One of the best ways to get paid for using your credit card purchases is through rewards programs. You must understand the specifics of redeeming your accrued cash back, points, or miles in order to maximize your payout. The kind of rewards your card earns determines what kind of rewards you can redeem; there are three main types of rewards:
Cards with cash back. You get paid a percentage of the purchases you make with these cards. The most common types of cash-back cards are tiered rewards, bonus categories, or flat-rate cards.
Cards with reward points. Usually, these cards give you at least one point for every dollar you spend. You can choose to accrue rewards on certain cards and use them as cash back or points.
Cards for rewards on travel. These cards accrue points for travel rewards, which are occasionally displayed as “miles,” and typically have advantages and benefits linked to travel. If you have a preference for a particular airline or hotel chain, you can maximize your potential earnings with those travel cards that are co-branded with that brand.
Whether your rewards are in the form of cashback, points, or miles, we will investigate how to redeem them and maximize their value.
How to redeem cash back rewards
Obtaining a credit card with a rewards program that aligns with your overall spending patterns is the first step towards optimizing your cash-back benefits. For example, you might want to think about a credit card like the American Express Blue Cash Preferred® Card if you spend a lot of money on groceries each month because it offers 6 percent cash back at U.S. supermarkets (up to $6,000 per year, then 1 percent).
Alternatively, you might be better off with a cash-back rewards card that has revolving categories so you can maximize your return every quarter on a variety of purchases. Make sure to activate the categories as soon as possible if you do this to ensure that you don’t lose out on the rewards.
1. Go to your card issuer’s website
Redeeming your rewards is simple once you’ve made your purchases and have saved up enough cash back. Usually, the card issuer’s website has a redemption portal where you can view your points and select how you want to use them. A description of your rewards program should also be available; this information will come in handy before you use your cash back.
2. Make sure you understand your card’s cash-back rewards structure
The reward structure of each card is unique, and the ways in which you can gain the most will differ depending on the issuer. For instance, you really get cash back with the Amex Blue Cash Preferred Card in the form of Rewards Dollars, which you can use to get a statement credit. Nevertheless, you are unable to use your Rewards Dollars to settle the minimum amount owed. Moreover, Amex Membership Rewards points and Rewards Dollars are not the same thing.
Even though cash-back rewards practically put money back in your pocket, how you decide to profit from the return will determine how profitable your cash-back rewards are.
3. Choose how to redeem your cash back
Many card issuers will allow you to redeem your cash back with a statement credit, a direct deposit to your bank account, or a check payable to you. Aside from gift cards, tickets to sporting events and concerts, and even charitable donations, some issuers also provide redemption options.
How to redeem points-based rewards
Cashback and rewards based on points are not exactly the same. While cash back guarantees that you will receive money in your pocket in one way or another, points give you more choices and require more thought to ensure you receive the best value.
1. Go to your card issuer’s website
You can use the redemption portal provided by your card issuer to redeem point-based rewards, just like you would cash-back rewards. Remember that the value of your redemption varies when using point-based rewards. The same holds true for mileage rewards and travel, but more on that later.
2. Check out your redemption options
You may be able to redeem gift cards, cash back, travel benefits, and even online shopping credits. Since each issuer has a different set of categories, be sure to do your homework and choose a card that offers redemptions in line with your spending preferences and way of life.
3. Compare the value of your points through different redemption options
Examine the point value on your card and spend some time determining how to maximize the value of your points. Bankrate simplifies this process by offering current analyses of different point values and issuers.
One point is frequently equal to at least one cent each. Nevertheless, the value of credit card points varies based on the point system used by the issuer.
For instance, new users of the Chase Sapphire Preferred® Card can earn 60,000 bonus points as part of the current welcome offer after spending $4,000 during the first three months of the card’s availability. When you use Chase Ultimate Rewards to redeem it for travel, that is valued at $750.
Chase Ultimate Rewards points are worth one cent each when redeemed for cash through the Chase Ultimate Rewards portal; however, when using the Sapphire Preferred, points are worth twenty-five percent more, or 1.25 cents each, when redeemed for travel. Furthermore, based on Bankrate’s point valuations, Chase Ultimate Rewards points can be valued at approximately 2.0 cents when applied to high-value transfer partner travel.
4. Choose the redemption option that gives you the best value
Although playing the points game can be quite taxing, if you play it carefully, you may be able to obtain a lot more value for your money. Just keep in mind that the kind of redemption method you choose is just as important as the point’s monetary value. You won’t get what you want out of your card’s rewards if you decide to use your points for something you don’t really want just because it has a slightly higher valuation.
How to redeem travel and miles rewards
In terms of how and for what purposes they can be redeemed, miles and points are generally related. The primary distinction is that these rewards are most valuable when used for travel. Redeeming miles will begin with your issuer, just as it does with other reward categories.
1. Go to your issuer’s website
You ought to be able to locate your redemption portal from there and view the amount of miles and travel benefits you have amassed.
2. Take a look at your redemption options
Your options for redeeming travel rewards vary based on the kind of travel credit card you own. Generally, you can use travel points for hotel stays and air miles for airline tickets. You may also be able to use some of your rewards toward specific travel benefits. A hotel or airline card that partners with your preferred brand can likely offer you a significant amount of rewards value if you are a regular and devoted customer of that particular chain or airline.
3. Pay attention to high-value transfer partners in particular
Certain credit cards come with the ability to transfer points or miles to hotels, airlines, and other travel partners that are connected to your card issuer. Depending on the program, you may gain, lose, or break even on value, but a 1:1 ratio or higher is ideal. To ensure you receive the greatest value when transferring rewards to travel partners, it’s critical that you thoroughly examine the program details.
For example, after spending $4,000 on purchases within three months of opening an account, the Capital One Venture Rewards Credit Card offers 75,000 bonus miles, which can be redeemed for $750 through the Capital One Travel portal. However, according to Bankrate’s estimates, each Capital One mile is worth roughly 1.7 cents when used to book travel with a Capital One transfer partner. As a result, the current welcome offer would be valued at roughly $1,275.
4. Choose the redemption option that gives you the best value.
To get the most value out of your miles on this specific travel card, you’re better off using the Capital One rewards portal to make travel reservations or transfer your miles to a partner airline.
The worst thing you can usually do with your Capital One mile is to redeem it for cash back, as this reduces its value to approximately 0.5 cents per mile. Additionally, bear in mind that your points will lose some value and only be worth roughly 0.8 cents per mile when you redeem them for gift cards, Amazon.com purchases, or PayPal purchases.
What to look out for when redeeming credit card rewards
Recommendations on how to redeem credit card rewards are no different from lists of dos and don’ts. When it comes time to use your credit card rewards, bear the following advice in mind:
If you have a travel credit card, stay with travel rewards. Any redemption of travel rewards that isn’t related to travel purchases is usually less advantageous. Generally speaking, the conversions from points and cash back don’t compare favorably to receiving miles.
Consider carefully when to exchange gift cards. When redeeming rewards for gift cards or merchandise, many reward programs offer a 1:1 value ratio; however, this isn’t always the case. When the issuer is running a promotional discount, that’s the ideal time to redeem for gift cards.
Read the fine print about your rewards. Make sure you won’t lose any of your points, miles, or cash back if you’re hoping to save them for a later time by reviewing the terms and conditions and disclosures. If you don’t use certain reward points or miles within a specific amount of time, they may expire.
The bottom line
As long as you use your rewards credit card responsibly, the best ones on the market today are meant to work in your favor. Aside from accruing points, miles, or cash back, rewards credit cards offer a plethora of benefits such as sign-up bonuses or welcome offers.
However, the value will change based on the issuer’s points system and how you ultimately choose to use your credit card points when it comes time to redeem them. Read the fine print on your credit card carefully and visit Bankrate’s point valuations to find out the exact value of your points to make sure you get the most out of your rewards credit card.