How to redeem credit card rewards

Rewards programs offer prime opportunities to get a payout from your credit card purchases. To maximize that payout, you need to know the ins and outs of redeeming the cash back, points or miles you’ve earned. What kind of rewards you’re redeeming depends on the type of rewards your card earns, with three main types:

• Rewards points cards. These cards typically offer at least 1 point for each dollar you spend. Some cards offer you the option of earning and redeeming your rewards as either cash back or points.
• Travel rewards cards. These cards earn travel rewards points, sometimes presented as “miles,” and tend to come with travel-related perks and benefits. Some travel cards are co-branded with a certain airline or hotel chain, so if you’re loyal to a certain brand, those cards can maximize your potential earnings.
• Cash back cards. These cards reward you with a percentage of the purchases you make on the card. Most cash back cards are either flat-rate, bonus category or tiered rewards cards.

We will look into how to redeem your rewards, whether they’re cash back, points or miles, and how to get the maximum value out of those rewards.

How to redeem points rewards

If you choose a card with a points-based rewards program, you might be wondering what the difference is between points and cash. With cash back, you can expect simple cash redemptions, but with points, you’ll have more options and more decisions to make in order to get top value.

1. Go to your card issuer’s website

You can claim point-based rewards through your card issuer’s redemption portal. Keep in mind with points-based rewards, the value of your redemption is not always the same. The same applies to travel and mile rewards, but more on that later.

2. Check out your redemption options

Your options could include anything from cash back, gift cards and travel benefits to online shopping redemptions. Every issuer’s categories are different, so make sure you do the research and go with a card that offers redemptions that suit your spending habits and lifestyle.

3. Compare the value of your points through different redemption options

Take a look at your card’s point valuation and take the time to figure out how you can get the most value out of your points. Bankrate makes this step easy by providing up-to-date breakdowns of various points values and issuers.

In many cases, one point is equivalent to at least one cent each. However, credit card points have different values depending on the issuer’s point system.

For example, the limited time welcome offer for the Chase Sapphire Preferred® Card allows new cardholders to earn 75,000 bonus points after spending $4,000 on purchases in the first three months. That’s worth $937.50 when you redeem for travel through Chase Ultimate Rewards.

Chase Ultimate Rewards points redeemed for cash are worth 1 cent apiece, whereas points redeemed for travel through the Chase Ultimate Rewards portal are worth 25 percent more (1.25 cents apiece) with the Sapphire Preferred card. Additionally, Chase Ultimate Rewards points can be worth about 2.0 cents each when used toward high-value transfer partner travel, according to Bankrate’s point valuations.

4. Choose the redemption option that gives you the best value

Playing the points game can be exhausting, but you have the potential of getting much more bang for your buck when you play the game carefully. Just remember that the type of redemption method matters just as much as the monetary valuation of your points. If you choose to redeem your points for something you don’t really want just because the valuation is a little higher, then you’re not getting what you want out of your card’s rewards.

How to redeem travel rewards

Miles are typically treated similarly to points when it comes to how you redeem them and what you can redeem them for. The main difference is that these rewards will give you the best value when used specifically for travel. Just like with other rewards types, redeeming miles will start with your issuer.

1. Go to your issuer’s website

From there, you should be able to find your redemption portal and see how many miles and travel rewards you have saved up.

2. Take a look at your redemption options

With travel rewards, your redemption options depend on the type of travel credit card you have. You typically redeem air miles for airline tickets and travel points for hotel stays, or you might have the option to apply some of your rewards toward certain travel perks. If you’re a loyal and frequent customer with a particular hotel chain or airline, you can probably get a lot of rewards value from a hotel or airline card that partners with your brand of choice.

3. Pay attention to high-value transfer partners in particular

Some credit cards add the option to transfer points or miles to airlines, hotels and other travel partners affiliated with your issuer. Whether you gain, lose or break even on value depends on the program, but ideally, the ratio would be 1:1 or greater. It’s important that you really dig into the program details when you transfer rewards to travel partners so you can get the most value possible.

For instance, the Capital One Venture Rewards Credit Card offers 75,000 bonus miles after spending $4,000 on purchases within three months of account opening, equal to $750 if you redeem through the Capital One Travel portal. However, based on Bankrate’s valuations, Capital One miles are worth about 1.7 cents toward Capital One transfer partner travel. This would make the current welcome offer worth an estimated $1,275.

4. Choose the redemption option that gives you the best value

In the Venture card example, you’re better off transferring your miles to a partner airline, booking travel through the Capital One rewards portal or redeeming for statement credit to cover a travel purchase in order to get the most value out of your miles.

Redeeming for cash back is typically the worst thing you can do with your Capital One miles because doing so cuts the value to about 0.5 cents per mile. And while you can redeem miles for gift cards or purchases made on Amazon.com or PayPal, keep in mind your points will lose some value and come in at about 0.8 cents per mile.

How to redeem cash back rewards

A cash back card offers a simple, straightforward way to get money back when you swipe your card. The best way to maximize your cash back rewards starts by getting a card with a rewards structure that matches your general spending habits. For instance, if you spend a significant amount of money on groceries each month, you are going to want to consider a card that rewards you for shopping at supermarkets, grocery stores and/or wholesale clubs.

Or, you may be more interested in a cash back rewards card with rotating categories so you can maximize your return across an array of spending categories each quarter. If you do this, always activate the categories as soon as possible so you don’t miss out on those rewards.

1. Go to your card issuer’s website

Once you’ve made your purchases, earned your rewards and have enough cash back saved up, it’s quite easy to redeem your rewards. On the card issuer’s website, there will typically be a redemption portal where you can see what you’ve earned and choose how you want to redeem it. You should also find information about your rewards structure, which will be helpful to know before you redeem your cash back.

2. Make sure you understand your card’s cash back rewards structure

Every card’s reward structure is different, and how you benefit most will vary from issuer to issuer. For example, with the Blue Cash Preferred® Card from American Express, which offers 6 percent cash back at U.S. supermarkets (up to $6,000 per year, then 1 percent), your cash back is actually received in the form of Rewards Dollars that can be redeemed as a statement credit. However, you cannot use your Rewards Dollars to pay your minimum balance due. Furthermore, Rewards Dollars aren’t the same as Amex Membership Rewards points.

While cash back rewards essentially put cash back right back into your pocket, your cash back rewards are more lucrative depending on how you choose to cash in on the return.

3. Choose to how to redeem your cash back

Many card issuers will allow you to redeem your cash back with a statement credit, a direct deposit to your bank account or a check payable to you. Some issuers also offer redemption options like gift cards, tickets to concerts and sporting events or even charitable donations.

Keep in mind: This is one example of many, but it is important to read your card’s fine print to check your specific card’s redemption options, rules and limitations.

What to look out for when redeeming credit card rewards

Every list of do’s should has a corresponding list of don’ts, and advice on redeeming credit card rewards is no exception. Here are tips to keep in mind when you want to redeem your credit card rewards:

• Stick to travel rewards if you have a travel credit card. With travel rewards, any redemption outside of the realm of travel purchases is typically a less valuable option. The pay-with-points and cash back conversions generally don’t measure up to what you’d receive in travel.
• Be strategic about when you redeem for gift cards. Many rewards programs offer a 1:1 value ratio when you redeem rewards for gift cards or merchandise, but that’s not always the case. The best time to redeem for gift cards is when the issuer offers a promotional discount.
• Read the fine print about your rewards. If you’re trying to save up your points, miles or cash back for a later date, check the terms and conditions and disclosures to make sure you won’t lose them altogether. Some rewards points and miles expire if you don’t redeem them within a certain timeframe.

The bottom line

The best rewards credit cards available today are designed to benefit you as long as you use them responsibly. In addition to earning cash back, miles or points, rewards credit cards come with plenty of perks including welcome offers or sign-up bonuses.

However, when it comes down to redeeming your credit card rewards, the value will vary depending on the issuer’s system and how you ultimately decide to use them. To ensure you get the most value out of your rewards credit card, read your card’s fine print and check out Bankrate’s points valuations to learn more about what your points are worth.