How To Make the Most of Your Rewards Credit Card

Young woman uses contactless card on cellphone at store

Francesco Carta fotografo/Getty 

Rewards credit cards are great—if you’re making the most of your rewards and redemption offers. But it’s easy to get caught up in your daily to-do list and miss out on card rewards.

In fact, Bond Brand Loyalty, a brand loyalty agency, estimated that in 2017 there were $100 billion in unclaimed loyalty points, including those from airline and rewards-based credit cards.

Below, we’ll go over some ways to make the most of your rewards credit card, from enrolling in the rewards program to the different options for redeeming your rewards. As well, you can learn if some redemption offers are more valuable than others. (Spoiler alert: they are.) 

Types of Rewards Cards

First, there are three types of rewards cards available—cash back, co-branded, and general travel.

  • Cash-back cards return money to you based on your spending, whether through statement credits, checks, or another method.
  • Co-branded cards and store cards reward your loyalty with a particular retail store, airline, or hotel chain. While you can sometimes use points elsewhere, you’ll often find the best value by redeeming them with the co-branded business.
  • General travel rewards cards let you earn and redeem points for all kinds of travel. You’ll use points or miles to pay for where you fly, sleep, and play, although many also permit you to use points and miles to shop or get cash back.

Sign-Up Bonuses

Many cards offer a sign-up bonus of some type. Some offer enough miles or points for a free flight or hotel room (or two), while others offer a cash bonus. In order to earn the sign-up bonus, you’ll need to spend a certain amount on your card within a certain time frame. Generally, bigger bonuses come with cards that charge an annual fee.

Earning Rewards

When using a rewards card, you’ll earn points, cash back, or miles at a certain rate for every dollar spent on the card. For example, you may earn 2 points per dollar spent or 2% cash back, through one of three structures: 

A flat rate for every dollar you spend (for example, 1.5% cash back for all purchases)

A tiered structure where some purchases earn more than others (for example, 3 points on groceries, 2 points on gas, and 1 point on everything else).

A rotating tiered structure. Sometimes the reward categories rotate. For example, you might earn 5% cash back on groceries during the first quarter and 1% on everything else. Then the next quarter, you'd earn 5% cash back on gas and 1% on everything else. You’ll want to make sure you maximize your spending in any bonus categories. Rotating reward cards usually require you to register for bonus categories each quarter, so you’ll need to pay attention to that.

Consider pairing cards. If you have a cash-back card that gets 6% on groceries, but only 1% on most non-grocery purchases, you might want to use a flat-rate rewards card that gets 1.5% to 2% for your non-grocery purchases. 

Chose a hotel card that fits your travel preferences. If you’re a Marriott loyalist, it makes sense to sign up for that hotel chain’s program; the same is true if you frequently fly one major airline.

Make sure you’re signed up for—and actually use—the appropriate loyalty program for your lifestyle. If a particular airline doesn’t have many flights from your area’s airports, don’t get a card co-branded with that airline.

With cash-back cards that earn extra points at certain kinds of retailers, some types of merchants may be excluded. For example, the card’s terms and conditions may specify that warehouse stores don’t count as grocery stores for the purposes of earning extra points at supermarkets. Or convenience store gas stations may be excluded from gas bonus points. 

In addition, some large merchants don’t accept certain types of cards—for example, the only cards Costco accepts for purchases made in-store are Visa cards (others are accepted online).

Pay attention to the fine print. For most hotel and airline cards, you’ll need to book directly through the hotel or airline website in order to earn bonus points, so don’t book through online travel agents or travel websites. 

Reward Card Perks

Reward cards provide more than cash back or points—many come with attractive, practical benefits tailored to the cardholder’s needs. Pay attention to reward card perks because often, they add significantly to a card’s value, but only if you use them.

Types of Rewards Cards
Airline cards Often offer free checked bags or discounted or free passes to airport lounges, which offsets the annual fee, as long as you fly often. Some offer a free or discounted companion fare.
Hotel cards May offer a free night's stay on your card anniversary
General travel cards May offer valuable insurance benefits like free car rental insurance or travel accident insurance, and often do not charge foreign transaction fees
Cash-back cards May offer extended warranties and reimbursement for stolen or damaged purchases

Ways To Use Your Card Rewards 

Before choosing a rewards credit card, research the rewards offered by that particular card. After all, it doesn’t make sense to rack up impressive points for a reward you’ll never use. 

Pay close attention to value—with certain retailers, a point goes further. Or they may have far less value. Our credit card reviews often contain information about the value of a card’s rewards points.

If you're not getting at least 1 cent per point, then it’s usually wise to look for a better redemption option or a better card, unless you’re just trying to use up points before you close the card.

Depending on the type of card, rewards options may include flights, hotel stays, cruises, car rentals, a statement credit, direct deposit, gift cards, merchandise, and purchases via iTunes or Amazon. 

Airline miles can be lucrative if you’re able to find a flight that’s cheaper to buy with points than with cash. For example, if you can spend 30,000 miles to get a flight worth $500, your miles are worth 1.7 cents each—well above that 1 cent per mile benchmark. 

You can get extra value with frequent flyer programs because the major U.S. airlines are part of international alliances (like SkyTeam, Star Alliance, oneworld), and you can use your miles for flights on any of those carriers, too.

Keep an eye on blackout dates, as many airline loyalty programs have schedule restrictions on points-based flights. 

For cash-back cards, the points valuations are usually the same whether you're redeeming for a statement credit, a check, or a gift card. Buying merchandise or gift cards may or may not give you the same valuation, so you’ll need to calculate before you cash in. 

Transferring Points From General Travel Card Programs 

Some general travel rewards cards allow you to transfer your points to another loyalty program, and that may give you the most bang for your points, especially if it’s an airline frequent flyer program. (Remember what we said above about how airline miles can give you exceptional value if you find the right reward flight? That’s what’s at work here.)

Transferring points is also a nice workaround to point expiration, a potential pitfall of the credit card rewards system. 

One example of a card that provides a good transfer program is the Chase Sapphire Preferred card. It lets you earn Ultimate Rewards points, which are worth 1.40 cents on average. That’s already a good deal.

But research by The Balance shows you can get 1.98 cents in value on average. You can do so by transferring points to the United MileagePlus program and redeeming those points for flights on United—or on its Star Alliance partners when you book those flights through United.

The Ultimate Rewards program is particularly good because it lets you transfer points at a 1:1 ratio to hotel and airline partners (meaning 1,000 Ultimate Rewards points = 1,000 United MileagePlus miles, for example). But some cards have worse transfer ratios, so be sure to pay attention to that.

Takeaway: Reward Cards

As long as you can pay your balance in full each month—even while trying to hit that required spending target—rewards cards are a great fit for those who could use the money, flights, and free nights.

Of course, don’t sign up for a rewards card if it tempts you to rack up more debt. Reward cards tend to have higher interest rates than plain-vanilla credit cards, so you’ll pay extra for the balances you carry. Try to clear your balance monthly so interest won’t outweigh the value of your rewards, and you’ll be able to jet off to a honeymoon or get money back for the holidays … guilt- and debt-free.