Redeeming Credit Card Rewards for a Statement Credit
Cash back credit card rewards is one of the most versatile ways to get your rewards, but you won't always get your rewards as cold card cash. Instead, many credit card issuers allow you to redeem your rewards as a statement credit rather than sending a check in the mail or making a deposit to your bank account. Even if your credit card gives you multiple options for redeeming your rewards, you might still opt for a statement credit because it’s easy and convenient.
How a Statement Credit Works
A statement credit reduces your outstanding balance by the amount of your redemption, similar to a refund. For example, if you have a $100 balance and redeem your rewards for a statement credit of $5, your outstanding balance goes down to $95. Essentially, a statement credit lets you spend less money on your outstanding credit card balance, which can be especially beneficial if you’ve accumulated a high amount of rewards. You can use the statement credit to cover part or all the cost of large purchases like a family vacation or home electronics.
Your Minimum Payment May Still Be Due
Typically, redeeming your rewards for a statement credit doesn’t take the place of any minimum payment due. There may be an exception only if the statement credit is applied to your balance right away and wipes out your entire credit card balance, leaving you with a zero balance or even a credit to your account.
It may be beneficial to call your credit card issuer to confirm whether you still need to make a payment after a statement credit is applied.
Missing a payment would lead to a late fee and could hurt your credit score if you don’t make up the missed payment before it’s 30 days past due.
If you accidentally miss your credit card payment, some credit card issuers may be willing to waive the late fee if you’re a good customer and usually make your payments on time.
Making a Statement Credit Redemption
Most credit cards allow you to make a statement credit rewards redemption directly from your online account. Once you’re logged in, you’ll be able to view your outstanding rewards and choose the amount you want to redeem. You can also call your credit card issuer using the number on the back of your credit card to redeem your rewards.
Depending on the credit card, your statement credit may be applied to your account immediately. Or, it may take one or two billing cycles to show up on your credit card statement. In some cases, the statement credit can free up some additional credit that you can use for making credit card purchases.
What to Watch Out For
Some credit card issuers have minimum redemption requirements or may require you to redeem your rewards only in certain increments. That means you must have accumulated enough rewards before you can get a statement credit. If you’re a big spender or you tend to spend heavily in the categories with the highest reward amount, you redeem your rewards before they expire.
While many rewards credit cards have no expiration date, for credit card rewards there are many that do. Make sure you’re familiar with the expiration timing for your credit card rewards. That way you can initiate the redemption before the rewards expire.
A 2017 survey from Bankrate found that 31 percent of credit cardholders have never redeemed their rewards. You should also redeem your rewards before you lose them. For example, you could forfeit your rewards if you close your card before using your rewards, miss a credit card payment, allow the rewards to expire, or break the rules of the rewards program. You could also lose your rewards if the credit card issuer changes the rewards program.
The longer you hold on to your rewards, the bigger the risk of losing them. Unless you’re saving up for something specific, it’s better to redeem your rewards often. Whether you use them or not, you may even have to pay taxes on those credit card rewards.
Other Ways to Redeem Your Credit Card Rewards
If you want more flexibility in redeeming your rewards, you’ll have to pick a credit card that offers redemption options outside of a statement credit. For example, you may be able to apply rewards directly toward purchases or redeem for gift cards, travel, or merchandise.
Discover. "Common Credit Card Questions (part 2): Rewards, Cash Back and Statement Credits." Accessed June 30, 2020.
JPMorgan Chase Bank. "Chase Sapphire Preferred with Ultimate Rewards Program Agreement." Page 2. Accessed June 30, 2020.
Capital One. "Quicksilver from Capital One." Accessed June 30, 2020.