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Redeeming reward points for cash: Is it worth it?

You often have the option of receiving cash for points, but it is probably a poor value

Summary

Travel rewards credit cards usually let you redeem points for cash – but if cash is what you want, a solid cash back card may give you a better value.

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Dear Cashing In,

Can you cash in your points for money? – Peggi

Dear Peggi,

In general, reward cards come in two different forms: cash back and travel.

With cash-back cards, as the name implies, you earn money back based on your charges. In some cases, you earn a flat rate – usually between 1 percent and 2 percent. In other cases, you earn a variable rate based on what you charge – like, say, 3 percent on groceries, 2 percent on gas and 1 percent on everything else.

Travel rewards come in different forms, too. Usually, they give you either miles – like an airline card – or points, which can be redeemed for travel and for other goodies.

Check out all the answers from our credit card experts.

Ask Tony a question.

See related: How to plan your summer rewards travel now

Cashing points for cash: usually, a losing game

If you like receiving cash back on your purchases, the obvious approach to take is to apply for a cash-back card. Usually, the cash comes back to you in the form of a statement credit, though in some cases you might be able to request an actual check if that’s what you prefer.

With travel cards, you have many more options on redeeming points. Often, one of those options includes redeeming your points for cash. This might sound like an attractive option, and it is nice to have the flexibility to use points the way you want.

However, in almost every case, exchanging points for cash with a travel card is a poor use of points, because the value you receive from a cash redemption is much lower than other options.

For example, look at one popular travel card, the Capital One Venture Rewards Credit Card.

  • It earns 2 miles per dollar spent, and then each point can be redeemed for travel purchases or to offset past travel expenses at a rate of 1 cent per mile.
  • In other words, if you charge $5,000, that earns you 10,000 miles, which is worth $100 toward travel.

Capital One Venture also gives you the option of redeeming for cash. But instead of the 1 cent per mile that you receive for travel, you get only half a cent for cash. Those 10,000 points are worth only $50 in cash.

Many other cards work the same way. For instance, if you have a card that earns Chase Ultimate Rewards points, those can be redeemed for cash at a rate of 1 cent per 100 points.

That means 10,000 points can be redeemed for $100. But you can receive a lot more value out of those points by transferring Chase Ultimate Rewards points  to airlines or hotel programs.

Travel cards can give you flexibility in redeeming rewards, but they are not really set up to be a good value for people who want cash.

See related: Best travel credit cards

Redeem travel points wisely

If you need the cash, of course, by all means redeem the points. But in this case, it might be wiser to use the points for travel purchases, if you have any coming up. Note that in many cases, you don’t need to hold your points for a big vacation – ride-sharing expenses on Uber and Lyft typically count as travel purchases. Those would give you a better value than cash.

If it is cash you really want, your best bet is to find a solid cash-back card. It will give you a much better return on your spending than a card that isn’t really equipped to be a good value for giving you money.

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Credit Card Rate Report Updated: June 19th, 2019
Business
15.61%
Airline
17.54%
Cash Back
17.68%
Reward
17.57%
Student
17.79%

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