Families that have had to tighten spending due to a loss of income can benefit from creative ideas to help them pay for necessities and maintain an emergency fund. For instance, unused credit card rewards can be an unexpected source of “found money” to help you through lean months. Read on to find out how to maximize and cash in those already accumulated points and miles.
- You shouldn't rely on a credit card emergency fund (using your credit card to cover emergency expenses), but if you have rewards accumulated, that “found money” can fuel a rainy day savings account.
- Credit card points and miles can help stretch your budget if you redeem them for gift cards that can cover groceries, gas, and other everyday essentials. Just be sure to consider the value of your various redemption options to choose the one best for you.
- Look over your credit card accounts carefully to opt into limited-time statement credits and other special offers that can help you save money.
Review Your Unused Rewards
Before you can start cashing in points, you’ll want to understand how the credit card rewards you have actually work. To take an inventory of what you have accumulated, head to your credit card apps, said Justin Zeidman, manager of credit card products at Navy Federal Credit Union.
“The mobile apps for all the different credit cards you have can help you monitor both your spending and rewards earned,” Zeidman told The Balance during a phone interview.
A 2020 report from PayPal found that 39% of credit card rewards holders are unaware of their rewards balances.
Once you log in, dig deeper to figure out the different ways you can use your points or miles. On some cards, your redemption options might be limited to airline or hotel bookings. Other cards may be more flexible because they offer multiple redemption choices, including gift cards, while some are strictly cash-back cards that offer a statement credit or cash deposit.
Because these are not regular times, your credit card issuer may have improved or added rewards categories. For example, Chase boosted rewards rates for groceries. It’s worth revisiting program rules to see if your issuers have made any changes.
“Sometimes there may be rewards lurking in places that you might not be thinking about,” said Neal Stern, a member of the American Institute of CPAs' National CPA Financial Literacy Commission.
Here's what to look for in your rewards account program terms:
- The redemption options: From cashback to gift cards to credits on travel bookings, look over the ways in which you can redeem your points.
- Limited-time offers: Especially on travel-focused cards during the pandemic, check to see if more flexible redemption options are available.
- If points expire: Hanging on to points for a long time could be risky if you have a card that puts a time limit on redemption. While most general rewards-card points do not expire as long as you keep the account in good standing, airline or hotel card programs may have more stringent rules.
Redeem Points Then Move Money Into Savings
Check to see if your issuing bank gives you redemption bonuses for depositing your rewards into one of the bank’s accounts, Stern told The Balance during a phone interview.
For example, with the SunTrust Cash Rewards Credit Card, cardholders can get up to a 10%, 25%, or 50% bonus when they redeem cash back directly into a SunTrust checking, savings, or money market account.
With credit card rewards that offer cash back, consider redeeming your rewards for a cash deposit that you can use to start an emergency fund. Seeding an emergency fund is wise if the first wave of the virus wiped out your savings and a potential second wave is threatening to put you out of work again or put you in debt, Stern said.
Moving earnings from credit cards into a high-yield savings or investment account that gains interest can squeeze a bit more value out of rewards, too.
If your card’s cash-back redemption rate is less than 1 cent per point, look for more valuable ways to redeem your points.
Redeem Points for Grocery or Gas Gift Cards
Some cards that let you redeem points for cash back also allow you to redeem your rewards for gift cards to stores you already shop at.
“Take note of what your points are worth, since some cards will have different redemption values if you’re redeeming for a gift card or a statement credit,” Zeidman said.
With cash-back cards, sometimes gift card redemption values will be the same as getting cash, but that's not always the case. In rare cases, you may even get bonus value on gift cards, such as with the Discover it Cash Back, which offers more than 1 cent per point on certain gift cards.
Travel cards will likely offer less than 1 cent per point or mile on gift cards, however. For instance, points you redeem with a Capital One Venture Card are worth 0.8 cents when you redeem them for gift cards, according to The Balance’s research.
In tough times (when you’re probably not thinking about booking travel anyway), it might be worth forgoing a bit of value if that will help you get through an immediate budget crisis.
“When you harness the value of the points [for gift cards], you can free up some cash that you otherwise would have used for those purchases,” Stern said.
Make Sure You're Earning All Possible Statement Credits
In addition to earning rewards, you should look at some of the latest offers that particular cards may be offering.
“Checking up on the benefits that come with your card can be a fantastic way of getting even more value out of it,” Zeidman said. In other words, you can save money just by being selective about which credit cards you use to cover certain expenses.
Other credit issuers have been offering statement credits for routine purchases, such as streaming services or food delivery fees. For example, American Express Platinum, Gold, and Green cardholders can get a free Uber Eats Pass membership (normally $9.99 per month) for up to 12 months. The pass also provides 5% off restaurant orders over $15, and no delivery fees on grocery deliveries over $30 in participating areas.
Special Offers That Can Help With Everyday Expenses
Many travel cards are offering limited-time programs to stay relevant to cardholders who aren't thinking about travel right now.
“What some of them have been doing is offering alternatives to using miles for travel,” Stern said. “You just need to look into what particular card you have and whether they're offering up things that can really benefit you.”
Deals and offers come and go all the time, so be on the lookout.