Each rewards program handles statement credits a little differently. Here’s what to consider when deciding if they’re the best way to redeem your rewards.
A recent trend in credit card rewards is increased flexibility in how you can redeem your cash back, points or miles. You can book travel, invest, get gift cards and more – but one of the most common ways a credit card company will issue rewards is as a statement credit.
Statement credits may seem simple, but they’re handled a little differently by each rewards program, and there’s a lot to consider when you’re trying to decide if they’re the best way to redeem cash back or other rewards.
See related: What is cash back?
What is a statement credit?
Put simply, a statement credit is money credited to your account. In its most basic form, a statement credit is not much different from a payment. Like a normal monthly payment, a statement credit is deducted from your card balance, reducing the amount of money you owe. But where cardholders are responsible for payments, credits come from either a merchant or card issuer.
How do statement credits work?
Statement credits are perhaps most familiar in the form of a refund. You return something and the amount you paid is credited back to you, effectively “erasing” the original purchase.
But not all statement credits come from refunds. Many rewards cards also allow you to redeem the points or miles you’ve earned as statement credits. While some cards allow you to use a statement credit to reduce your balance with no restrictions, others only apply credits to your account after you meet certain criteria or make purchases in specific spending categories.
Statement credits on cash back cards
Cash back cards usually make it easy to redeem your points as a statement credit. In most cases, all you need to do is meet the card’s minimum redemption criteria, then choose a statement credit as your redemption method. Once a credit is applied to your account, your card balance decreases accordingly.
If, for example, you were to spend $3,000 with a flat rate 1 percent cash back card, you’d earn a $30 credit; and if you were to redeem this entire credit, $30 would be deducted from your account balance.
While many cards give you the option to request your cash back in the form a check, some only allow you to redeem as a statement credit – so be sure to read your issuer’s terms carefully. After all, when you get your cash back as a check or direct deposit, the money is yours to spend or save as you’d like. With a statement credit, however, the funds are “trapped” in your account and only impact your card balance. If you stop using your card or close your account, you could lose any cash back or points you haven’t redeemed.
Statement credits on travel cards
While redeeming points for a statement credit is simple enough with cash back cards, other rewards cards can add a layer of complexity to the process. More flexible travel cards often allow you to request rewards as a statement credit, but many do so at a conversion rate that makes them much less valuable when redeemed in this form.
The Capital One Venture Rewards Credit Card, for example, allows you to book travel through the rewards center at a rate of 1 cent per mile. But if you redeem your miles for cash back as a statement credit, their value is cut in half to just 0.5 cents per mile.
If you prefer to redeem your rewards as a statement credit, make sure doing so doesn’t dilute the value of your points or miles, as each rewards program grants and values statement credits a little differently.
Statement credits for an introductory bonus
Statement credits also frequently appear as part of a card introductory or annual bonus, when issuers offer to reward you if you spend a certain amount of money within a given timeframe. The Blue Cash Preferred® Card from American Express, for example, offers a $300 statement credit after you spend $3,000 in purchases within the first 6 months of card membership. Instead of simply sending you a check for the amount you earn, however, American Express credits your account after you’ve met the conditions of the offer. Once received, the credit will cover the next $300 you charge.
Statement credits for card benefits
Many cards also award extra perks in the form of a statement credit. The United Explorer Card and Chase Sapphire Reserve, for example, each offer up to a $100 credit to cover the cost of a Global Entry or TSA PreCheck application.
In these cases, a statement credit is applied to your account only after you make the eligible purchase and cannot be used for anything else.
How statement credits work with the major rewards programs
Here’s how some of the major rewards programs treat statement credits:
|Rewards program||Can you redeem rewards as a statement credit?||Minimum redemption||Rewards rate when redeemed as a credit|
|Discover cards Cashback Bonus||Yes||None||1:1|
|Bank of America Cash Rewards||Yes||None ($25 for automatic redemptions)||1:1|
|American Express Membership Rewards||Yes||$25||1:0.6|
|Chase Ultimate Rewards||Yes||$20||1:1|
Should I redeem my points as a statement credit?
Once you know what a statement credit is and how it’s treated by your rewards program, you’ll probably wonder if it’s smart to redeem your points or miles in this form. While the answer will depend on your spending habits, goals and financial situation, it makes more sense in certain circumstances.
If you’re trying to decide whether you should redeem your points as a credit statement, consider the following:
- Are you going to carry a balance? If you’re not sure whether you’ll be able to pay off your balance in full by the due date, redeeming your points as a statement credit makes sense. You’ll knock a chunk off your balance and make it easier to pay in full and avoid interest charges. Keep in mind, however, that statement credits are not usually considered payments, so if you can’t help carrying a balance, you’ll still have to make a minimum out-of-pocket payment.
- Does your card offer an incentive for redeeming points as a statement credit? Some cash back cards offer redemption bonuses when you opt for a statement credit over “true” cash back in the form of a check or direct deposit. If that’s the case, and you plan to continue using the card, go with a statement credit to get more mileage out of your cash back rewards.
- Are your points worth less when redeemed as a statement credit? If you’re using a card with a more flexible rewards program, redeeming your rewards as a statement credit is likely possible, but not necessarily wise. Check your issuer’s terms to see if your points lose any value when redeemed as a statement credit. If 1 point is worth 1 cent when used for travel purchases, but only 0.5 cents when redeemed as a statement credit, you’re missing out on a lot of the value you’ve earned. If you have no interest in travel, see if you can get full value out of your points in a roundabout way, like redeeming points for gift cards at stores you frequent.
Other ways to redeem your credit card rewards
Many cards offer several other options for redeeming your rewards. In addition to statement credits, you may be able to redeem cash back, points, or miles for:
- A direct deposit – You can link your bank account so that when you hit “redeem,” that money goes directly to your account. For some, this is more satisfying than receiving a statement credit.
- A check – If you don’t mind waiting, many credit card issuers will mail a check for the value of your rewards.
- Gift cards – Some credit cards allow you to exchange your points or cash back for gift cards. Make sure that you’re getting the same or more value before you choose this option – sometimes the dollar value of gift cards is different from what you would get redeeming for a statement credit or direct deposit.
- Merchandise – Credit card issuers sometimes have shopping portals that give you the option to use your cash back or points to pay for merchandise. This is another option that you should approach with caution. Do the math to make sure you’re getting the same dollar value as you would with a direct deposit or statement credit.
- Travel – Travel redemption options vary from card to card, but there are two main methods, one of which is receiving a statement credit for travel purchases you’ve already made. The other is using the issuer’s portal to book travel, such as flights or hotels, online.
A statement credit is just one way you can receive bonuses and redeem the rewards you’ve earned. If you’re using a cash back card, it could be a smart, low-maintenance way to reduce your balance and build good spending habits. If you’re using a more flexible rewards or travel card, though, make sure redeeming as a statement credit still gets you fair value for your points or miles.