There are three types of rewards cards: travel rewards credit cards, cash back credit cards, and store credit cards.

Note that some of the best rewards cards technically fall into multiple categories, but there is always usually only one category that best describes each card. The Chase Sapphire Preferred® Card is a popular example. It earns points that you can use for travel, cash back, or in-store gift cards. However, his points are more valuable when used for travel, and he earns bonus rewards on travel purchases. For these reasons, it is considered a travel credit card.

Travel Rewards Credit Cards

A travel credit card earns you rewards that you can redeem for travel. This can include airline tickets, hotel stays, vacation rentals, car rentals, cruises and more. Travel credit cards generally offer special travel benefits and no overseas transaction fees. Most come with an annual fee, however.

There are several ways to use the travel rewards based on the card. Some cards allow you to redeem rewards at a fixed rate for cash travel purchases.

Airline and hotel cards earn rewards in the supplier’s loyalty program. United Airlines cards earn miles in the United MileagePlus program, Hyatt cards earn points in the World of Hyatt program, etc. With this type of travel rewards card, you can use your rewards for reservations through the loyalty program.

Some cards from the major credit card rewards programs offer transferable rewards. This means that you can transfer your points to any partner in the card issuer’s rewards program. Let’s say you have the American Express® Gold Card. You can send rewards to airline and hotel partners in the American Express Membership Rewards program.

Compare other choices: Explore The Ascent’s Best Travel Reward Cards

Credit cards with cash back

A cash back credit card earns rewards in the form of cash back. There are several ways to redeem rewards for cash.

Almost all cash back cards allow you to apply your rewards in the form of statement credit to your credit card account. If you have $ 100 in cash back, you can use it to lower your credit card bill by $ 100. A word of warning: Credit card companies generally don’t view Cash Back as a substitute for your minimum payment. If there is a balance on your cash back card, you must always pay at least the minimum amount.

Many cash back cards also allow you to deposit money into your bank account or request a check.

Compare other choices: Discover the best cash back credit cards from The Ascent

Store credit cards

Store credit cards work a little differently than travel cards and cash back cards. There are many retailers that have their own store cards, and each retailer sets the rules with the cards they offer. This type of loyalty card is only recommended if you spend a lot of money in the store in question. For most consumers, cash back cards are the best choice.

Most store cards yield rewards that you can redeem for a gift card with that store. However, there are exceptions. Some store cards also offer cash back rewards, with the Citi Costco Anywhere Visa® Card being an example. Some store cards offer a discount on purchases instead of rewards.

There are two basic categories of store cards. Closed Loop Store Cards only work with this retailer and all other brands they own. Open Loop Store Cards can be used with other merchants. Some stores only offer one of the two, while others offer both. When stores offer both, they typically approve customers with lower credit scores for closed-loop cards. Applicants with better credit can qualify for open loop cards.

Here is an example of how it works. Let’s say you apply for a credit card with TJ Maxx. Any of the following can occur:

• You may be approved for the TJX Rewards® credit card. This is a closed loop card, which means you can only use the card at TJ Maxx and its other brands.
• You may be approved for the TJX Rewards® Platinum Mastercard®. This is an open loop card that can be used anywhere Mastercard is accepted.
• TJ Maxx could, of course, also refuse the request.