Six Times You Definitely Want a Rewards Credit Card

There’s a reason people chase credit card points and miles: A solid rewards credit card can help you earn free stuff with almost no effort on your part, and nearly anyone with good credit can qualify.

Still, a lot of people opt for other means of payment, and that includes cash and debit cards – and even the dinosaur of personal finance, personal checks. In fact, the most recent Gallup poll on credit card ownership showed that 29% of American adults didn’t even own a credit card in 2014, and another 33% only had one or two cards in their wallets.

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Those who shy away from credit cards may do so for good reason. Perhaps they’ve spiraled into credit card debt in the past and don’t want to go down that road again, or maybe they’re nervous to get involved in the first place. Using credit is definitely a personal decision, and it’s one that shouldn’t be taken lightly.

Still, there may come a time when you wish you had a good rewards card at your disposal. Here are six times in your life when using a rewards card makes a lot of sense:

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    #1: You’re preparing to make a large purchase – and have the cash on hand.

    Most rewards credit cards offer lucrative signup bonuses to those who can meet a minimum spending requirement within a certain length of time — for example, you might have to charge $3,000 in purchases within three months to receive points worth anywhere from $200 to $500.

    Spending more than you can afford just to meet a signup bonus is a fool’s errand. But if you have a large purchase or expense coming up, and you already have the cash on hand, a strategic rewards card or two can help you earn hundreds of dollars back on purchases you’d be making anyway.

    So if you’ve saved up for a home renovation or your next vacation, you’re in a good position to earn a bunch of free stuff by charging those big purchases – as long as you pay your credit card bill in full immediately to avoid paying interest.

    #2: You realize your debit card or bank credit card pays zilch on your everyday spending.

    If you’ve never upgraded your credit card or switched from debit to credit, you might be spending tons of cash and getting almost nothing in return. Or you could be earning thousands of “points” that are worth almost nothing when you try to redeem them.

    Most American families spend several hundred dollars a month on household bills, groceries, and other expenses. If you’re always putting those expenses on debit – or on a credit card that doesn’t offer rewards – you could be missing out on your fair share of cash back rewards or travel points.

    #3: You desperately want to travel, but need help with airfare or hotel stays.

    If you want to travel and don’t think you can afford it, a travel credit card can ease the financial burden. By using your card for everyday spending, you can rack up rewards points that are redeemable for hotel stays, train tickets, airfare, and other travel expenses.

    The best travel rewards cards make it easy to earn points on everyday spending, and some even offer “bonus points” in certain categories like dining out, groceries, gas, or department stores. For example, with a card that earns triple points on groceries, a family that charges $600 a month at the supermarket can rack up more than 21,000 points in a year — typically enough to score a free flight.

    The key to making the most out of these offers is learning to maximize your points and miles to the hilt, without making unnecessary purchases. The best rewards card for you will depend on your spending habits — e.g., do you tend to spend more at restaurants, or on gas and groceries? — and what kind of travel rewards you want to earn.

    #4: You’re having trouble keeping track of your spending, and want an easy, detailed record.

    If you use cash for all of your spending, you’ll need to keep physical receipts if you hope to track your spending (a crucial part of personal finance). This can be a huge pain if you’re constantly on the go or simply forgetful about grabbing a receipt after each purchase. Not to mention the hassle of carrying a wad of cash in your wallet and busting out the calculator to add up each crumpled receipt.

    Using a credit card, on the other hand, means all of your expenses and purchases get tallied up for you automatically. Most of the best rewards credit cards offer online account management tools that make it easy to track your purchases and expenses, even allowing you to filter and sort them by budget category. Just log in, analyze your spending, and you’re set – no receipts necessary.

    #5: You want to pay bills and order stuff online, but don’t want to use debit.

    In a recent post, we highlighted several reasons using a debit card online is a bad idea. Most notable, however, is the fact that the risk and potential fallout of fraud is heightened when you shop with debit instead of credit.

    Here’s how the Federal Trade Commission describes your liability when you use debit: “If a fraudulent transaction made with debit goes unreported for more than 60 days after your statement is sent, you could be on the hook for “all the money taken from your ATM/debit card account, and possibly more; for example, money in accounts linked to your debit account.”

    Since most rewards credit cards come with zero-fraud liability, and even regular credit cards are legally required to limit your liability to $50 for fraudulent purchases, you’re much better off using credit for your online purchases.

    man with credit card using laptop
    While debit cards can leave your bank account vulnerable to online theft, most rewards credit cards come with zero-fraud liability.

    #6: You want to build credit while earning free stuff.

    If your credit profile is thin, using a credit card responsibly is a great way to demonstrate responsible credit use and get it reported to the major credit bureaus who determine your credit score. And if you ever want to purchase a home, take out a loan for a car, or borrow money to fund a business idea, a longer credit history will put you in the best position possible.

    While any credit card will do the trick, a rewards credit card can help you earn free stuff while you build up your credit history. Most basic, no-fee rewards cards let you earn points that you can redeem for cash back, gift cards, or merchandise.

    To build credit as quickly and safely as possible, you’ll want to make prompt payments on your card every single month. In addition, you’ll want to pay your balance in full to avoid paying interest on your purchases.

    Over time, the monthly payments you make will be reported to the three credit reporting agencies – Experian, Equifax, and TransUnion — which can build your credit history and ultimately boost your credit score.

    Editorial Note: Compensation does not influence our recommendations. However, we may earn a commission on sales from the companies featured in this post. To view our disclosures, click here. Opinions expressed here are the author’s alone, and have not been reviewed, approved or otherwise endorsed by our advertisers. Reasonable efforts are made to present accurate info, however all information is presented without warranty. Consult our advertiser’s page for terms & conditions.

    Holly Johnson

    Contributing Writer

    Holly Johnson is a frugality expert and award-winning writer who is obsessed with personal finance and getting the most out of life. A lifelong resident of Indiana, she enjoys gardening, reading, and traveling the world with her husband and two children. In addition to The Simple Dollar, Holly writes for well-known publications such as U.S. News & World Report Travel, PolicyGenius, Travel Pulse, and Frugal Travel Guy. Holly also owns Club Thrifty.