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Cash Back, Points, or Miles: Get the Most From Your Rewards Card

If you're like a lot of Americans, you've recently noticed an influx of credit card offers in your mailbox.

And because many of the lenders sending out these offers are now attempting to maximize the chances that you'll sign up for a new account, the majority of these offers are for cards that are tied to some type of rewards program. The problem you'll probably face, though, is that there are a lot of different types of rewards. So which one is right for you?

The most popular types of rewards credit cards are those that offer cash back, points that can be redeemed for bonuses, or airline miles rewards. But choosing between the best credit card rewards for cash back and a rewards card that offers points and airline rewards can be tricky. The best thing you can do is to closely examine all the various offers you get for these cards to determine which rewards would give you the most return. This may include the value they provide in terms of points, the interest rate you would pay for carrying a balance from one month to the next and whether the latter would be more expensive than the benefits the former provides.

Most rewards programs offer benefits at a ratio of about 1 percent, but many also incentivize certain types of purchases, which can be a significant coup if you do a lot of your credit card spending in one particular category. For example, if you’re a frequent traveler and regularly purchase airline tickets on your account, getting a card that gives you an additional 1 or 2 percent for every purchase related to booking airline tickets and travel accommodations will carry higher dividends than other rewards programs that do not.

For this reason, it's important to go back through old credit card statements and examine your spending habits, then compare your findings with the offers you've received in the mail. If you can earn more points for purchases you've been making on your credit cards all along, then it may be a good idea to open a new account, particularly if you're in the habit of paying off your balance in full every month.

However, if you do tend to carry a balance from month to month, you should factor in the additional interest costs and how it will impact your finances, as rewards credit cards typically have higher interest rates than traditional credit card accounts.