How Do Credit Card Rewards Work?

Find out how credit card rewards programs work and how you can redeem your rewards


Whether you’re a frequent flier, diner or shopper, credit cards can be rewarding. Based on your spending and the type of card in your wallet, you might earn cash back, miles or points.

Keep reading for an overview of the different forms credit card rewards come in, how to redeem them and how to maximize their value.

Types of Credit Card Rewards Programs

When you’re looking for a rewards credit card, you’ll generally find three types: cash back, miles and points. You might decide to stick with cash back or points cards, based on your spending patterns, or you might go with cards that supply miles or travel rewards to help pay for airfare, hotel stays and more.

Cash Back Rewards

A cash back card lets you earn a certain percentage of your purchase in the form of cash. Generally, there are three categories of cash back cards: flat rate, tiered and rotating. 

Your rewards will vary depending on the lender and which card you have, but here’s a quick overview:

Flat-Rate Cash Back Card

With a flat-rate cash back card, you earn the same percentage rate on every purchase you make with your credit card. That applies to gas, groceries and a whole host of other purchases. The Capital One Quicksilver and QuicksilverOne cards are examples of flat-rate cash back cards. Each offers unlimited 1.5% cash back on every purchase, every day.

Tiered-Category Cash Back Card 

A tiered-category card allows you to earn different levels of cash back in different spending categories. For example, the Capital One Savor card offers 4% cash back on dining, entertainment and popular streaming services, 3% at grocery stores, and 1% on all other purchases. 

SavorOne has similar rewards: 3% cash back on dining, entertainment, popular streaming services and grocery stores and 1% on all other purchases. There are also other differences between Savor and SavorOne you may want to check out before you apply.

How do credit card issuers know which purchases qualify for which cash back rewards? A four-digit number known as a merchant category code tells a credit card issuer which category your purchase falls into. This code is attached to every credit card transaction, enabling the issuer to pinpoint what kind of purchase you made (such as gas or groceries). 

Keep in mind, those category codes are selected and assigned by the merchant. So that means some purchases may not earn cash back.

Rotating-Category Cash Back Card 

Merchant category codes are also used with rotating-category cash back cards. Rotating cash back cards offer rewards for different spending categories throughout the year. In some cases, you can pick the categories. In other cases, the credit card issuer chooses the categories, which may change on a regular basis.

Purchases that don’t fall into bonus categories may be rewarded with a flat cash back rate. But bonus categories will typically earn a higher rate than other purchases. And you might have to remember to activate your bonus categories each time they change in order to earn your full rewards.

How often categories change is up to the card issuer.

Miles and Travel Rewards

If you use a travel rewards card for everyday spending, you generally earn a certain number of miles or points for every dollar you spend. And if you’re a frequent traveler, you may be interested in earning rewards on upcoming trips. But would a general travel rewards card or an airline-specific rewards card be better?

Some miles-earning cards may offer more flexibility on where and how you can redeem your rewards. But if you’re devoted to one airline, a credit card associated with that airline could earn you miles to use with your favorite carrier and its partners.

But if you fly on a variety of airlines, a travel rewards card might be a better option. That’s because a travel rewards card may let you use miles or points on a number of airlines or for a number of travel purchases. You might even be able to transfer miles from one airline to another. 

The Capital One Venture and Venture One cards are examples of travel rewards cards. You can earn miles on every purchase as well as bonus miles on qualifying purchases. And when you’re ready to use your rewards, you can redeem them on any hotel, airline or travel purchase, with no blackout dates. 

Check out this calculator to see how many miles rewards you could earn with Venture or VentureOne, based on your monthly spend.

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 lender and the rewards program it’s related to. Each lender and rewards program measures their rewards a bit differently. 

Points Rewards

Rather than cash back or miles, some rewards credit cards let you earn a certain number of points based on every dollar spent. The value of those points may differ based on the kind of purchase you make. 

How you earn or redeem points varies based on the card. Some may be similar to a miles-earning card, while others may be more like a cash back card.

Some lenders have what’s known as a fixed-point system, which means you consistently earn the same amount of points. Others may rotate spending categories to reward some purchases more than others. With that type of points card, it’s a good idea to keep track of the rotating categories in order to earn the highest rewards for your spending. 

How Do You Redeem Credit Card Rewards?

Redemption options vary depending on your lender and what type of rewards card you have. 

Here are some ways you might be able to redeem your cash back and miles:

  • Redeem for cash. With cash back, points and even some travel cards, you can redeem your rewards for cash. This may be a better option with cash back and some points cards. The value of miles and other points may be lower when you redeem them this way. Your credit card issuer might mail you a check, or you may be able to apply rewards directly to your account as a statement credit.1
  • Cover 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 more flexibility.
  • Get gift cards. Some issuers let you redeem your rewards for gift cards to use at your favorite retailers.

With Capital One, you can also use your rewards to shop at Amazon.com. Simply link your eligible card and pay using your miles or cash back rewards at Amazon.com.

Or you can use your Capital One rewards with PayPal Pay with Rewards. Link your rewards card to PayPal, and apply your miles or cash back on eligible purchases when you check out at millions of places online, like Target®, Apple® and The Home Depot®. It’s a great way to use your rewards at many of the spots you already shop.2

Can Rewards Be Lost?

There are some circumstances in which you can lose credit card rewards. For example, with Capital One, your rewards are yours for the life of your account. But if your account is closed, you’ll lose any rewards you haven’t redeemed.

And to redeem your rewards, your accounts must be in good standing. That means they can’t be suspended, restricted, delinquent or in default. 

Choosing the Right Rewards Card

To enjoy the most rewards from your credit card, consider choosing cards that match your spending habits. Whether you’re a globe-trotting adventurer, an avid foodie or someone who wants to be rewarded for everyday purchases, there’s a rewards card out there for you. 

And remember, paying your statement in full every month can help you avoid interest charges and other fees. And that can help you get the most value from the rewards you earn. 


1Account credits lower your account balance but do not count toward your minimum monthly payment obligation.

2PayPal Pay with Rewards is available to eligible Venture, VentureOne, Quicksilver, QuicksilverOne, Savor, SavorOne, Spark Miles, Spark Miles Select, Spark Cash, Spark Cash Select, Spark Classic, and Journey Student account holders with accounts open and in good standing. Visit www.paypal.com/capitalone for additional details.

Learn more about Capital One’s response to COVID-19 and resources available to customers. For information about COVID-19, head over to the Centers for Disease Control and Prevention

Government and private relief efforts vary by location and may have changed since this article was published. Consult a financial adviser or the relevant government agencies and private lenders for the most current information.

We hope you found this helpful. Our content is not intended to provide legal, investment or financial advice or to indicate that a particular Capital One product or service is available or right for you. For specific advice about your unique circumstances, consider talking with a qualified professional.

Capital One does not provide, endorse or guarantee any third-party product, service, information, or recommendation listed above. The third parties listed are solely responsible for their products and services, and all trademarks listed are the property of their respective owners.

Related Content