Types

• Credit card rewards come in three basic forms: points, travel rewards and cash rewards. With points programs, you accrue points based on your spending levels, usually a point for each dollar spent. Once you amass enough, your issuer will offer rewards in exchange for these points, such as merchandise and gift certificates. Travel rewards are similar, except with them you earn points directly into an airline's or hotel's frequent traveler program. These rewards often come on cards co-branded with specific airlines or hotels. Cash rewards let you earn money directly once you reach certain spending levels, either in the form of a bank deposit or payment toward your credit card bill.
  
  

Size

• Card rewards will vary by issuer, but you can generally expect one-for-one exchanges on both points and travel rewards. Most programs give you a single point or mile for every dollar spent. You might get reward bonuses when using your card with certain type of vendors. In both cases, a single point generally is worth a cent or less. A $25 gift card for Amazon through Chase, for example, requires 2,500 points. With cash rewards, you can often get between 1 percent and 2 percent back on purchases, and some programs offer as much as 5 percent back on certain purchases such as groceries or gas. These also usually come with spending limits, however.
  
  

Considerations

• Analyzing your spending habits will help you choose a rewards program. Airlines and hotels in general require thousands of miles or points for a single flight or hotel stay. If your spending levels on a credit card are low, and you don't travel frequently to earn supplemental points on these programs, these rewards might not be worth it. Caps on cash-back rewards, on the other hand, will limit your rewards if you spend heavily on the card. Most points programs offer both low- and high-cost rewards, but these points usually expire over time, and the card issuers can change the programs at their whim.
  
  

Effects

• When comparing rewards programs, you also should examine the effects they have on your card terms and conditions. Many programs come with fees as high as $150 a year, so if you do not have a high level of spending on it, you are unlikely to earn sufficient rewards to offset that fee. Similarly, annual percentage rates will vary by program but they generally are higher on rewards cards than non-rewards cards. If you're not in the habit of paying off your full balance every month, you probably are paying more in extra interest than you are gaining in rewards.
  
  

Warning

• All major credit card issuers will take away reward points earned during a cycle in which you are delinquent on payment. Discover will completely erase all reward points if you are delinquent two cycles in a row, and American Express also can clean out delinquent accounts on a case-by-case basis. If you are concerned that delinquency could be a problem in the future, a cash reward program is your safest bet. Though they have their limitations, cash reward programs generally are the most stable because you receive your rewards instantly rather than accruing points over time.