How Credit Card Rewards Work: Points, Types, + Redemption

Earning credit card rewards can be a great way to earn "free" or deeply discounted stuff, from flights to gift cards. By reaching for a rewards credit card when it's time to spend or pay a bill, you can do more than just soften the blow of expenses. You can essentially offset sales tax, apply small discounts to every purchase, and pay yourself back. It's the most exciting and worst-kept secret.

Rewards cards are valuable on their own, but they pack the most punch when you know not just how to earn more rewards but also the best ways to redeem them. Choose the wrong redemptions, or fail to understand your card's rewards program fully, and you leave money on the table. Learn how to make the most of any rewards credit card and its points here.

How cash back rewards work

The simplest type of credit card reward is cash back. Whenever you make a qualifying purchase, you earn a percentage of cash back on that purchase. The percentage depends on:

• Your credit card
• The purchase category
• Any spending/earning limits that might apply

For example, the Blue Cash Everyday^® Card from American Express offers 3% cash back at U.S. supermarkets, U.S. gas stations, and U.S. online retail purchases (up to $6,000 per year on eligible purchases in each category, then 1%); and 1% cash back on other eligible purchases (cash back is received in the form of Reward Dollars that can be redeemed as a statement credit and at Amazon.com checkout).

Some credit cards cap how much cash back you can earn at the highest rates, especially on very high-rate cash back credit cards, then reduce your rate for spending beyond that limit. But many cash back cards offer unlimited rewards.

How to redeem cash back

You can generally redeem cash back for cash equivalents, such as statement credits, gift cards, direct deposits, and purchases. Sometimes, you can also use it to purchase qualifying travel.

How points and miles work

The other types of rewards you can earn with a credit card are points and miles. These often work similarly, and you earn a set amount of points or miles on qualifying purchases. For example, the Chase Sapphire Preferred^® Card offers 5X points on travel purchased through Chase Travel℠; 3X points on dining, select streaming services, and online groceries; 2X points on all other travel purchases, and 1X points on all other purchases. The Capital One Venture Rewards Credit Card offers 2 miles per dollar on every purchase, every day, 5 miles per dollar on hotels, vacation rentals and rental cars booked through Capital One Travel and 5 miles per dollar on Capital One Entertainment purchases.

How to redeem points and miles

You can often redeem points and miles for:

• Travel
• Cash back (in the form of statement credits, direct deposits, or checks)
• Gift cards
• Purchases
• Transfers to travel partners

Most major credit card companies have a travel booking portal you can use to book hotels, rental cars, flights, and more with points. If a card offers transferable points, which we'll cover shortly, you can transfer your rewards to a travel partner, such as a specific airline, and redeem them through their portal.

To give you an example, American Express transfer partners include Delta Air Lines, JetBlue, Air France, British Airways, and Virgin Atlantic Airways.

Some rewards cards, however, have more restricted earning structures and redemption options. With co-branded travel cards, for instance, you may only be able to redeem miles for perks at specific airlines or hotels. Take the Delta SkyMiles^® Gold American Express Card. You can earn miles with every dollar you spend, but they can only be traded in for travel on Delta or its airline partners.

Guide to travel credit card point types

When it comes to travel credit cards, it's important to understand your options for redeeming points or miles. Different redemptions can translate to vastly different point values, and you could miss out on serious savings if you're not careful about how you apply your earnings.

Here's an overview of the types of travel credit card points and miles available.

Transferable points

Transferable points let you use your rewards within the program where you earned them or transfer them to one of the program's travel partners. These partners can include airlines, hotels, and more.

Transferable points and miles could offer more flexibility than other types of rewards. And because airline and hotel loyalty programs typically offer dynamic reward values, transferable points could give you a chance to squeeze more value out of your rewards than you might by redeeming them with the original program.

You won't have the chance to transfer your points to just any program, though. You'll be restricted to travel companies with which your card issuer partners.

Both the Chase Sapphire Preferred^® Card and the Chase Sapphire Reserve^® offer transferable points, and the Capital One Venture Rewards Credit Card offers transferable miles.

Fixed-value or eraser points

Fixed-value or eraser credit card points and miles typically offer a fixed value per point or mile, with a lot of flexibility in how you redeem your rewards. As long as a purchase is coded as travel or you can find something in the program's booking tool, you can use your rewards.

With the Bank of America^® Travel Rewards credit card, for instance, you use your card to book just about any type of travel. Then, use your points within 12 months to get a statement credit for the purchase, effectively "erasing" the transaction.

You can also use these points to book travel directly through a reward program's booking tool. For example, you can book travel through the Chase Travel℠ platform with the Sapphire cards to maximize the value of your rewards.

The drawback to these programs is that they don't always offer the best per-point values. If, for example, you use 100,000 points to book a $1,000 hotel stay, that's a rate of one cent per point. But if you could get the same stay by transferring 75,000 points to the hotel's loyalty program, that would be 1.33 cents per point.

Co-branded cards and points

Co-branded travel credit cards partner with a specific airline or hotel to offer rewards and special perks. So, when you earn miles with your favorite airline, you could easily redeem those for nearly free flights.

Earning points or miles with a co-branded credit card could be an excellent choice if you're loyal to a brand and want to take advantage of brand-specific perks, such as priority boarding, free checked bags, complimentary room upgrades, or a free anniversary night.

These loyalty programs typically don't offer much value when used for anything other than their primary purpose: booking flights and hotel stays. Also, because they have a dynamic rewards structure, it can be hard to tell exactly how much value you're getting out of each point or mile.

Some of the better airline and hotel cards that offer co-branded points and miles include United℠ Explorer Card, Delta SkyMiles^® Gold American Express Card, The World of Hyatt Credit Card, and Marriott Bonvoy Boundless^® Credit Card.

How to earn points, miles, and cash back

You can earn points in many ways outside of spending. Here are some of the best ways to earn credit card rewards.

Everyday purchases

The most obvious way to earn credit card rewards is to use your card for everyday purchases. Instead of using cash or a debit card when you spend, use a rewards card to rack up points or cash back on every dollar.

The more strategic you are about which credit card you use and when, the more rewards you could earn.

Welcome and sign-up bonuses

Another way to earn rewards is through sign-up bonuses. These can also be called welcome offers, welcome bonuses, and new-customer offers.

Many credit card issuers offer special bonuses to new cardholders who meet requirements. Typically, you need to spend a certain amount on the card within a set period after opening it. Spending requirements vary widely between cards with welcome offers, but the timeframe to qualify is often 90 or 120 days.

For example, the Chase Freedom Flex^® lets you discover will match all the cash back you’ve earned at the end of your first year..

Referring a friend

You could even earn credit card points by referring other people to sign up for the card. Many card issuers offer referral programs that pay a decent reward or cash bonus when someone signs up using your special referral link.

Adding authorized users

You can also add an authorized user to your credit card to potentially earn even more credit card rewards, although this isn't a decision you should take lightly.

By adding an authorized user to your account, that person's spending can qualify for rewards, too (and you could help them build credit, if yours is strong). But you'll be on the hook to make sure the bill gets paid, so be cautious about who you add and set boundaries. There can also be fees to add authorized users.

Flat vs. rotating bonus rewards

Some credit cards offer a flat rewards rate, while others offer higher tiers for certain spending categories. For example, the Capital One Savor Cash Rewards Credit Card offers 3% cash back at grocery stores (excluding superstores like Walmart® and Target®), on dining, entertainment and popular streaming services; 5% back on hotels, vacation rentals and rental cars booked through Capital One Travel; 8% cash back on Capital One Entertainment purchases; and 1% cash back on all other purchases.

Credit cards that offer rotating bonus categories may earn the highest rates on qualified spending automatically or require you to activate categories. If your card requires activation, you'll need to opt in to the top earning categories each month or quarter to qualify for the best rates on spending in those categories. Then, the bonus categories will change again, and you'll rinse and repeat.

Rotating category credit cards require a little more maintenance on your end, since you'll have to track a calendar. This is why we recommend these cards to people with some experience with credit card points/cash back.

How much are credit card points worth?

How much credit card points are worth differs significantly between cards. The type of credit card points and miles you earn, and exactly how you redeem them, determine the real value of your rewards.

Generally speaking, credit card points are often worth about one cent each when you redeem them for travel or merchandise. For example, 60,000 Capital One Venture miles equals $600 worth of travel.

However, there are rewards cards and programs that may offer a higher redemption rate for certain items. The value of Chase Ultimate Rewards points, for instance, can fluctuate if you're booking travel.

You may even be able to transfer points and miles to a travel partner and get more bang for your buck. If you can transfer credit card points to an airline's loyalty program, for instance, you may find your points carry more value there. However, whether or not this is a smart move depends on the specific credit card and airline reward programs.

How to choose a rewards credit card

Here are our tips for comparing rewards credit cards to choose the best one.

Annual fees

Consider whether it's worth signing up for a rewards card with an annual fee, and whether you're likely to offset it with your rewards earnings.

Let's say you have a cashback card with an annual fee. If you want to break even (or, ideally, earn additional money), you'll need to spend a certain amount on the card to earn enough cash back to offset the annual fee.

That said, there are many excellent no-annual-fee cash back credit cards out there, so you don't have to pay an annual fee for one if you don't want to.

Rewards redemption options

Beyond finding out your basic options for redeeming rewards, read the fine print to see if there are limits to how you can redeem rewards.

Some cards may have blackout dates or other restrictions, meaning you can't book travel at certain times of year. Other cards may have rewards that expire, so you'd need to use up your points before this happens.

Earning caps

Another thing to consider is reward-earning caps. As mentioned, some credit cards offer unlimited earning potential, while others set maximums on what you can earn.

For example, the Chase Freedom Flex^® offers 5% cash back on rotating quarterly categories you activate (on up to $1,500 total spent) and travel purchased through Chase Travel℠, whereas the Capital One Savor Cash Rewards Credit Card offers unlimited 3% cash back on grocery stores (excluding superstores like Walmart® and Target®), on dining, entertainment and popular streaming services.

Your travel habits

Understand your travel habits and goals before you choose a rewards card.

For example, if you love traveling with just one airline or hotel chain, getting a co-branded credit card could help you level up with elite status and give you access to exclusive perks. If, however, you want more flexibility, a card with transferable points could be your best bet.

Unfortunately, there's no simple formula for calculating the value of a credit card point or mile. However, you can do some research while you're booking your trip.

For example, if you find a Delta Airlines flight for 25,000 miles or $400, you're getting 1.6 cents per mile out of that redemption. If you look at another flight with the same mileage requirement but a $300 price tag, you're getting just 1.2 cents per mile — not as worth it.

Credit requirements

Many of the best rewards credit cards require good-to-excellent credit to qualify. Check a credit card issuer's website to see if you can prequalify for a card. This way, you can see if you might be approved without dinging your credit.

Paying off your balance

Finally, remember that while it's exciting to earn rewards, being a responsible credit card owner is most important.

Overspending on a card for the sake of earning rewards could land you in debt. If that happens, the interest you pay could quickly cancel out the value of any rewards you end up earning. Make sure you can afford your purchases and pay off the balance every month.

Rewards credit cards we recommend

Here are some of the best rewards credit cards we've found:

Card	Reward type	Rewards rate	Welcome bonus
Blue Cash Everyday® Card from American Express	Cash back	3% cash back at U.S. supermarkets, U.S. gas stations, and U.S. online retail purchases (up to $6,000 per year on eligible purchases in each category, then 1%); and 1% cash back on other eligible purchases (cash back is received in the form of Reward Dollars that can be redeemed as a statement credit and at Amazon.com checkout)	As high as $200 cash back after spending $2,000 in eligible purchases on the Card in the first 6 months (welcome offers vary and you may not be eligible for an offer; cash back is received as Reward Dollars, redeemable for statement credit or at Amazon.com checkout; terms apply)
Capital One VentureOne Rewards Credit Card	Miles	1.25 miles per dollar on every purchase, every day and 5 miles per dollar on hotels, vacation rentals and rental cars booked through Capital One Travel	Earn a bonus of 20,000 miles once you spend $500 on purchases within 3 months from account opening, equal to $200 in travel
Capital One Quicksilver Cash Rewards Credit Card	Cash back	1.5% cash back on every purchase, every day; and 5% cash back on hotels, vacation rentals and rental cars booked through Capital One Travel	Earn a one-time $200 cash bonus after you spend $500 on purchases within 3 months from account opening
Chase Sapphire Preferred® Card	Points	5X points on travel purchased through Chase Travel℠; 3X points on dining, select streaming services, and online groceries; 2X points on all other travel purchases, and 1X points on all other purchases	Earn 75,000 bonus points after you spend $5,000 on purchases in the first 3 months from account opening
Chase Freedom Unlimited®	Cash back	5% cash back on travel purchased through Chase Travel℠, 3% cash back on drugstore purchases and dining at restaurants, including takeout and eligible delivery service and unlimited 1.5% cash back on all other purchases	Earn a $250 Bonus after you spend $500 on purchases in your first 3 months from account opening (limited-time offer)

Guide to credit card rewards programs by issuer

American Express Membership Rewards Program

If you carry any number of American Express credit cards, you'll be able to earn points from your spending. These points are part of the Amex Membership Rewards program, which gives you many redemption options.

To get the most value from Membership Rewards points, consider using them in the following ways:

• Book flights directly through Amex Travel, which allows you to score insider fares with more than 40 airlines at a rate of 1 cent per point.
• Upgrade your existing flight with points at a rate of 1 cent per point.
• Book Fine Hotels & Resorts at a rate of 1 cent per point through Amex Travel.
• Book vacations and cruises, or reserve prepaid hotel rooms, through Amex Travel at a rate of .7 cents per point.
• Transfer points to a partner loyalty program (such as your favorite airline or hotel) and then redeem those points directly for award travel.

Amex transfer partners include Delta Air Lines, Hawaiian Airlines, KLM, and Etihad Airways, as well as Marriott and Hilton hotels, among many others.

Do Amex Membership Rewards expire?

Membership Rewards points do not expire, which is good news but not uncommon. As long as your account is in good standing, your points will be waiting for you whenever you're ready for them.

Chase Ultimate Rewards points

Perhaps the most popular credit card rewards program is Chase Ultimate Rewards.

Like Amex Membership Rewards, Chase Ultimate Rewards offers cardholders the flexibility to choose how they want to redeem their earnings. You can cash out for a statement credit at a cent-per-point rate, or you can maximize those valuable earnings in other ways.

• The Chase travel portal allows you to book (often discounted) flights, cruises, hotels, and rental cars directly, using your accrued points.
• With certain cards, you may be able to get even more value from these redemptions. For instance, Chase Sapphire Preferred^® Card cardholders get up to 1.5x more value when redeeming points through the platform. If you carry the Chase Sapphire Reserve^®, this bonus jumps to up to 2x more value.
• You may be able to squeeze more value out of your points by using them with Chase Ultimate Rewards transfer partners, including Southwest Airlines, JetBlue, British Airways, World of Hyatt, and Marriott Bonvoy.

Do Chase points expire?

Points never expire with the Chase Ultimate Rewards program. You can, however, lose points if your account is no longer in good standing or if you misuse the program, engage in fraudulent activity, or file for bankruptcy.

Citi ThankYou Points

With certain Citi credit cards, you'll earn what's called ThankYou Points. Compared to some other popular platforms, Citi's ThankYou program can be confusing to navigate. That's because the value of your points and even your basic redemption options will depend on which card(s) you carry.

You can earn Citi ThankYou points through welcome bonus promotions, by spending with a Citi ThankYou credit card, or by holding certain Citi bank accounts/products. These points can then be redeemed for things like cash back, gift cards, travel, or used with Citi transfer partners.

Do Citi ThankYou Points expire?

No matter how you plan to redeem your earned Citi ThankYou points, you can rest easy knowing they won't expire with most cards. There are a few older cards, such as the Citi Platinum with ThankYou Rewards, Citi Simplicity Rewards Card, and Diamond Preferred Rewards Card, that do allow their points to expire, however.

It's also important to keep an eye on the points that are given to or shared with you:

• Points issued directly by ThankYou Rewards — such as promotional points — will expire three years after they are awarded.
• Points shared with you by someone else will expire 90 days after they are shared.
• If you earn points through a card such as the Citi PremierPass/Expedia Card, your points will expire after 18 months of account inactivity.

Capital One Venture Miles

A few different Capital One credit cards offer Venture miles as rewards for your spending. The Capital One Venture Rewards Credit Card and Capital One VentureOne Rewards Credit Card both earn Venture miles.

Redemptions are simple: You can:

• Cash them in for a statement credit or paper check (at .5 cents per mile).
• Redeem them to cover eligible travel expenses charged to your card in the past 90 days.
• Book a new trip through the Venture travel portal.
• Transfer your miles to a Capital One transfer partner to use them for award travel or upgrades when you fly or stay at a hotel.

Do Capital One miles expire?

Capital One Venture miles don't ever expire. As long as your account is open and in good standing, your miles will remain yours. However, if you close your account before redeeming all those miles, you will lose any unused miles.

5 airline miles programs' expiration policies

Airline miles can be used for everything from free flights to upgraded seats, early boarding, and even preferred status. You can earn points by taking flights, using a credit card that earns you miles, or transferring miles from a partner credit card rewards program to your favorite airline.

Here's a look at some popular domestic airline programs and whether your accrued miles will expire.

	Do they expire?	When they expire
American Airlines AAdvantage miles	Yes	After 18 months of account inactivity
Delta Skymiles	No	N/A
JetBlue TrueBlue points	No	N/A
Southwest Rapid Rewards points	No	N/A
United MileagePlus miles	No	N/A

Tips to prevent credit card points and miles from expiring

Although many travel programs no longer let points expire, you don't want to risk losing any rewards that are rightfully yours. Whether you're saving up airline miles or hotel points, here are a few ways to prevent them from expiring:

Use shopping portals for online spending

A great way to earn extra rewards and keep your account(s) in good standing is to shop through an online portal every time you buy.

If you're worried about your AAdvantage miles expiring soon, for instance, sign up for the American Airlines eShopping portal. From there, you can earn miles (and reset your account activity) by shopping online at more than 950 stores, such as Sam's Club, Apple, Sephora, Nike, and more.

Book flights with miles

Depending on the program, you may be able to keep your account current by redeeming miles for an upcoming flight or a seat upgrade. You can often book these pretty far in advance.

Transfer from a partner program

If you have points or miles from a travel rewards credit card sitting around collecting dust, transfer some to a partner program to keep the rest from expiring. Sometimes, you can even transfer as few as 500 or 1,000 points.

Buy extra points or miles

Many programs allow you to buy points or miles. If your balance is about to expire and you have no other options, buying as few points as possible can keep you from losing what you already have.

Donate your points or miles to charity

Not sure what you want to do with your points balance, but don't want to risk letting them expire? Help a good cause. Many programs let you donate points or miles to charity, and this often counts as new-account activity.

FAQs

Bottom line

Earning rewards on spending you already do is a great way to save on everyday expenses and upgrade your travel without blowing your budget. The points and miles you earn from credit cards can be valuable, but you have to put thought into how you redeem and make sure you don't let any of your rewards expire.