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Rewards

How to redeem credit card rewards

A guide to getting the most value from your points and miles

Summary

Scoring that rewards credit card is step one, earning rewards with it is step two – but redeeming them is where the payoff happens. Here’s what you need to know to get the most value from your rewards.

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If you use rewards credit cards regularly, it’s only a matter of time before you’re ready to start redeeming your points, miles or cash back. But it can sometimes seem as challenging to redeem your rewards for maximum value as it was to earn them in the first place. 

Since different rewards programs call for different strategies, here’s a breakdown of how to redeem each type of credit card rewards.

Types of credit card rewards programs

There are several types of rewards you can earn with your credit cards, including cash back, points and miles. If you’re new to rewards and keen to travel, you may be eyeing your first travel rewards card. Cash back is often the easiest type of reward to redeem, but each card issuer can offer different options to redeem your rewards. 

Points and miles are the terms most commonly used in loyalty programs, and each one will have its own rules for redeeming rewards. Airline miles are very popular, but they can be difficult to redeem for award flights at the lowest mileage levels.

Hotel points can have their challenges, but are usually somewhat easier than airline miles. Then there are credit card points that can be redeemed for a variety of rewards, and sometimes transferred to airline miles or hotel points, depending on the program.

How to redeem cash back

How you redeem your cash back rewards depends on the rules of the card issuer’s program. For example, Capital One offers several cash back reward cards, and you can redeem your rewards as a check or apply the amount to your account as a statement credit. You can request your cash back online or using Capital One’s mobile app. In fact, you can configure your account to automatically redeem your rewards every time you earn a preset amount, starting at $25. You can also redeem your Capital One cash back for other options including gift cards and Amazon.com purchases, although your rewards can be worth more or less than you would have received as a check or statement credit. 

Capital One’s options for redeeming cash back rewards are similar to other card issuers’ options, including U.S. Bank, Bank of America®, American Express and others.

A notable exception is the Costco Anywhere Visa® Card by Citi. With this card, your cash back rewards are only available in February as the last page on your February statement or via email if you have chosen the paperless option. You can use your certificate to make a purchase at a Costco store, or you can visit their customer service desk to redeem it for cash. 

How to redeem credit card rewards points

Many credit cards have their own, proprietary loyalty programs that issue reward points. The most popular programs include Chase Ultimate Rewards, American Express Membership Rewards and Citi ThankYou Rewards. When you’re ready to redeem your rewards with these programs, you have a wide range of options including cash back, gift cards, merchandise, travel reservations, charitable donations and credits to stores like Amazon.com. 

Many of these programs also offer you the option to transfer your rewards to airline miles or hotel points with select travel partners. When you’re able to find the ideal travel partner to transfer your rewards to, and then redeem those points or miles for expensive flights or hotel rooms, you can receive significantly more value than you would have if you’d redeemed your rewards for cash back or other options. 

How to redeem hotel points and airline miles

Hotel rewards programs and airline frequent flyer programs offer points and miles that can be confusing to redeem. With airline frequent flyer programs, it can be extremely challenging to redeem your rewards for award flights at the lowest mileage levels. That’s because the major carriers – American, Delta and United – use variable pricing systems that increasingly correspond with the cash price of new reservations. 

For example, it was once easy to redeem 25,000 miles for a domestic, round-trip ticket in economy, regardless of how much the ticket was selling for. But today, you could be charged more than twice as many miles for an expensive ticket or less than half the number of miles for a highly discounted ticket. Or you might find a few tickets available at a low mileage price, but not as many as you need. 

Other carriers, however, such as JetBlue and Southwest, have frequent flyer programs that have more or less fixed values to their rewards. With these programs, you can redeem your rewards for any unsold seat, and the number of points required directly correlates with the price of the ticket. This makes it simple and easy to book as many awards as you want, but you never receive more than the nominal value of your points. 

To make matters more complicated, the major U.S. carriers allow you to redeem your miles on flights operated by foreign carriers, which can mean tremendous value when traveling internationally. Most airline programs also offer options to redeem your points or miles for other rewards, such as merchandise, gift cards, hotel reservations and rental cars. But these non-travel options rarely offer as much value as award flights. 

When it comes to redeeming hotel rewards, you’ll often receive the most value when using your points during the peak season, when rooms are most expensive. However, you may need to book these award stays in advance in order to find available rooms you can book with your points. 

How to maximize credit card rewards

There are many ways to get the most value from your credit card rewards. Here are some key factors to keep in mind:

  • Choose a rewards program that matches your spending.
  • Review your card’s terms and conditions.
  • Score the sign-up bonus.
  • Use the issuer’s portal.
  • Take advantage of promotions.
  • Use those built-in card benefits.

Choose a rewards program that matches your spending

First, make sure your rewards match your spending. For instance, if you’re a suburban family that drives a lot, you will want a card that offers you bonuses for purchases like gas and groceries.

But if you live in the city and go out often, you’re probably better off with cards that reward dining and entertainment expenses. And small-business owners have an entire range of cards that they can choose from to use for their company charges. 

Review your card’s terms and conditions

Read the fine print before you apply, then review terms and conditions regularly to make sure you’re meeting the spending minimums for a particular reward. Reward redemptions often hinge on spending minimums and time limits.

Score the sign-up bonus

One big reward redemption may be the sign-up or welcome bonus. Each credit card offers different bonuses and can have limits on the amount of purchases necessary to qualify for the bonus. Often there’s a time limit for reaching that purchase limit – such as charging $3,000 in the first three months of activating the card. Consider setting an alert halfway through that period to make sure you’re on track to hit that spending minimum.

Take advantage of promotions

You’ll also want to take advantage of promotions offered by your rewards card. Some cards will give you offers to earn bonus rewards for particular purchases, while others will give you bonuses for things like referring a friend or adding additional authorized cardholders. 

Use the issuer’s portal

Many card issuers also offer shopping portals that you can use to increase the rewards you earn. You can easily access these portals by logging on to your card account on the issuer’s website before making purchases, thereby snagging an extra bonus reward. When it comes to booking travel through a card’s travel portal, those discounts can be significant.

Use those built-in benefits

You’ll also want to take advantage of your card’s built-in card benefits. Your card may offer you statement credits at featured retailers and travel perks such as priority boarding of your flight or hotel room upgrades. While not technically rewards, these offers can greatly increase the value of your card. 

3 common mistakes to avoid with rewards cards

While rewards credit cards present great opportunities to earn rewards, there are a few mistakes you should take care to avoid. One or more of these blunders can reduce or even erase your gains fast.

1. Missed or late payments

You can incur costly interest charges and fees if you make a late payment, as well as endanger your credit score. So, your first priority should be to always make your payments on time, preferably in full to avoid interest charges. 

2. Missing the sign-up bonus deadline

Another common mistake is to miss out on your new account bonus by failing to complete the card’s minimum spending requirement in-time. Remember, these time limits are based on the day your card was approved, not when it was shipped, received, activated or used the first time. Nothing more depressing than checking that third statement on your new credit card and realizing you were $80 short of scoring the 80,000 bonus points.

3. Trading travel points for cash or merchandise

Finally, one of the biggest mistakes reward card users tend to make is redeeming travel points for cash or merchandise. These cash back or merchandise rewards sometimes offer as little as a half a cent in value per point or mile redeemed, as opposed to several cents in value for premium class award flights or hotel rooms during peak season. 

Bottom line

Savvy credit card users know that how you redeem your rewards is as important as how you earned them. By taking the time to study each program and learn how best to redeem your rewards, you can be sure to get the most value possible from your credit card points, miles or cash back. 

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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