There’s no set rule regarding redeeming your credit card rewards, but you should consider things such as expiration dates and if you’re planning on closing the card in the near future.
Whether you’re earning points, miles or cash back, you can use them for anything from travel to merchandise to statement credits to cold, hard cash.
You can even find a rewards card that fits your spending habits, allowing you to maximize your points or cash back just by making everyday purchases.
A lot of people wonder when they should redeem their awards, so we asked some experts for their thoughts. A great rewards credit card can be invaluable, so make sure you make the most of yours by redeeming those rewards at the best possible time.
See related: How to get the most from rewards credit card points
Why you should save your rewards
There are definitely reasons for saving your rewards.
Say you’re planning a vacation or making a big purchase in the future – you probably want to let them stack up until they can make a real dent in what you’re buying.
But be very careful, however, about how long you save your rewards.
“At a moment’s notice, credit card rewards can expire, so if you try to hold out for too long, you can lose it all,” said Mark Nicholson, marketing director at the website Match Financial.
David McHugh, CMO of Crediful, also stressed that the most important time to redeem your credit card rewards is before they expire.
“It may sound common-sense to use it before you lose it,” he said, “But so many rewards are lost each month because people forget to use them.
McHugh suggested finding out what your financial institution’s schedule for rewards is and set a reminder for when they expire so you can use them before that.
Alternatively, he said, if your credit card allows it, set up an automatic credit for your rewards to deposit cash into your account once the point balance reaches a certain threshold.
“Automatic rewards credit is a great way to set it and forget it,” McHugh pointed out.
Why you should use your rewards now
There are also lots of reasons to use your rewards now, and not just because they might expire.
If you’re about to cancel your card or you’ve had it a long time but haven’t used it, it’s probably best to redeem your rewards soon.
Leslie H. Tayne, debt attorney and founder of Tayne Law Group, strategizes with clients to help them build their credit scores, pay off debt, build savings and create financial opportunities.
She noted that redeeming rewards depends on what kind you’re earning, your spending needs and your plans for the card.
You should redeem your credit card rewards as soon as possible if you plan on downgrading or canceling your card and the rewards you earn aren’t tied to a hotel or airline loyalty program, she recommended.
But if you let your rewards sit and you decide to cancel your card, you could lose them. For example, if you have American Express Membership Rewards, unused points are forfeited when the card is closed.
If you have an airline specific card, such as the Southwest Rapid Rewards® Plus Credit Card, you can typically cancel the card without losing rewards, since the miles earned are held by the airline and not the card issuer.
If you have a cash back card such as the Discover it® Cash Back, it may be a good idea to build up your earned cash back for gift card redemptions.
By opting for a gift card instead of a statement credit or a direct deposit credit, you can save even more, Tayne pointed out. For instance, Discover offers an added bonus on gift cards you buy with rewards, which increases the value of your cash back.
You should also redeem your credit card rewards if you haven’t used your card in a while, she said.
For instance, your rewards balance on a Citi® Double Cash Card will expire if you haven’t earned rewards on purchases or payments for 12 months.
See related: How to donate unused miles or rewards points
Cash back doesn’t increase in value
Ted Rossman, industry expert at CreditCards.com, said that because cash back is unlikely to get more valuable over time, he redeems his frequently.
“For example, once I’ve accumulated about $25 or $30 worth of cash back on a card, I tend to redeem for a statement credit,” Rossman said.
Another idea is to redeem every month or two, especially since most cash back cards post their rewards only once per month, Rossman added.
Rossman said there’s no real advantage to stockpiling cash back rewards. He said his $25 to $30 threshold is just enough to use on something substantial.
“I could cash out for $5 or $10 but that just feels so low and I’d be doing it so frequently – for me, around $25 is a happy medium, and that works out to redeeming about once a month,” Rossman said.
And if you happen to be short on cash due to being laid off from your job, you might want to redeem your rewards or cash back to help in that situation.
Some people view their credit card rewards as a backup emergency fund of sorts, Rossman said.
“If you’re sitting on a stockpile, it makes sense to turn it into cash, particularly if you’re unemployed or otherwise struggling,” Rossman said.
In this situation, he said, you shouldn’t hold out for the absolute best value – like a free first-class flight – because those points can do more for you right away in the form of cash.
See related: Should you book your rewards travel now or wait?
Remember these tips for redeeming rewards
Always be mindful of your rewards expiration dates because some issuers have a “use it or lose it” policy that requires you to redeem your points within a certain time frame, or your balance will go back to zero.
Familiarize yourself with all of your redemption options, said Schimri Yoyo, financial advisor and agent at the life insurance comparison site QuickQuote.
For example, he said, many credit card companies offer various rewards options with differing “price” options. The more extravagant the reward, the more points it will cost you to redeem.
Also, make sure you have a thorough understanding of the terms and conditions of each redemption option, he mentioned.
Last, Yoyo suggested, always be on the lookout for opportunities to increase your rewards balance.
Credit card companies are famous for running monthly or quarterly promotions to encourage you to use their cards.
These promotions can include earning an extra 5% cash back for using your card at select restaurants or the opportunity to double or triple your rewards points for buying gasoline with your card.
If you’re close to crossing a desired rewards threshold, it would be smart to take advantage of such promotions to help you reach your destination, Yoyo said.
Of course it’s really up to the cardholder when they want to redeem their credit card rewards.
But remember that because of rewards’ expiration dates and redemption thresholds it can get tricky to figure out when they are most valuable.
Redeeming at just the right time will help you get the most value out of your rewards.