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Rewards

How do credit card points work?

Learn more about credit card points, how to redeem them and the rewards you might reap

Summary

Credit card points may be redeemed for a number of rewards. Find out how to make the most of your card whether it’s for cash back, travel, deals or donations.

The content on this page is accurate as of the posting date; however, some of our partner offers may have expired. Please review our list of best credit cards, or use our CardMatch™ tool to find cards matched to your needs.

There are over a thousand credit cards on the market today. Many are considered rewards cards, offering points, miles or cash back for all sorts of different categories.

You can maximize your spending if you use a certain card to buy groceries in the wintertime, or charge gas to a different card on your summer road trip. The more cards you have, and the more diversified your spending, the more complicated it can get. You might find yourself asking, who’s got time to figure all this out? And is it worth it?

Not everyone aspires to be a points maven, flying to Australia for free and trading points for hotel upgrades while you’re there. But with a little bit of effort, you can make your current credit card work better for you. Or maybe you can find a new card that gets you closer to where you want to go, whether that’s saving more money or traveling for less.

Read on to learn everything you need to know about credit card points and how to make them work for you.

What are credit card points?

Think of credit card points as a loyalty program designed to reward you for doing business with a particular merchant. Only in this case, the merchant is the card issuer.

“Points are an incentive for you to use the credit card,” says Kiara Martin, author of the blog Credit With Kiara.

If you have a credit card that gives you points for spending, you will earn points every time you charge a purchase to that credit card. The number of points you will earn varies depending on the card. So does what you can do with those points.

While some cards market cash back or miles instead of points, you can often redeem these in different ways, just as you can with points.

How are points calculated?

Generally speaking, you should earn at least one point for every $1 spent. But cards tend to distinguish themselves by offering more points on certain types of spending. Here are a few examples:

  • The Amazon Prime Rewards Visa Signature Card offers 5 points for every dollar spent at either Amazon or grocery store Whole Foods (now owned by Amazon).
  • The Blue Cash Everyday® Card from American Express gives 3% cash back (basically three points) on the first $6,000 worth of supermarket purchases per year, then 1%, and 2% cash back at U.S. gas stations and select U.S. department stores.
  • The Discover it® Cash Back has quarterly bonus categories. From July to September this year, for instance, it gives cardholders 5% cash back on up to $1,500 worth of restaurant and PayPal purchases.
  • The Capital One VentureOne Rewards Card offers 1.25 miles for every dollar spent, redeemable on all travel without blackout dates
  • Branded cards can offer even sweeter deals if you are willing to stick to that one brand. The Marriott Bonvoy Bold Card offers Bonvoy members up to 14X points on every Marriott stay.

Expert tips for scoring credit card points

If you have a credit card that rewards you for spending money, you’re going to rack up points whenever you use it. But if you’re strategic, you can accrue points more quickly. Here are some ways to do that.

Use the right card for the right purchases

If you’re about to order dinner from Postmates, charge it to a card that gives you extra points for restaurant purchases. That may be a different card than one offering bonus points this fall at home improvement stores. Still, a different card may get you extra cash back at the gas station.

You don’t have to – indeed, you probably shouldn’t, if you’re being careful with your finances – own a card for every category. But if you have more than one card, pay attention to the specific rewards attached to each and use it accordingly.

See related: Best rewards cards

Be aware of boosted redemption options

Some issuers will increase the value of your points if you redeem them in a certain way, often through the issuer’s own portal and usually for travel. The Chase Sapphire Preferred Card, for example, offers card holders 25% more for their points when they redeem them for travel purchases through Chase Ultimate Rewards (so 80,000 points, usually worth $800, is worth $1,000 in travel expenses).

Leverage sign-up bonuses

Many rewards cards offer bonus points for a minimum spend in the first few months of owning the card. If you use those bonuses strategically, you can earn big rewards on purchases you were already going to make.

“I always wait [to get a new credit card] until I have a big planned purchase,”  says J.J. Haglund, a travel blogger with a family of six who pays for much of their travel with points. He acquired his latest credit card right before he purchased a backyard playset for his kids and the big expense took care of the bonus requirement. Still, he says, “I’m only using my credit cards for things I would buy anyway.”

Don’t forget about referrals

Issuers want you to spread the word about their cards and referral incentives by offering cash or point bonuses. You can generally earn up to $500 cash back or up to 100,000 points by maxing out your refer-a-friend options with your issuer.

“I love referrals,” Haglund says. He saw recently that one of his airline credit cards was offering a sizable referral bonus. He put a link to the card on his blog and got a few referrals out of it – enough, he says, to pay for a couple free flights on the airline.

What can you do with credit card points?

Think of credit card points as bonus money. You can cash them in to pad your bank account or use them towards online purchases. You can even give them as charitable donations.

Making vacations cheaper

Paying for travel, such as airfare, is one of the most popular ways to use credit card points, and can often deliver higher redemption value per point depending on your issuer.

Haglund and his wife decided last December that they wanted to kick off the new year at Disney World. Thanks to their miles, though, they only had to pay for one round-trip ticket from Utah to Florida. In 2019, they also used points to finance a trip to Hawaii, paying for four of their six nights at a Marriott resort, as well as all their flights.

“Knowing how each program works, who the partners are, who the alliances are, that’s a complex game but there are these goldmines,” says R. J. Weiss, a Certified Financial Planner and founder of personal finance site The Ways to Wealth.

Weiss recently flew his family for free from Chicago to Florida to see his parents. He funneled his points to American Airlines via British Airways, where he was able to purchase American tickets for 7,500 points each way.

Cash back

Cash back cards allow cardholders to use their points as money, either as a statement credit toward the credit card bill, or as a check issued by the card issuer. Some cards that do not call themselves cash back nevertheless offer this option.

Many American Express cards allow users to convert points into a statement credit. Chase cardholders can use their Ultimate Rewards points as statement credits or have the card issuer deposit the money into their bank accounts.

Gift cards and online purchases

Card issuers will often run promotions that involve trading points for gift cards or using points to make purchases at merchants through the card issuer’s portal. If you choose to do this, Weiss says, make sure the deal you’re getting is at least as good as if you used the points for cash back or a statement credit.

Charitable donations

Some card issuers will allow you to use points as donations. Some Chase cardholders can use their points as statement credits to pay for charitable donations. Amex allows its cardholders to sign up for a program called JustGiving. They can then use points as a statement credit towards a donation.

See related: How to donate rewards points

How do you redeem credit card points?

Each card issuer has an online portal where you can sign in to redeem your points, whether that’s for cash back, a statement credit, travel or another type of reward. Weiss recommends researching your options before you redeem your points: “Make sure you are indeed getting good value.”

Do credit card points expire?

Sometimes. It depends on your issuer. Some issuers require you to have some activity on the card, whether that’s spending or redeeming some portion of your points, within a certain time period. This tends to be more true for branded airline and hotel cards. Most credit card issuers offer points that don’t expire as long as the account is open.

How do you pick which rewards credit card is right for you?

As with anything that involves your finances, start small. Dip one toe in the water. See how it feels. “Don’t start with a whole bunch of new credit cards,” Martin says. “Think: What do you need right now?”

Also, be aware that the better the rewards, the higher the credit score you will likely need to get approved for that card. And better rewards also often come with higher annual fees, sometimes ranging into the hundreds of dollars a year.

So consider what would be helpful to your life, and balance that against what you can afford. Then, once you get your new rewards card, don’t spend just for the sake of accruing more points.

“Credit cards can start off as something amazing,” Martin says, “but if you are not careful you can find yourself overwhelmed and drowning in debt.”

Beyond those cautions, experts advise asking yourself what you’re trying to achieve with a rewards card. “People should start with what is the experience they are trying to have, and then reverse-engineer how they can use points for that,” Weiss says.

And value is in the eye of the beholder.

“The person who is the clear winner,” Weiss says, “is the one who is having the experience they want to have, and is doing that with points.”

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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