When a family friend recently closed on his house, I noticed that he was paying for all of his “moving in” expenses with credit cards. Being the diehard saver that I am, I made a harsh comment: “Credit cards only cost you more in the long run.” His response was unexpected, but wise: “No, people who don’t know how to use credit cards properly will cost themselves more in the long run.”

That statement led to a long conversation about credit card rewards and how to actually make money off of the companies. I went home and did some research only to find that there are tons of credit cards that offer rewards; my issue was finding out which one was best for me. Here’s what I learned about how to get the most from credit card rewards:

Consider all the options

Don’t rely on a website that simply lists the best credit cards. Instead, compare different credit cards through sites such as Nerd Wallet or CreditCards. These sites have tools and surveys to help narrow down the options in order to make an informed decision. For example, Nerd Wallet allows users to search for credit cards by how they will be used (personal, business, student, etc.) and also breaks down the search based on the user’s monthly expenses. Similar search criteria are offered on CreditCards, and users can narrow searches based on credit history (excellent, good, bad, limited, etc.). CreditCards also lists cash back rewards cards with at-a-glance information in order to see each card’s essential details (how to apply, percentage of cash back, annual fees, etc.).

While getting the big picture, it also helps to know the language. CreditCards features a handy glossary that defines common credit card terms.

Determine priorities

Consider the various rewards that are available and decide which options make the most sense based on lifestyle and other factors. For instance, we love to see the world. There are credit cards that give us travel rewards for things like gas and hotel stays. Some credit cards even give us rewards if they are associated with an airline we already use for mileage benefits.

It makes sense to choose travel rewards if the biggest priority is traveling. But if cash back is of greater interest, it is better to look at a card that will give back a percentage of the money you’d already spend on things like dining out or shopping.

Both Nerd Wallet and CreditCards allow users to search and compare cards based on reward type (travel, gas, cash back, points, etc.).

Do the math

Compare all the rewards to the actual dollar amount to see if it is possible to truly make money. For example, if a card gives 2% cash back when spending $15,000 within 12 months, that means the cardholder would get $300 in cash back rewards.

Finally, look at how that money is going to compare to cards that offer mileage or points. Visit any airline website to see where you can travel for $300, determine how many miles would need to be used to take that flight and how much would be paid in order to use that amount of miles. If you get one mile for every dollar and a $300 plane ticket will cost 15,000 miles, it’s a good value. If the cost is more, cash back is a better option.

Here are a few examples of top credit cards and how they compare:

Capital One VentureOne Rewards Credit Card

  • 1.25 miles per dollar on every purchase, every day and no annual fee
  • One-time bonus of 10,000 miles after spending $1,000 dollars on purchases within the first three months (equal to $100 on travel)
  • Redeem miles for airline tickets, hotel rooms, car rentals and more
  • No limit on the miles you can earn and miles don’t expire
  • Fly on any airline, any time with no blackout dates
  • 0% intro APR on purchases until December 2013
  • No foreign transaction fees

Capital One Venture Rewards Credit Card

  • Earn double miles with every purchase toward free flights on any airline
  • Named “Most rewarding card if you crave free airline flights” by Money Magazine (May 11, 2011)
  • Earn 10,000 bonus miles when spending $1,000 on purchases within the first three months (equal to $100 in travel)
  • Redeem miles for any travel expense
  • No limit on the miles you can earn and miles don’t expire
  • Fly on any airline, any time with no blackout dates
  • No foreign transaction fees
  • $0 intro annual fee for the first year; then $59

Chase Sapphire Preferred

  • Earn 40,000 bonus points after spending $3,000 in the first three months ($500 toward travel rewards)
  • Two points per dollar spent on travel and dining at restaurants and one point per dollar spent on all other purchases
  • No foreign transaction fees
  • Receive a 7% Annual Points Dividend on all new points earned on purchases
  • Introductory Annual Fee of $0 the first year, then $95

Chase Freedom Visa

  • Earn $100 Bonus Cash Back after making $500 in purchases within first three months of opening account
  • 0% Intro APR for 15 months on purchases and balance transfers
  • 5% Cash Back on up to $1,500 spent between Jan 1 and Mar 31, 2013 at gas stations, drugstores and Starbucks
  • New 5% categories every three months
  • Unlimited 1% cash back on all other purchases
  • No annual fee and rewards never expire
Understand Credit Card Rewards to Maximize Benefits