Redeeming Your Reward Points

Redeeming Reward Points

You are a responsible credit card user.  You put all purchases on your reward credit card(s) for maximum rewards.  You pay your credit card bill in full every month.  And you use Reward Summit to make sure you are choosing the best reward credit card with every purchase.  As a result, you’ve racked up a ton of reward points!

Now, what are you going to do with them? Read on to learn about your options and some tips to determine if you’re getting the best value from each reward when redeeming your reward points.

1. Cash Back
Typically, credit cards companies offer users an easy-to-understand 1 cent for 1 point exchange for cash back redemption.  This option is flexible because you can spend the cash anywhere.  Also, sometimes there is an additional incentive to use the card issuer’s bank.  For example, Bank of America card holders can earn an additional 10% for depositing cash back rewards into a Bank of America checking account.

Tip: Double-check the fine print or call your credit card company to find out if there is an incentive for opening a checking account with the card issuer’s bank.  Unless there is a fee for the account that negates the benefit of the incentive, open up a checking account to get the additional percentage incentive.

2. Statement Credit
Like cash back rewards, statement credits are often very transparent because most credit cards offer a simple 1 cent to 1 reward point exchange. There is often a minimum point requirement before you can begin applying this reward to your statement.  

3. Travel
Travel rewards typically include airline miles, nights at hotels and resorts, car rentals, cruises, and vacation packages.  Some credit card users set a goal for themselves to rack up enough points to have entire vacations completely paid in full with reward points.  Usually, these card holders get more benefit from a travel credit card that specialize in these types of rewards than a general rewards credit card.  Also for consideration, these rewards are often limited by eligibility restrictions, expiration dates, and limited award seats on airlines. 

Tip: The credit card user who is able to take an entire “free” vacation on reward points doesn’t rack up enough reward points by accident, but instead strategically makes large purchases or all purchases on a travel rewards card to work towards this goal.  Before going to such lengths, check the fine print of your credit card or contact your credit card company to learn more about restrictions and limitations on rewards.

4. Goods
Many online retailers allow credit card users to pay for merchandise with their reward points.  For example, Discover Card has over 200 retailers that users can access via the Discover website and pay with their credit card reward points. In addition, purchases made with Discover card reward points at these retailers, earn users an additional 5-20% cash back bonus. However, weigh your options before purchasing goods with reward points.  If cash back is a 1 cent for 1 point exchange and the item you are purchasing requires more points per cent, the better option is to take the cash back, unless a cash back bonus sweetens the deal. You have to do the math to fully understand which is your best option.

Tip: To get the most benefit for your rewards, use reward points at retailers for items you would buy regardless of whether you have reward points.  Also, do your homework to make sure you are getting a good deal by purchasing directly from the retailer as opposed to discount sites like Amazon (which you can also shop at via Discover Card).

5. Experiences
Experience rewards cover the gamut from concerts to wine tours and everything in between.  Like merchandise goods, it is often difficult to determine whether you are getting the best deal possible because of no clear exchange rate between value of the experience and your reward points.  However, experiences are sometimes offered at discounts and are a unique way to cash in your hard earned rewards.

6. Gift Cards
Gift cards are a great option when you opt for a gift card to a retailer at which you typically shop.  Also, some credit cards will offer discounted gift cards, like 2,500 points for a $30 gift card.  In this case, the gift card value is higher than the simple 1 cent to 1 reward point exchange rate and is a better deal. 

Tips: To get the most bang for your buck, only opt for gift cards if they’re discounted at a better exchange rate than your cash back rewards and only choose retailer at which you already shop.

7. Charitable Contributions
When donating reward points to charities, card users are restricted to the charities offered by their credit card company,which may or may not include their favorite charity.  Charities also typically have to pay a transaction fee of 2-3% so they aren’t receiving the full amount of your charitable donation.  However, if the exchange rate is better than that of your cash back reward, this reward might be worth it. 

Tips: Do the math to determine if the charitable contribution reward is a better value than cash back, also taking into account the transaction fee. If not, you can simply opt for cash back and then make the donation directly to the charity of your choice.

By : Kelly Davis /November 07, 2013 /Reward Points /Comments Off

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