This article was updated on June 25, 2018.

When you're new to the world of rewards programs, the sheer number of them can make your head spin. Just about all the major airlines, hotel chains, and credit card issuers have their own loyalty programs. Not all programs work the same, and points from one program aren't exactly comparable with points from another. It's easy to get overwhelmed trying to figure out the difference between Chase Ultimate Rewards points, Hilton Honors points, Capital One Venture miles, and all the other rewards points you can earn.

There's no need to give up on the idea of credit card rewards altogether, though. Although rewards programs look perplexing at first glance, they're simpler than you may think.

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Before we begin, a quick note on the terms "points" and "miles": These two terms are practically interchangeable in the context of rewards programs. In general, credit card programs and hotel programs use the term "points," while airline frequent flyer programs and some travel reward cards use the term "miles," but this isn't always true. For simplicity's sake, I'll use "points" in this article except when referring to programs that use miles.

Travel redemption options are the distinguishing feature

While there are dozens of rewards programs, there are two ways you can redeem points for travel. Some rewards programs only allow one method, while others allow both.

The first is to book travel in points. For example, you could purchase an economy ticket on a domestic flight for 25,000 points or a hotel stay for 20,000 points. The cash value of said ticket or hotel stay is irrelevant. Airlines and hotels typically give you the option to search for points bookings on their homepages. American Airlines has a "Redeem Miles" box you can check under its "Book Flights" tool, and Marriott has a similar "Use Rewards points" checkbox available when you enter your desired location and booking dates. Some companies, such as Hilton Hotels and Resorts, give you the option to toggle between prices in cash and points on their search results pages. 

The second is to book travel in cash, but pay using your points. With this option, your rewards program will value your points at a certain amount (1 cent per point is the most common valuation), and you can redeem those points toward the cash price of travel purchases. You do this either by shopping through the rewards program's travel portal and cashing in your points to make the purchase, or by making a travel purchase in cash, and then applying your points toward that purchase as a statement credit.

Most rewards programs offer one of the two redemption options above. American Express Membership Rewards, Chase Ultimate Rewards, and Citi ThankYou Rewards give you both options, making points in those programs especially valuable.

Now let's take a closer look at each option.

Booking travel in points

The following programs allow you to book travel in points:

  • All airline frequent flyer programs
  • All hotel rewards programs
  • American Express Membership Rewards
  • Chase Ultimate Rewards
  • Citi ThankYou Rewards
  • Online travel agency rewards programs, although these are more limited

Most of those allow you to sign up and begin earning points by getting a credit card that's part of the program and using it to make purchases (some online travel agencies don't have their own credit cards and only offer points when you shop through them). With airline and hotel loyalty programs, you can also simply register for a free account with them and receive an ID number. After that, just sign into your account when you book travel through them or enter your ID number with your billing information to earn points every time you book a flight or hotel stay. One benefit of this method is that you can double up on the points you earn. If you book a flight through Alaska Airlines with your American Express card, for example, you'll earn both Amex points and Alaska miles on the purchase.

With enough searching and some flexibility regarding when you travel, you can find fantastic redemption opportunities this way, making a flight or hotel much cheaper in points than it is in cash. Just remember that there can be fees and surcharges tacked on.

The key factor in the quality of these rewards program is their transfer partners. The more transfer partners, the more ways you can use your points. That's why American Express, Chase, and Starwood Hotels have the best rewards programs. All three have plenty of airline and hotel transfer partners that allow you to transfer points at a 1:1 ratio. Starwood does you one better: Every time you transfer at least 20,000 Starpoints to a frequent flyer program, you'll get a 5,000-point bonus.

Booking travel in cash and paying with points

The following programs allow you to book travel in cash and pay with points:

To join one of those programs, you need to get one of their credit cards. Once you've earned points, you can redeem them through the program's travel portal or cash them in as a statement credit toward prior travel purchases. A few programs allow you to choose from both those options.

When you log into a program's travel portal, you can search for flights and hotel stays and then pay for them in cash with your points balance. The value of your points will depend on the reward program and the credit card you have. Even within one program, having certain credit cards can entitle you to a higher redemption rate. One notable example is the Chase Ultimate Rewards program. When you shop through its travel portal, you can get 1.25 cents per point if you have the Chase Sapphire Preferred or 1.5 cents per point with the Chase Sapphire Reserve.

The other method is redeeming your points for a statement credit. After you've made anything that qualifies as a travel purchase with your card issuer, you can apply your points toward the resulting balance on your account.

Other redemption options

Many rewards programs give you other ways to use your points, such as redeeming them for cash, gift cards, or a product you can choose from the program's points store. These are almost never worth it. If you're going to use a travel rewards card, you'll get much greater value from your points when you redeem them for travel.

You don't need a Ph.D. in credit card rewards to save money on your travels. With an understanding of how redeeming points works, you can get the most value out of your current points or select a new card in a rewards program you like.