If I told you that you can be rewarded for doing what you are already do every day, would you be interested? The answer is easy, of course!
This is basically how credit card points and miles work. Companies make money when you use their credit card so they want to incentivize you to choose theirs. They do this by offering an extensive rewards program that can score huge perks for consumers, mainly to be redeemed for travel.
The best part? For many credit cards you receive rewards on everyday purchases from groceries, to gas, to dining out at no extra cost to you (well, sort of). We will break down how credit card points and miles work so you can receive the biggest benefits on your everyday spending.
What are credit card points?
Credit card points are rewards customers earn for spending money with specific credit cards. The reward points are often called “miles” because they can be redeemed for travel or transferred directly to airline loyalty programs. These points are highly sought after because of their value in being redeemed for flights, hotels, or other travel perks.
Each time you make a purchase with a credit card, you’ll earn a certain number of credit card points based on the amount of money spent. This is made possible because credit cards earn a commission, paid for by the retailer, on everything you buy. The more you spend on a credit card, the more that company makes, therefore incentivizing them to give you “points” to spend more.
It’s common for most credit card to reward you with 1 point per $1 spent on everyday purchases as well as bonus points on certain purchases. These bonus points can be as much as 2x, 3x, or even 5x or certain purchases like travel and dining allowing you to rack up huge points balances.
While there are generic points credit cards that allow you to transfer your rewards to their partner airline, some airlines even offer co branded credit cards themselves. These are designed to allow you to boost points towards that specific airline as well as gain additional status perks in the process.
How much are credit card points worth?
Each airline and credit card rewards program has different redemption methods meaning the value ranges widely. The baseline is often around $0.015 per point in value as baseline but its not uncommon to find sweet spots where you can redeem them for much more.
To find how much each credit card programs points are worth refer to the table below:
|Credit Card Program||Value Per Point||Value of 100k Points|
|Ultimate Rewards (Chase Sapphire Reserve)||$.0144||$1,440|
|Ultimate Rewards (Chase Sapphire Preferred)||$.0140||$1,400|
|Citi ThankYou Rewards (Citi Premier/Prestige Cards)||$.0121||$1,210|
|American Express Membership Rewards||$.0111||$1,110|
|Capital One Venture Rewards||$.0102||$1,020|
How to earn credit card points
The basics of how to earn points is simple: the more you spend, the more you earn. However, in reality there are lots of ways to jump start your earning and accumulate a large balance in a relatively short period of time.
Choose the right card. The most important step is getting the right credit card that best fits your spending habits. If you spend a lot of money on one particular activity, it’s probably wise to get a card that rewards you for that. Dining out often? Traveling for work? You’ll want a high spender card like the AMEX Platinum or the Chase Sapphire Reserve. If you are a more modest spender look for a lower fee card that still rewards you with points like the Chase Sapphire Preferred or the Capital One Venture Card.
Look for a large sign-up bonuses. Credit card companies often offer you bonus points if you spend a certain amount on eligible purchases within the first few months of opening a new card. This is one of the best ways to accelerate your points earnings. A typical sign-up bonus might offer 50,000 points if you can spend $3,000 in the first three months but you can find much bigger bonuses of 80,000 to even 100,000.
Refer your friends. Your rewards credit card might offer a referral program allowing you to earn a little bonus on each sign up. You can refer friends to your card using your own unique link and check the online portal to find out how.
Get more than one card. If you spend enough and prefer travel rewards, it might be a good idea to get more than one credit card. For example, you can pair an airline credit card with a generic travel credit card that lets you transfer your credit card points to that airline and switch them out depending on what you’re purchasing for maximum earning.
How to redeem credit card points
The redemptions system for each rewards program is different, but almost all rewards have an online portal where you can redeem your rewards. Be careful of using the portals though since the rates for redemptions can vary widely depending on how you redeem. With most programs, there will be some dates when redemptions are not available or cost significantly more than usual.
Here are some tips for getting the most out of your redemptions:
Transfer to travel partners. Many airline credit card programs have airline partners that you can transfer points to and often times a redemption through the airline is cheaper than your credit card company. If you can’t find a low-cost flight through the portal, consider searching with some of their partner airlines and transfer to them to finish the booking.
Book in advance. It’s important to search for redemptions early and ideally over 45 days in advance. Not only will this help you select dates that offer lower redemption costs, but booking last minute might incurs additional fees.
Be flexible. This is one of the best ways to make the most out of your miles. If you’re flexible with your travel dates, it’s easy to work around popular and expensive dates to book the low-cost options.
Airline points have been around for years and there is no signs of the bonus stopping anytime soon. It’s important for you to understand how points work and why they can be beneficial to you to get the most out of your money. It’s often mentioned that technically credit card points are not “free” and we pay for them in higher retail prices due to the fees they charge retailers. This makes it even more important for you to get your value since you are paying for it one way or another.