What is the best way to use credit card points?

Written by
Curtis Arnold
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Credit card reward programs have become increasingly popular with cardholders over the past couple of decades. This growth has resulted in more options for consumers when it comes to the ways that you can earn points.

Given this growth, it’s not surprising that the number of ways you can redeem your rewards has increased as well. Historically, most cardholders have redeemed for airline miles or cash back; however, there are many newer options available to consumers now, such as the ability to redeem your points for exclusive experiences like dining at a 5-star restaurant or attending elite sporting events. On a personal note, I was recently given the option to instantly redeem my points while checking out at Walmart.

While it is certainly good to give cardholders more options, these new redemption options can be confusing and lead to additional questions. The most important question, from my perspective, is are all options comparable in terms of their actual monetary value?

This answer begs the following related question- what are the worst ways to redeem credit card rewards? The logic here is that identifying poor redemption choices can help you stretch your reward dollars as far as possible.

As Lynnette Khalfani-Cox, a personal finance expert and author of “Bounce Back: The Ultimate Guide to Financial Resilience,” puts it, “People cash in their card points in all kinds of ways that either make little financial sense or that simply shortchanges themselves. Anytime you redeem rewards in a way that’s not maximizing the value of your rewards, you’re basically leaving money on the table.”

How to value your credit card points

There are so many ways to redeem your points. According to Beverly Harzog, credit expert and podcast host of “Your Personal Economy,” redemption options vary as does the cash value of points.

The challenge is that it’s often hard to figure out the actual cash value of different options. The only redemption option that is quick and easy to compute is cash back earned with a cash-back credit card. I personally prefer using a cash rebate card that offers a flat-rate cash-back rate on every dollar I spend as it’s simple and, most importantly, I know exactly how much cash back I’m going to earn (to the penny).

But what if you’re considering other popular redemption options and want to make sure you are comparing apples to apples? Well, this is when things can get more complicated.

Because different credit cards offer different types of rewards – such as flexible points which can be transferred to various airline and hotel partners, or fixed-value points which can only be redeemed for select purchases – it’s crucial to first understand your points system. Once you understand how your point system works, calculate the value of your points by dividing the cost of the reward (in cash) by the number of points required for redemption. For example, if you’re looking to book a flight with points and the flight costs $400 or 30,000 points, the value of each point would be $.013 ($400/30,000). If your credit card offers cash back as a redemption option, compare the value of your points to the cash-back value. If you could redeem 30,000 points for $300 cash back, your points would be valued at $.01 each ($300/30,000). In this scenario, redeeming points towards the flight would be the better value.

It’s also important to consider transfer partners. If your card allows you to transfer points to airline or hotel loyalty programs, make sure you research the transfer ratios and the potential value of those loyalty program points as they could be worth even more if transferred. Similarly, it’s also important to factor in flexibility. Flexible points that can be transferred to different loyalty programs tend to have higher potential value because they offer more options and sometimes better redemption rates.

EDITOR’S NOTE: Redeeming your rewards for cash back, or more commonly, as a statement credit, is typically only the best bet with a standard cash-back credit card. If you redeem your rewards for cash back with say, a travel rewards card, you’ll likely lessen the value of your rewards. On the flip side, travel credit cards typically offer the best rewards value when you redeem your rewards for travel purchases either through the card’s travel portal or by transferring your rewards to an eligible travel partner. Similar to cash-back credit cards, some travel credit cards even offer the option to “erase” travel purchases made with the card for a statement credit. This could be a good option for purchases that aren’t a better value redeemed through a travel portal or transferred to a travel partner.

– Jennifer Doss,
Executive Editor, CardRatings

Redeeming for merchandise or gift cards often leaves money on the table

If your card gives you the option to redeem for gift cards or merchandise, you should proceed with caution. Merchandise is typically available through an online catalog and historically a lot (not all) of the merchandise is well, to be frank, overpriced. And gift cards often don’t offer as strong of a value as cash back.

Case in point, I recently logged into my own rewards card account and noticed that Apple AirPods Max headphones were available for $549, or 54,900 points. On the surface, this sounds reasonable and is easy math. But, after doing a quick Google search, I discovered that Best Buy had the same item listed for $479. As you can see in this case, some quick research can potentially save you a lot of money.

Khalfani-Cox notes that buying merchandise that you’ll never use and/or that is overpriced is a “common way that consumers squander away their hard-earned rewards.”

Harzog echoes these remarks by stating that you “generally won’t get a high value per point with merchandise.” She adds that it’s a good idea to look at your rewards balance and plan how to use your points wisely and to be aware of how much value you’ll get for each point or mile. One notable exception she points out, though, is if you’re redeeming your points for a gift for a friend that you can’t afford since you’re saving money on the purchase.

EDITOR’S NOTE: Harzog’s last point is worth pausing on. While redeeming points towards merchandise or gift cards does not typically offer the best value, it can still be a valuable option. For example, say finances are tight and your roof just started to leak. Redeeming your rewards for a gift card to a home-improvement store could be your best option at that moment. And while they don’t usually have the best rewards value, keep an eye out for sales or promotions on gift cards. If you can snag a gift card while it’s on sale, the reward redemption value could balance out. I’d say keep this as a worst-case-scenario option though. If you don’t need to redeem your rewards at the moment, there’s no harm in holding onto them and redeeming them at a later date.

– Jennifer Doss,
Executive Editor, CardRatings


Some issuers offer handy online calculators or graphs that can help you figure how many points are needed for various redemption options. American Express, for example, offers a calculator that shows you the value of membership reward points if you decide to redeem them for such things as travel, statement credits and gift cards.

Avoid the temptation of instant redemption at the register

Instant redemption is one of the newest options available to some cardholders. It’s very convenient since with the click of a button (on the credit card terminal), you can instantly redeem some or all of your points while checking out at your favorite retailer. This option can be very tempting as it provides instant gratification since it lowers the price of your bill in a matter of seconds.

I personally encountered this while shopping at my local Walmart. A message popped up while I was trying to pay with my card in the self-checkout line. I was offered the chance to instantly redeem 2,500 points for $20 off my purchase price.

After calming down from the initial excitement and thinking about it for a minute, I realized that my points would be devalued if I chose instant redemption. Why redeem 2,500 points to save $20 when I could get a $25 statement credit for the same 2,500 points (it’s always best to try to get at least a 1:1 redemption value)?


Redemption methods continue to evolve based on technology and demographics. Young cardholders tend to prefer instant access and ease of use according to a recent survey by Pymnts.com, which helps explain why 49% of Gen Z and 46% of millennials prefer getting rebates through mobile apps. In contrast, 46% of baby boomers chose email as their preferred method of receiving rewards.

Final thoughts

Redeeming card rewards should be fun (if not exhilarating!) and profitable. That said, I also realize that redemption values can be subjective, and you may value rewards that I don’t and we may value the same rewards differently. As Harzog eloquently explains, “they are your points and you should use them the way it will benefit you the most.”

Harzog adds that “the highest point value option might not be best for you in certain situations“It’s important that you use your rewards on what you want or need. Sure, it’s great to the most value for points, but it’s more important to use the rewards for what’s important to you at that time.”

Let’s use the example above to illustrate this point:

Let’s assume that Jimmy’s Airpods break and he “needs” to replace them as soon as possible but doesn’t have the cash to spare. Using a credit card’s shopping (merchandise) portal in this case, even if it isn’t the best value, is still better than spending cash that he doesn’t have. This is especially true if he were to charge it a card with a high interest rate!

The key is to redeem your points in the way that brings YOU the most value. In truth, the absolute worst way to redeem your points is not to redeem them at all since a large percentage of points never get redeemed according to various studies.

Curtis Arnold
CardRatings Founder

Curtis founded Cardratings.com in 1998 and, in so doing, helped pioneer the concept of rating credit cards. He has been a nationally recognized expert in consumer credit for well over 20 years. He is the author of “How You Can Profit from Credit Cards: Using...Read more

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