Most credit cards today offer some kind of rewards program to cardholders in the forms of points, frequent flier miles, or cash. These incentives help credit cards attract new customers and give consumers an incentive to make purchases with a credit card rather than cash.

Credit card rewards are paid back to cardholders as a percentage of the total amount changed to the credit card.

The most basic credit card rewards programs pay cardholders 1% back on every purchase. For example, if you charged exactly $500 to a credit card every month for a year, your total purchases would equal $6,000. One percent of $6,000 would equal a $60 reward.

The American Express Clear Card offers this simple no-guesswork reward system.

Some credit cards provide a higher reward payout for certain purchases. For example, some cards may pay between 2% and 5% in rewards for purchases made at specific stores (like the Starbucks Duetto Card or Borders 3.2.1. Card).

Other credit cards pay a higher reward for purchases in specific categories such as gas or groceries.

Some cards also offer ways to increase the amount of a reward by spending it in certain ways. For example you could turn a $20 cash reward into a $40 gift card at certain stores or restaurants, which is common with the Chase Freedom Card and Discover More Card.

While every credit card reward program works slightly differently, most calculate your rewards at the end of every month and display your reward balance on your statement. With most credit cards, your rewards can be redeemed once you reach the $20 or $25 level.

Thanks to the heavy competition among credit cards, cardholders can enjoy rewards programs without paying an annual fee. Many airline cards, however, still charge annual fees for the ability to earn multiple frequent flyer miles for every dollar spent.

For somebody charging thousands of dollars a year and flying that particular airline frequently, the mileage s rewards earned can far surpass the cost of the annual fee. The Delta SkyMiles Card is an example.

Credit card rewards are a good value for cardholders who do not carry a balance on their credit cards. Since you will be charged an interest rate of more than 10% on any credit card balance, rewards do not make up for the interest rate you pay.

Additionally, on most credit cards, cardholders do not earn rewards on the interest and fees paid or cash advances.