How Do Credit Card Points Work?
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Are you wondering "How do credit card points work?" You've come to the right place.
You've probably heard of credit card rewards, but you might not fully understand how credit card points work. In this article, we cover how credit card points work, how to pick the best travel rewards credit cards, and how you can use credit card points to travel for free.
The best rewards credit cards earn either credit card points, hotel points, airline miles, or cash back. You earn these rewards each time you use your rewards card, and you may earn bonus rewards on certain types of purchases.
Technically speaking, credit card points are the rewards you earn within a card’s own rewards system. They can be redeemed for travel, statement credits, gift cards, and more. Examples include Chase's Ultimate Rewards® points, American Express's Membership Rewards® points, and Citi's ThankYou® points.
However, many people also use the term “credit card points” as a catch-all phrase for credit card-based rewards, including hotel and airline miles.
On average, the value of any given credit card point tends to hover around $0.01 per point. However, credit card point values vary greatly. This depends both on the rewards program and how you choose to redeem your credit card rewards points. Points with some premium credit cards can be redeemed for $0.0125 or $0.015 per point, and strategic redemptions can often squeeze up to $0.03 or $0.04 out of each point. On the other hand, some redemptions, like statement credits and gift cards, yield only $0.005 to $0.008 per point.
There's a big difference between how credit card miles work compared with credit card points.
Credit card points are earned with a generic rewards credit card and are meant to be redeemed through that credit card's rewards portal. They're more flexible in that they can usually be redeemed for a range of goods and services, including flights, hotel rooms, gift cards, and more. On the other hand, credit card miles are usually earned with an airline credit card and are meant to be redeemed for flights with that specific airline.
Generally speaking, credit card points earned with most major rewards programs don't expire as long as your rewards card remains open and in good standing. That said, miles earned with some airline credit cards can expire after a long period of inactivity.
The most common way to earn credit card points is to put your everyday purchases on the rewards credit card. Most rewards credit cards earn 1 point per $1 spent on purchases, with bonus points that reward you for spending in specific categories. For example, a credit card might offer 2 points per $1 spent on dining or 3 points per $1 spent on travel.
Aside from using your rewards card regularly, there are a handful of ways to accumulate points faster.
Many rewards credit cards offer sign-up bonuses that offer a large sum of points to new cardholders as an incentive to attract more customers. You'll usually have to open the credit card and spend a certain amount of money on eligible net purchases within the first few months to earn the sign-up bonus. A typical sign-up bonus might be an offer of 20,000 points if you spend $1,000 in the first three months.
In addition to getting points for your regular spending, you can also earn points on a gift card purchase. This is particularly helpful if you have a credit card that offers a bonus on spending at supermarkets. You can earn additional bonus points if you purchase gift cards at the supermarket for other retail stores, restaurants, and gas stations you shop at regularly.
Apart from putting your own spending on your rewards credit card, you can also put purchases your friends make on your credit card and ask them to pay you back. For example, if you're at a big family dinner, ask to put the bill on your credit card and have everyone send you their portion. This is particularly useful if you're trying to achieve a sign-up bonus.
Your rewards credit card might reward you for referring a friend. Refer-a-friend programs let you send friends your own referral code or link, and if they sign up for the credit card, you earn bonus points. Often, you can earn anywhere from 5,000 to 15,000 points for each friend who opens an account.
If you have a lot of business expenses, it's wise to get a business credit card and use it for your business-related purchases. Not only will this help you keep your finances separate, but you'll earn rewards on business spending. Business credit cards often earn more credit card points on business-related purchases.
Most credit card rewards programs include an online shopping portal where you can earn extra points. As long as the prices match what you'd normally pay, you can earn more by doing your online purchasing through your rewards portal.
Having more than one rewards credit card can be intimidating. But you can seriously increase your earnings by juggling multiple credit cards.
For example, you can have a dining rewards credit card, which you use at restaurants. Then, you could have another card that earns more on travel, which you use for flights and hotels. To add to these, you could open a grocery credit card, which you use at supermarkets.
A note of caution: If any of your cards charge an annual fee, just make sure you're using them enough to recoup the annual fee with reward points. And only use this method if you're confident you can keep track of due dates, never miss a payment, and avoid going into debt. There's no point in getting extra credit card rewards points if you damage your credit score or rack up heavy interest charges in the process.
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Credit card points are often redeemed for travel, but most credit card rewards programs also let you redeem them for cash back, statement credits, gift cards, or online shopping. The value you'll get from your points depends mostly on how they're redeemed. You can log on to your credit card rewards portal to see all of your redemption options.
Travel credit cards usually allow you to redeem your credit card points through a travel portal within your credit card account. Most will allow you to book flights or hotel rooms using those points, and some even allow you to book transportation, tours, and other travel-related activities. This is one of the best ways to redeem your points if you want both value and flexibility.
A few major credit card rewards programs, including Chase's Ultimate Rewards® and American Express's Membership Rewards®, also allow you to transfer your points to a list of airline and hotel partners, often at a 1:1 ratio. If done strategically, this redemption option can be one of the best ways to maximize your credit card rewards.
Many rewards programs let you turn your points into cash back or statement credits. This is great you want the flexibility to liquidate your credit card points for cash. However, this is one of the lowest-value point redemptions.
A lot of rewards programs offer the option to redeem your points through an online shopping portal or for gift cards. This offers more flexibility if you aren't interested in travel, but it generally offers low value.
Credit card rewards can be worth it, especially if you choose the right credit card for your needs and read up on the best ways to earn and redeem credit card points. Make sure the reward points you earn are easy to use as well. If not, you might want to consider a cash back card instead of a travel credit card.
Keep in mind that credit card interest rates are usually quite high, and the best ones also come with an annual fee. It's critical to make sure that the fees you pay don't outweigh the rewards you earn. If you have a credit card with an annual fee, make sure it's a good fit for your spending habits. The rewards need to be valuable enough to cancel out that annual fee.
The most important advice to follow is to pay off your bill in full every month. If you end up in credit card debt, you'll pay far more in interest fees than you'll ever earn in rewards.
We recommend comparing options to ensure the card you're selecting is the best fit for you. To make your search easier, here's a short list of standout credit cards.
| Offer | Our Rating | Welcome Offer | Rewards Program | APR | Learn More |
|---|---|---|---|---|---|
|
Rating image, 4.50 out of 5 stars.
4.50/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
= Fair = Poor |
Discover will match all the cash back you’ve earned at the end of your first year. INTRO OFFER: Unlimited Cashback Match for all new cardmembers–only from Discover. Discover will automatically match all the cash back you’ve earned at the end of your first year! There’s no minimum spending or maximum rewards. You could turn $150 cash back into $300. | 1% - 5% Cashback Earn 5% cash back on everyday purchases at different places you shop each quarter like grocery stores, restaurants, gas stations, and more, up to the quarterly maximum when you activate. Plus, earn unlimited 1% cash back on all other purchases. |
Intro: Purchases: 0%, 15 months Balance Transfers: 0%, 15 months Regular: 18.24% - 27.24% Variable APR |
|
|
Rating image, 5.00 out of 5 stars.
5.00/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
= Fair = Poor |
$200 cash rewards Earn a $200 cash rewards bonus after spending $500 in purchases in the first 3 months. | 2% cash rewards Earn unlimited 2% cash rewards on purchases. |
Intro: 0% intro APR for 12 months from account opening on purchases and qualifying balance transfers Purchases: 0% intro APR, 12 months from account opening Balance Transfers: 0% intro APR, 12 months from account opening on qualifying balance transfers Regular: 19.24%, 24.24%, or 29.24% Variable APR |
|
Apply Now for Bank of America® Travel Rewards credit card
On Bank of America's Secure Website. |
Rating image, 4.00 out of 5 stars.
4.00/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
= Fair = Poor |
25,000 points 25,000 online bonus points after you make at least $1,000 in purchases in the first 90 days of account opening - that can be a $250 statement credit toward travel purchases | 1.5-3 points per dollar Earn unlimited 1.5 points per $1 spent on all purchases, with no annual fee and no foreign transaction fees, and your points don't expire as long as your account remains open. Earn 3 points per $1 spent on travel purchases booked through the Bank of America Travel Center. |
Intro: 0% Intro APR for 15 billing cycles for purchases. 0% Intro APR for 15 billing cycles for any balance transfers made in the first 60 days. After the intro APR offer ends, 18.24% - 28.24% Variable APR on purchases and balance transfers will apply. A 3% fee for 60 days from account opening, then 4% fee applies to all balance transfers. Balance transfers may not be used to pay any account provided by Bank of America. Purchases: 0% Intro APR for 15 billing cycles for purchases Balance Transfers: 0% Intro APR for 15 billing cycles for any balance transfers made in the first 60 days Regular: 18.24% - 28.24% (Variable) |
Apply Now for Bank of America® Travel Rewards credit card
On Bank of America's Secure Website. |
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