best card for each issuer based on how much monetary worth its rewards yielded through the first 2 years of account opening. Check out the results below:
*For the purpose of this report we considered all non-cobranded, consumer rewards cards offered by each issuer. Detailed scoring for other cards considered in this report can be obtained by request.
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Rewards cards aren’t one size fits all. Different factors – such as the type of rewards currency and earning structure – suit some consumers more than others. Our tips below will help you pick the right card:
- Identify Your Spending Interests – Strive to get a rewards credit card that aligns with your spending habits and interests. For instance, if you rarely dine out, do not pick a card that offers high earning rates on restaurant spending – rather, pick a card with extra on travel or gas.
- Consider Both Earning & Redemption Value – To gauge how much value a rewards card can yield, it’s important to look at both sides of the rewards equation. A card with high earning rates might have low redemption rates, and vice versa, and that can drastically skew the offer’s value proposition.
- Avoid Hassle If You’re Forgetful – If you know you’re the forgetful type, stay away from cards that feature rotating categories requiring sign-up. They prevent customers from earning bonus rates if the spending categories are not “activated” each quarter, resulting in a lot of wasted time, energy and earning potential.
- When In Doubt, Think Cash Back – You will never have to worry about rewards devaluation with cash back cards, as you will be earning rewards in terms of dollars and cents. Points and miles cards, on the other hand, are quite vulnerable, however, because credit card execs can jack up the number of points or miles needed for a free flight or hotel room whenever they please.
- Don’t Rule Out Annual Fees – Often times, cards with annual fees offer better initial bonuses and higher earning rates than free cards. Therefore, don’t discount a card simply because it charges a fee, especially if it’s low. Just make sure the rewards you reap will sufficiently outweigh the fixed costs (which will most likely be the case if you spend more than the average American).
|Qualifying Factor||Max Points||Amex||BofA||Barclays||Cap One||Chase||Citi||Discover||PNC||US Bank||Wells Fargo|
|Offers Automatic Program Enrollment||1.0||1.0||1.0||1.0||1.0||1.0||1.0||0.7||1.0||1.0||1.0|
|Offers 100% Transparency In Displaying Redemption Rate Details For Non-Members||1.0||0.9||0.6||0.0||0.6||0.0||0.2||0.3||0.5||0.2||0.0|
|Does Not Advertise Points/Miles Cards as Cash Back Cards||1.0||0.8||1.0||0.7||1.0||0.5||1.0||1.0||1.0||1.0||1.0|
|Issuer Informs Customer of Remaining Rewards at Time of Account Closure||1.0||1.0||1.0||1.0||1.0||1.0||1.0||1.0||0.5||1.0||1.0|
|No Minimum Spending Required To Earn||1.0||1.0||1.0||1.0||1.0||1.0||1.0||1.0||1.0||1.0||1.0|
|No Overall Earning Limit Imposed||1.0||1.0||1.0||1.0||1.0||1.0||1.0||1.0||1.0||1.0||1.0|
|Earning Rate Does Not Vary Depending On Amount Spent or Time Period||1.0||0.6||0.6||1.0||1.0||0.5||1.0||0.3||0.5||0.3||0.2|
|No Sign-up Required for Bonus Categories||1.0||1.0||1.0||1.0||1.0||0.5||1.0||0.7||1.0||0.8||1.0|
|Ability to Combine Earnings Across Your Accounts||0.5||0.5||0.5||0.0||0.5||0.5||0.4||0.3||0.0||0.3||0.5|
|Ability to Share Earnings With Other Members||0.5||0.0||0.3||0.0||0.5||0.5||0.4||0.3||0.0||0.5||0.5|
|Earnings Are Granted Despite Account Inactivity||0.5||0.5||0.5||0.5||0.5||0.5||0.4||0.5||0.5||0.5||0.5|
|Earnings Are Granted Despite A Missed or Late Payment||0.5||0.0||0.4||0.5||0.3||0.5||0.5||0.5||0.5||0.0||0.0|
|Earnings Do Not Expire By Date||0.5||0.5||0.5||0.5||0.5||0.5||0.5||0.5||0.3||0.0||0.4|
|Expired Earnings Can be Reinstated (Free of Charge)||0.5||0.5||0.5||0.5||0.5||0.5||0.5||0.5||0.3||0.0||0.5|
|Ability to Utilize Transfer Partners||1.0||0.6||0.0||0.0||0.0||0.3||0.3||0.0||0.0||0.0||0.0|
|Ability to Utilize Transfer Partners is Free of Charge||0.5||0.0||0.0||0.0||0.0||0.3||0.2||0.0||0.0||0.0||0.0|
|Ability to Use Earnings to Offset Any Travel Purchase or Receive Cash Back Without Sacrificing Value||1.0||0.3||1.0||1.0||1.0||1.0||0.2||1.0||0.5||1.0||1.0|
|Statement Credit Can Be Applied to Full Balance (instead of matching to specific charges)||0.5||0.2||0.5||0.5||0.5||0.5||0.5||0.5||0.5||0.5||0.5|
|No Minimum Threshold Required to Redeem For Cash Back||1.0||0.0||0.2||0.0||0.6||0.0||0.0||1.0||0.0||0.2||0.0|
|Offers Low Redemption Value Volatility||1.0||0.5||0.8||0.3||0.6||0.8||0.4||0.6||0.9||0.6||0.6|
|Rewards Value Per $1 Spent||5.0||4.0||5.0||5.0||5.0||5.0||5.0||5.0||4.0||5.0||3.0|
*Percentage Score is calculated by dividing the Total Score by 21 points.
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This report analyzed the rewards offered by the 15 credit card issuers by outstanding balances. For each issuer, we scored all of their non-cobranded, consumer rewards cards according to the metrics laid out in the table, which encompass four main categories:
- Eligibility & Transparency – Max 4 points
- Earning Policies – Max 7 points
- Redemption Policies – Max 5 points
- Rewards Value Per $1 Spent – Max 5 points
TOTAL: 21 POINTS
Each individual’s score was ultimately averaged to determine a comprehensive overall score for each issuer, which we then convert to a percentage by dividing the total by 21.
|Qualifying Factor||Maximum Amount of Points Awarded||How To Calculate Points Awarded|
|Eligibility & Transparency – Max 4 points|
|Offers Automatic Program Enrollment||1||Award max point if the card qualifies for this factor.|
|Offers 100% Transparency In Displaying Redemption Rate Details For Non-Members||1||Award max point if the card qualifies for this factor.|
|Does Not Advertise Points/Miles Cards as Cash Back Cards||1||Award max point if the card qualifies for this factor.|
|Issuer Informs Customer of Remaining Rewards at Time of Account Closure||1||Award max point if the card qualifies for this factor.|
|Earning Policies – Max 7 points|
|No Minimum Spending Required To Earn||1||Award max point if the card qualifies for this factor.|
|No Overall Earning Limit Imposed||1||Award max point if the card qualifies for this factor.|
|Earning Rate Does Not Vary Depending On Amount Spent or Time Period||1||Award max point if the card qualifies for this factor.|
|No Sign-up Required for Bonus Categories||1||Award max point if the card qualifies for this factor.|
|Ability to Combine Earnings Across Your Accounts||0.5||Award max point if the card qualifies for this factor.|
|Ability to Share Earnings With Other Members||0.5||Award max point if the card qualifies for this factor.|
|Earnings Are Granted Despite Account Inactivity||0.5||Award max point if the card qualifies for this factor.|
|Earnings Are Granted Despite A Missed or Late Payment||0.5||Award max point if the card qualifies for this factor.|
|Earnings Do Not Expire By Date||0.5||Award max point if the card qualifies for this factor.|
|Expired Earnings Can be Reinstated (Free of Charge)||0.5||Award max point if the card qualifies for this factor.|
|Redemption Policies – Max 5 points|
|Ability to Utilize Transfer Partners||1||Award 0 points if card has no ability, 1/3 points if card has 1-10 transfer partners, 2/3 points if card has 11-20 transfer partners or 1 point if card has 21+ transfer partners.|
|Ability to Utilize Transfer Partners is Free of Charge||0.5||Award max point if the card qualifies for this factor.|
|Ability to Use Earnings to Offset Any Travel Purchase or Receive Cash Back Without Sacrificing Value||1||Award max point if the card qualifies for this factor.|
|Statement Credit Can Be Applied to Full Balance (instead of matching to specific charges)||0.5||Award max point if the card qualifies for this factor.|
|No Minimum Threshold Required to Redeem For Cash Back||1||Award max point if the card qualifies for this factor.|
|Offers Low Redemption Value Volatility||1||Where possible, we took the average redemption values for these categories: travel, cash back, gift cards & merchandise, and subsequently, calculated the variance across them.
Award 1 point if the variance is 0, 0.8 points if the variance is under 2%, 0.6 points if the variance is under 3%, 0.4 points if the variance is under 6%, 0.2 points if the variance is under 7% and 0 points if the variance is 7% or more.
|Rewards Value Per $1 Spent – Max 5 points|
|Rewards Value Per $1 Spent*||5||≤ $379 = 0
$380 – 569 = 1
$570 – 759 = 2
$760 – 949 = 3
$950 – 1,139 = 4
$1,140 + = 5
|Total – Max 21 points|
*Rewards Value Explanation:
In order to calculate rewards-value scores, we identified the best card from each issuer by calculating the 2-year monetary value of each offer’s rewards (including initial bonuses), minus any annual fees.
When calculating the card’s rewards value, we picked the best redemption option – travel, gift cards, cash back or merchandise – and used the average value for that redemption option to convert rewards currency into monetary terms.
We used the following spending data from the U.S. Bureau of Labor Statistics to calculate each card’s monetary value. Exact values were used whenever possible, but in certain cases – such as “Travel” – we combined categories such as “Airlines,” “Hotels,” “Other Lodging” and “Public and Other Transportation” to create a more digestible list. We assumed that half of one’s utility expenses would be charged to a credit card, as certain types – electric bills, for example – typically aren’t plastic plastic-eligible. “Other” spending represents the sum of small household spending categories: healthcare, apparel and housekeeping supplies, for instance.
|Gas||$2,611||U.S. Bureau of Labor Statistics Consumer Expenditures in 2013 Report|
|Groceries||$3,977||U.S. Bureau of Labor Statistics Consumer Expenditures in 2013 Report|
|Restaurants||$2,625||U.S. Bureau of Labor Statistics Consumer Expenditures in 2013 Report|
|Hotels||$649||U.S. Bureau of Labor Statistics Consumer Expenditures in 2013 Report|
|Airfare||$537||U.S. Bureau of Labor Statistics Consumer Expenditures in 2013 Report|
|Entertainment||$2,482||U.S. Bureau of Labor Statistics Consumer Expenditures in 2013 Report|
|Drug Stores||$608||U.S. Bureau of Labor Statistics Consumer Expenditures in 2013 Report|
|Utilities||$1,869||U.S. Bureau of Labor Statistics Consumer Expenditures in 2013 Report|
|Other||$13,063||U.S. Bureau of Labor Statistics Consumer Expenditures in 2013 Report|
|Total||$28,523||U.S. Bureau of Labor Statistics Consumer Expenditures in 2013 Report|
Ask the Experts
- What do you think are the characteristics of a good rewards program? Does this differ between consumer and business credit cards?
- Based on your knowledge of the market, how does reputation mesh with reality in terms of each major issuer’s rewards program?
- When should consumers first start focusing on rewards credit cards?
- How do credit card rewards programs make credit card companies money?