Have you ever enjoyed the perks of credit card points, be it gift cards, travel purchases, or cashbacks? Typically, credit card points come as an incentive to encourage you to use the credit card more.
However, to fully enjoy the benefits of credit card points, you need to understand how they work, how to maximize your points, and how to redeem them.
So, if you are new to the world of credit card points or just want to broaden your understanding of how they work, you’re in the right place. Here we’ll look at the basics of credit card points.
We’ll begin by defining credit card points.
Credit card points are the rewards you earn within a credit card’s own reward system every time you make a purchase using your credit card. Although generally referred to as points, they are grouped into different categories; points, miles, and cash backs. And based on the credit card’s policies, you can redeem these points for travel, statement credits, gift cards, and more.
Typically, credit card issuers have different policies regulating how their credit cards operate. In most cases, credit card points are determined by the purchase you make. Some credit cards have a fixed-point system whereby you earn the same points after every purchase, while others rotate spending categories to reward certain purchases more than others.
For example, travel credit cards offer more points or miles per dollar for travel-related spending. Here, a top rewards credit can offer 2x, 5x, or even 10x points on certain purchases such as dining out and gas. This same credit card can offer as low as one point on all other standard purchases.
In a nutshell, 10x reward points means ten times the reward you would have otherwise earned on a standard purchase transaction. So, in this case, if you want more points, you should focus on travel-related purchases such as gas.
So, how do you earn credit card points?
Besides earning points through making purchases using your credit card, there are other ways you can expand your earning potential. Here’s how you can earn more valuable points.
Typically, you earn credit card points by making specific purchases using your credit card. The points vary depending on your credit card issuer and the type of purchase you make.
Using the right credit card for the right purchases can go a long way in increasing your points. For example, if you are a travel fanatic spending more on tickets and hotel rooms, you can charge your purchases on a credit card that gives extra points for such purchases.
In this case, you can get an American Express Platinum Card, which gives up to 5x membership reward points for flights booked directly with airlines or with American express travel (Amex Travel) on up to $500,000 of these purchases per calendar year. Besides, with this card, you also earn 5x Membership Reward points on prepaid hotels you booked via American Express Travel.
Most credit card issuers offer a sign-up bonus that allows you to earn a significant number of points once you open your card. However, you’ve to meet a certain spending minimum within the first few months of opening the card before claiming your bonus reward points.
So before signing up for a particular credit card, make sure that the spending minimum will favor your budget to avoid losing your bonus points.
You can also earn a significant number of points through referrals. Some credit card issuers offer referral bonuses to current cardholders who convince their friends or relatives to apply for the same family of credit cards.
Here, you make referrals through a link provided by the credit card issuer. If your friend or family successfully signs up for the card, you receive a certain number of points.
It’s important to note that referral bonus points vary depending on the card issuer, and some cards have restrictions on the number of people you can refer in a year. So, it’s important to understand the rules revolving around referrals for the credit card you’re using.
Referrals come as an inexpensive way to earn points without spending a single dollar in purchases.
Some credit card issuers increase your points if you redeem them in a certain way and for a certain purpose. This mainly happens when you redeem points through the issuer’s portal or use your points for travel-related expenses.
The common types of credit card reward points include:
A cashback reward system gives you a percentage of your purchase price back. Some credit cards offer flat-rate cashback for all the purchases you make, while others may give you higher cash backs on eligible purchases such as travel or gas.
With the gift card option, you can choose from many options, from restaurants to entertainment joints. Card issuers offer different gift card options, so you may have different options to choose from if you have different credit cards. However, redeeming your hard-earned points for gift cards may not give you the best value for your points.
Here, the credit card issuer will deposit the cash value equivalent to the rewards you have redeemed directly into your account.
Not all credit card issuers offer this option; if you plan to redeem your rewards through this, make sure it is available before applying.
Some credit card issuers allow you to redeem your points with online retailers such as Amazon. This may seem like a convenient way to use your rewards, but it may not be the most comfortable one as specific issuer restrictions are sometimes put in place restricting you on the online retailer you should purchase from.
If you own a travel rewards card, you can redeem the earned points and miles on the travel expenses you qualify for. The travel expenses may include plane tickets, a hotel room, or other luxurious perks.
Many credit card issuers will let you transfer your rewards to travel programs; this means you can turn your card points into travel loyalty programs, including hotel points or airline miles.
A few credit card issuers allow you to transfer your rewards to charity or nonprofit organizations. To confirm if your issuer provides this, log in to the redemption website of the portal and check the available options.
It’s advisable to check with your credit card issuer for the available redemption options. For example, if you are a First Global Bank credit cardholder, you can check the FGB points redemption list to redeem your points for the category that suits you. You can also look at the SCB reward points redemption catalog.
So, how much are credit card points worth? This is a question asked by many credit cardholders.
Typically, one point is often equal to a cent, although the issuers may adjust this value based on their policies. The value of credit card points also varies depending on the card issuer and the mode of point redemption.
For instance, your credit card points may have a greater value if you use them to book travel rather than redeeming them for cashback.
To find out the value of specific credit card points, you can call the issuer and ask questions on how you would redeem your points and the value of each point in each category. You can also find this information on the issuer’s website.
Also, make sure you read your card’s fine print to understand the value of the points and how their worth changes depending on the redemption method.
Alternatively, you can do some simple calculations to ascertain the value of your credit card points. To get the value of a single point, divide the dollar value of the reward by the number of points you need to unlock it. For instance, if you need 60,000 points to pay for a $600 airline ticket, the value of a single reward point is:
$600/60,000= 1 cent
Most issuers give cardholders reward points valued at one cent, but this may change from time to time depending on the redemption method.
When ready to redeem your card points, simply log in to your online credit card account and follow the steps required.
You can also redeem points through issuer-specific portals. For instance, if you have an American Express Card that earns American Express Membership Rewards, you can redeem your points by logging into your card account or visiting the membership rewards portal and choosing an option that matches your needs.
You have to be strategic about how you redeem your points. Let’s say your points are worth more for cashback than they would be if redeemed for a gift, then why not choose the cashback option? Always go for the option that maximizes the worth of your hard-earned points.
Sometimes points may expire depending on the issuer or the type of card that you have. If you possess a regular rewards card and not a travel card, your points are less likely to expire as most of the issuers dealing with regular cards don’t have expiration dates for points.
However, if you have an airline or hotel card, your points and miles will expire after the timeline given by the issuer. Always keep up with your issuer to check potential expiration dates and avoid the expiration of your points.
Understanding how credit card points work and how to maximize your points can go a long way in helping you save a few dollars through cash backs, miles, and points. To get more from credit card points, get a credit card that gives more points on your regular purchases such as airline tickets and hotel bookings.