Credit Card Rewards Made Simple: Tips to Make the Most of Points, Miles and Cash Back
Make the most of your credit card rewards this holiday season!
With the holidays fast approaching, it’s a smart strategy to use cash back, points and miles to help pay for gifts and travel expenses. But it can be hard knowing how to spend them. One reason is that each type has a different monetary value. For example, cash back is worth the dollar amount you earn with each purchase, while points and miles vary in value depending on how you redeem them. Here, Emily Thompson, a credit card rewards expert for ThePointsGuy.com, shares simple tips to help you pinpoint your best options.
Q “I’ve earned a lot of credit card rewards over the year. I’d like them to help cover holiday costs, but I’m not sure if I should use them for gifts or travel. What are my best options?”
Find the current values easily
When looking to get the most bang for your buck, the goal is to spend the least number of points or miles on purchases with the highest value, like electronics and airfare. “Each credit card system of rewards is different, so the first step is to log on to your card’s redemption portal,” says Thompson. For example, you can compare American Express point values at Global.AmericanExpress.com/rewards/ calculator. There, you can find out how many points you’ll need to buy directly on Amazon, how many points to get cash back for purchases and what your options are for using them for travel.
Get the most from your points
Program details differ from issuer to issuer, but there are a few rules of thumb about redeeming rewards that can help you make your best buying decision. Read on!
Planning to travel?
Typically, credit card companies offer the highest redemptions for points and miles when used for a trip. One reason is that credit cards often have partnerships with hotels and airlines. And to get even more out of your rewards, consider what your travel goals are, suggests Thompson. “Some people like to use their rewards to cover one big vacation, while others like to stretch their rewards across as many getaways as possible.”
Getting ready to buy gifts?
Look at the redemption value—how much your rewards are worth when spending them on purchases—before using points to pay at the checkout, Thompson recommends. “If your cash-back card offers 1 cent per point no matter how you use them, then paying for purchases can be a good option.” That’s because they won’t be worth any more than that if you save them for flights or hotels.
But some cards offer a lower value for your points when you’re paying at a merchant than when you’re redeeming them for cash back. For example, they might only cover $10 of your shopping bill, but be worth $15 when opting for cash back. “In this case, it’s better to pay for your purchase with your card, then redeem rewards as a statement credit to cover what you bought.”
Thinking about gift cards?
“If your rewards have multiple redemption options, redeeming them for gift cards typically yields a lower value,” Thompson says. For example, you might get 1 cent per point when using them for hotel stays, yet only .8 cents per point for gift cards. In this case, you’re better off not using them for gift cards since they’re worth more when you use them for other kinds of purchases.
But be sure to use them!
Nearly 70 percent of us are sitting on unused points, cash back and miles. “I encourage people to avoid getting too caught up in finding the ‘best’ value for their rewards. This can lead to analysis paralysis.” As a result, you could put off using them at all, so they end up sitting unused. “Decide what you need—it could be covering flights over the holidays or getting gift cards for your nieces. Even if you don’t get the very best value, simply using them adds value to your life, which is what I call a good redemption!”
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