Rewards programs offer great opportunities to earn rewards on your credit card purchases. To get the most out of those rewards, you need to know the details about redeeming the cash back, points, and miles you’ve earned. The type of rewards you redeem will depend on the type of rewards you can earn with your card. There are three main types:
- Point card perks. These cards usually earn you at least 1 point per dollar spent, and some cards offer the option to earn and redeem credit card rewards as cash back or points.
- Travel rewards card. These cards allow you to earn travel rewards points, sometimes presented as “miles,” and tend to come with travel-related perks and benefits. Some travel cards partner with specific airlines or hotel chains, so if you’re a fan of a particular brand, you can maximize the points you earn with these cards.
- Cashback card. These cards give you a percentage of the amount of purchases you make on the card as points. Most cash back cards are either flat-rate, bonus category, or tiered rewards cards.
Here we look at how to use rewards like cash back, points, and miles to get the most value out of them.
How to use credit card points
If you’ve chosen a card with a points-based rewards program, you might be wondering what the difference is between points and cash: With cashback, you can easily redeem them for cash, but with points, you have more options and have to make more decisions to get the best value.
1. Visit your card issuer’s website
Points-based rewards can be claimed through your card issuer’s rewards portal, but the redemption value isn’t always the same with points-based rewards, as it is with travel rewards and miles rewards, but more on that later.
2. Check your exchange options
Options include everything from cash back, gift cards, and travel rewards to redemptions for online shopping. Each issuer has different categories, so be sure to do your research and choose a card that offers redemptions that fit your spending habits and lifestyle.
3. Compare the value of your points across different redemption options
Check your card’s points rating and think carefully about how to get the most out of your points. Bankrate makes this step easy by providing an up-to-date breakdown of different points values and issuers.
In many cases, one point is worth at least 1 cent. However, the value of credit card points varies depending on the issuer’s points system. For example, the Chase Sapphire Preferred® Card’s limited-time welcome offer allows new cardholders to earn 60,000 bonus points after making $4,000 in purchases in the first three months, which is worth $750 when redeemed for travel through Chase Travel℠.
Chase Ultimate Rewards points redeemed for cash are worth 1 cent per point, but points redeemed for travel through the Chase Travel Portal are worth 25% more (1.25 cents per point) on the Sapphire Preferred Card. Plus, according to Bankrate points valuation, Chase Ultimate Rewards points are worth about 2.0 cents per point when used for higher-value Transfer Partner travel.
4. Choose the most advantageous exchange option
The points game can be exhausting, but if you play it carefully, you can potentially reap more rewards. Remember, the type of redemption method is just as important as the monetary value of the points. If you choose to redeem your points for something you don’t really want just because they’re a little more valuable, you won’t get what you want from the rewards of your card.
How to use your travel rewards
Miles are generally treated similarly to points in how and what they can be redeemed for. The main difference is that these rewards are most valuable when used exclusively for travel. As with other reward types, redemptions of miles are initiated by the issuer.
1. Visit the issuer’s website
From there, you should be able to find your redemption portal and see how many miles and travel rewards you’ve accumulated.
2. Check your exchange options
When it comes to travel rewards, your redemption options will depend on the type of travel credit card you have. Typically, you redeem airline miles for flights and travel points for hotel stays, but you may also be able to put some of your rewards towards specific travel rewards. If you’re a frequent flyer who flies with a particular hotel chain or airline, you can earn reward points from hotel or airline cards that are affiliated with your chosen brand.
3. Be especially careful with high-value transfer targets
Some credit cards offer the option to transfer points or miles to airlines, hotels, and other travel partners that have partnerships with the issuer. The value may go up, down, or break even, depending on the program, but ideally the ratio is 1:1 or better. When transferring rewards to travel partners, it’s important to research the program details carefully to get the most value.
For example, the Capital One Venture Rewards credit card offers 75,000 bonus miles after you spend $4,000 on purchases within the first three months of account opening. Plus, you’ll get a one-time $250 Capital One travel credit in your first year of card ownership, which is worth $1,000 in travel when redeemed through the Capital One travel portal. However, Bankrate values Capital One miles at about 1.7 cents toward travel with Capital One transfer partners. This makes the current welcome offer worth an estimated $1,275.
4. Choose the most advantageous exchange option
In the Venture card example, to get the most out of your miles, you’re better off transferring them to partner airlines, booking travel through the Capital One rewards portal, or redeeming them for statement credits to cover travel purchases.
Redeeming for cash back is generally the worst thing you can do with your Capital One miles, as it drops the value of your miles to about 0.5 cents per mile. You can also redeem your miles for gift cards or purchases on Amazon.com or PayPal, but be aware that the value of your points will drop somewhat, to about 0.8 cents per mile.
How to use cashback rewards
Cashback cards are cards that give you cash back simply by swiping your card. The best way to maximize your cashback rewards is to get a card with a rewards structure that matches your general spending habits. For example, if you spend a significant amount on groceries each month, consider a card that offers rewards for shopping at supermarkets, grocery stores, and wholesale clubs.
Or maybe you’re interested in a cash back rewards card with rotating categories to maximize returns across different spending categories each quarter. If you do this, be sure to activate the categories as soon as possible so you don’t miss out on any rewards.
1. Visit your card issuer’s website
Once you’ve earned rewards through your purchases and accumulated enough cash back, redeeming your rewards is relatively easy. Your card issuer’s website will usually have a redemption portal where you can see the rewards you’ve earned and choose how you want to redeem them. You’ll also likely find information about the rewards structure that’s helpful to know before redeeming your cash back.
2. Understand the structure of your card’s cashback rewards
Each card has a different rewards structure, and the way you get the most benefit varies by card issuer. For example, the American Express Blue Cash Preferred® card offers 6% cash back at U.S. supermarkets (up to $6,000 per year, 1% thereafter), but the cash back comes in the form of Reward Dollars, which you can redeem as a statement credit. However, Reward Dollars cannot be used to pay off minimum balances. Additionally, Reward Dollars are different from Amex Membership Rewards points.
While cashback rewards essentially put cash back in your pocket, how you redeem it can make or break your gains.
3. Choose how you want to receive your cashback
Many card issuers allow you to receive cash back as a statement credit, direct deposit into your bank account, or a paper check. Some card issuers also offer redemption options like gift cards, tickets to concerts or sporting events, and charitable donations.
Remember: This is just one example among many, but it’s important to read the fine print on your card to find out the redemption options, rules, and restrictions for your specific card.
Things to be aware of when using credit card rewards
Every list of do’s must also include a list of what not to do, and advice on taking advantage of credit card offers is no exception. Here are some tips to remember when taking advantage of credit card offers:
- If you have a travel credit card, take advantage of its travel perks. When it comes to travel rewards, redemptions outside of travel purchases are generally less valuable. Paying with points or cash back conversions generally have less value compared to what you can get on travel.
- Act strategically Redeem rewards for gift cards. While many rewards programs offer a 1:1 value ratio when redeeming rewards for gift cards or merchandise, this isn’t always the case. The best time to redeem rewards for gift cards is when the issuer is offering a promotional discount.
- Please read the offer fine print. If you’re saving up points, miles or cash back for later, be sure to check the terms and disclosures to make sure you don’t lose them all. Some reward points and miles will expire if not redeemed within a certain time period.
Conclusion
The best rewards credit cards available today are designed to give you benefits if you use them responsibly: Rewards credit cards come with a variety of perks, including cash back, miles, and points, as well as welcome offers and sign-up bonuses.
But when it comes to credit card rewards, the value you get will depend on the issuer’s system and how you ultimately use them. To get the most out of a rewards credit card, read the card’s fine print and check Bankrate’s rewards rating to learn more about the value of your rewards.
