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Cashing In Q&A columns

Options abound for redeeming reward points

Summary

Bank-related reward programs offer a lot of redemption choices. But consider how many points each kind of reward requires.

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Dear Cashing In,

Can I use my American Express card points for anything besides travel, like for buying a car or a gift card? – Rajrshwari

Dear Rajrshwari,

Over the years, one of the major consumer trends that has emerged is the idea of offering greater choices and more flexibility. Companies recognize that people have different tastes, and they have expanded their offerings to accommodate many individual preferences.

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Starbucks, for instance, reportedly can serve coffee in more than 80,000 different ways. Or next time you’re at the grocery store, see just how many Oreos flavors or versions of Quaker oatmeal are on the shelves.

The same trend is true with rewards. Surveys consistently show that cash back is by far the most popular credit card reward.

But typically, reward programs offer many, many more options. That doesn’t mean that anything you would receive by cashing in points would be equal in value to everything else. It does mean that you have a lot of choices and can redeem your points for a reward that is meaningful to you.

This is especially true of bank-operated reward programs, such as those run by American Express. But it is also true of even frequent flier programs run by airlines. A lot of people probably do not know that airline miles can be redeemed for rewards other than flights. For instance, airline miles can often be used for car rentals, hotel stays, newspaper and magazine subscriptions and gift cards.

But let’s look specifically at American Express. Its Membership Rewards program offers a lot of possibilities, and several American Express cards earn Membership Rewards. I find that the greatest value in using these points is in transferring them to one of 17 airline partners, including Delta, British Airways and Air Canada. (Remember that you can use British Airways miles for American Airlines flights and Air Canada miles for United Airlines flights.)

If that’s not your cup of tea, you have other options. You can book travel on the American Express portal and pay with points. For airfare, each point is worth 1 cent; for hotels, a point is worth 7/10 of a cent. That means a $500 plane ticket would cost 50,000 American Express points. A $500 hotel stay would cost 71,429 points.

You can select a gift card from among dozens of merchants, including ski resorts, major restaurant chains and hotels, movie theaters and retailers. I could find no gift card that was worth more than 1 cent per point. A $10 gift card to Bath & Body

Works, for instance, goes for 1,000 points.

You can also shop online at the American Express online store, which has a couple dozen merchants including Apple, GoPro, Callaway, Sephora and Bose. Used this way, the points are worth around half a cent each, so a $120 pair of Oakley sunglasses goes for 24,000 points.

Other pay-with-points options include Uber (1 cent per point) and Amazon (7/10 of a cent per point). You can also take a statement credit at a rate of 6/10 of a cent per point.

I’ve included these redemption rates because it can help you see where the value lies. If I have 25,000 American Express points, I’d prefer to transfer them to airline miles and try to book a $400-$500 round-trip plane ticket rather than redeem them for a $170 hotel room, a $250 Bath & Body Works gift card or a $150 statement credit. But that’s just me.

The only way I see to use American Express points for a car is to cash in 100,000 points for a $1,000 certificate with Mercedes-Benz for lease or purchase.

I think you’re out of luck with any other car brand. However, there are several cards that can help you buy a new car. Some of the best-known examples include the Capital One GM BuyPower card, the Toyota Rewards Visa, the Lexus Pursuits Visa and the American Express Mercedes-Benz card. They tend to offer rewards or annual certificates that can be cashed in at dealerships.

As you can see, you have many options when it comes to choosing how to redeem your rewards.

See related: Should you pay for merchandise with reward points?Transferring reward points to airlines often yields great value, How to transfer your miles and points into other reward programs

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In Cashing In Q&A columns

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How to evaluate the benefits, costs and your preferences to find the right rewards card

Published: May 17, 2016

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Credit Card Rate Report Updated: June 26th, 2019
Business
15.61%
Airline
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Cash Back
17.68%
Reward
17.58%
Student
17.79%

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