The Best Use for Credit Card Points
A points credit card earns you points when you make eligible purchases with the card. It is one of the most popular types of rewards credit card, along with cash back rewards cards and travel miles cards. Points earned with a points credit card can typically be redeemed for discounted or complimentary travel, merchandise, gift cards, statement credits, or more.
So, given that points can be redeemed for multiple rewards, is there a best way to use them? Well, “best” is obviously a subjective term, so what it really comes down to is how much value you’ll get for your points. But getting the most out of your points is also dependent on the particular interests and priorities of the points redeemer. For example, if you acquired enough points for free airfare to a domestic destination but have no interest in travelling, then redeeming your points for travel clearly isn’t the “best” use of them for you.
Here are some of the more common uses for credit card points and some of the things you may want to consider if you’re ready to redeem them and want to maximize their value.
Travel, according to WalletHub research, has been the best way to use credit card points since 2014. This is because redeemed points typically provide more value for travel than with other redemption options such as gift cards, merchandise, or cash back rewards. This tends to be especially true if a points credit card is travel-related and points are redeemable for a wide array of travel rewards, such as discounted or complimentary airfares, hotel stays, car rentals, cruises, and more.
Just keep in mind that the credit card issuer ultimately sets the value of the points it awards and how many points it takes to earn specific rewards, so what you’ll actually get for your points is completely up to them. Also, be aware that there may be blackout dates, expiration dates on your points, or other restrictions dictating how, when, and where you can travel using redeemed points.
2. Cash Back Rewards
If your points can be redeemed for cash back rewards in the form of a statement credit, check, or even a direct deposit into your bank account, then they could help offset the cost of your credit card purchases. But just how viable this option is depends on the cash value the card issuer assigns to its points.
For example, if your credit card earns you one point for each dollar spent on eligible purchases, and card issuer designates that each point redeemed is worth one cent, then that card essentially earns you 1% in cash back rewards. Sounds pretty good, right? But, unfortunately, not all credit card issuers value a point at one cent. Some may value it higher, while others may value it lower. In their research, WalletHub evaluated six major credit cards and found that the cash values they assigned to a point ranged from 0.67 cents to 1.3 cents, with an average cash back reward value of 0.977 cents per point.
So, if your points credit card offers an airline ticket valued at $200 for 20,000 points, that means you’re getting one cent per point ($200 ÷ 20,000) if you redeem them for that ticket. But, if that same card only offers a $150 statement credit if you redeem those 20,000 points for cash back rewards, then you’re only getting .75 cents per point ($150 ÷ 20,000). In the second scenario, you would get more bang (value) for your points by redeeming them for the airline ticket.
Merchandise may or may not be a good option for redeeming points, again depending on how the card issuer values its points. The good news is that it’s relatively easy to check the price of merchandise to determine if you’re getting good value for your points.
Let’s say that, with your points credit card, 2,500 points can be redeemed for a pair of Brand X slippers or a $25 statement credit. If you research that pair of slippers online and find that they can be purchased for $20, then you would actually get more value ($5 more) for your points by redeeming them for a statement credit. Then, just buy the slippers for yourself and save five bucks. On the other hand, if that same pair of slippers retails for $30, then using your points for the slippers would provide more value (again, $5 more) than redeeming them for a $25 statement credit.
4. Gift Cards or Shopping Credit
Gift cards and shopping credits with select retailers have an assigned monetary value, so it’s even easier to calculate if they’re a good value for your points because you don’t have to research costs.
Let’s say your points are worth one cent each. Well, then 2,500 points should be redeemable for a $25 gift card or shopping credit with a designated retailer like Amazon or Walmart. However, if your card issuer requires 3,000 points for that $25 gift card or credit, then it’s probably not the best option. Particularly not if those 3,000 points can earn you a statement credit or travel or some other reward that’s worth more than $25.
5. Charitable Donations
If philanthropy and giving back are important to you, donating points to charity may be a good option—especially if you don’t have anything specific in mind for your points but would like to help out a worthy cause. Many points credit cards offer you the option to donate a designated amount of points to select nonprofits. Doing so is typically just a matter of logging in to the card issuer’s reward portal and then navigating to their charity-donation page, where you’ll then be presented a list of organizations eligible to receive your donation. Once you’ve selected a charity that appeals to you, just enter how many points you’d like to donate and complete the transaction.
If your points are about to expire due to a lack of account activity, but you don’t want to redeem your points until you earn enough of them for something you really want, making a smaller donation to charity may qualify as account activity. This would then reset the clock and keep the remaining balance of your points active so you don’t lose them.
Know the Rules
Knowing what’s actually involved in redeeming your points could be very helpful in figuring out which redemption option is best for you. So, before you pull the trigger on redeeming your points, be sure to read the fine print of your cardholder agreement. It should clarify the process as well as the rules, regulations, and exceptions that apply to their points program. If you’re still confused, don’t hesitate to contact your credit card issuer to ask them to clarify.
They’re your points, after all, and you worked hard to earn them. Doing a little legwork and maybe even a bit of math could go a long way toward getting the most out of them.