credit card points

How To Make the Most of Credit Card Points

Everyone knows that credit cards can be incredibly dangerous when used incorrectly. In fact, the average American household has more than $16,000 in credit card debt.

Irresponsible spending can rack up tons of debt, get stuck with extraordinarily high-interest rates, and basically get yourself into a ton of financial trouble- all with the quick swipe of plastic.

With that said, credit cards can also be incredibly profitable if you know how to take advantage of credit card points. We’re talking cash back, gift cards, and travel!

Let’s get into it!

Sign-Up Bonuses

If you are relatively good with your money and budgeting, you shouldn’t fall prey to the inaccurate myth that you only need one credit card.

In fact, credit card gurus know that the secret sauce to earning credit card points comes with taking advantage of sign-up bonuses.

In order for a sign-up bonus to be lucrative, you need to fully understand the terms and limitations to determine your eligibility.

Most of the time, you will need to meet certain requirements in order to receive the bonus. For example, you may need to spend $3000 within 90 days.

For example, if you open up a Chase Sapphire Preferred card, you can earn $50,000 bonus points after spending $4,000 on purchases within 3 months.

What do those credit card points mean? It means that you can essentially redeem those $50,000 points for a $500 cash back statement or eligible gift cards or redeem $625 towards travel when redeemed through Chase Ultimate Rewards. Just from opening up a single card!

It’s very important for you to make sure that you can actually meet this spending before signing up for a new card. Otherwise, you won’t get the points (and you already pulled your credit).

Rotating Categories

One of the great perks of credit card points is that they are not just in the form of massive benefits. They can come in tiny increments, in 1-10% “rotating categories” that reward you for your daily spending habits.

For example, Chase, Discover, and Citibank all offer “5% quarters,” in which you can enroll to receive 5% cash back for eligible purchases from places like:

  • Department stores
  • Gas stations
  • Home improvement stores
  • Internet and/or cable
  • Mobile payment options
  • Restaurants
  • Movie theaters
  • Grocery stores

Many of these banks have certain limits regarding how much you can earn, but this is a very easy way to accrue credit card points and cash back with limited work!

Make sure that you know which cards offer extra points for different categories. Keep a calendar if you need.

Travel (Air and Hotels)

One of the greatest perks that come with credit card points? All the possibilities they create for travel.

In fact, there are devoted “travel hackers” who trek around the world just maximizing the virtues of credit card bonuses and points.

Whether you intend to join their ranks or just save money on your next vacation, your credit card is the place to look.

We talked about the Chase Sapphire Preferred card, where you can earn up to $625 in travel when redeeming through the Chase rewards portal. That just might be the cost of airfare on your next vacation.

Today, most credit card companies have travel portals. All major carriers, including American Express, Chase, Wells Fargo, and Citibank allow you to book vacations through their online features.

Even though most people associate travel as a luxurious privilege only available to the wealthy, you can learn how to become a happy, fulfilled frugal traveler (and still see the world).

Transfer to Partners

While most credit card companies and banks offer you the ability to “book” through their own travel portals, many also allow you to transfer to partners.

Have an SPG card? You can transfer SPG points to Marriott at a 3:1 ratio. Have a bunch of Chase Ultimate Rewards? You can transfer them to Southwest Rapid Rewards.

Transferring to partners is often the “best” way to improve your redemption rate. It’s not uncommon for people to fly first class all around the world by just tweaking their points and transferring them the right way.

The best way to get started if you want to venture down this path? Think about the trips you want to take and map out the best ways to get there.

If you’re someone who doesn’t care about how you fly, look for the cheapest economy tickets you can find. If you’re interested in a 5-star resort, you’ll also want to check out the transferable partners available to you.

As with anything else, this will be a learning curve. It’s important to make sure that you take the time to do your research thoroughly.

Loyalty and Status

Do you travel frequently for work? Like to stay in a particular chain of hotels or fly on the same airline?

Opening up a co-branded credit card can help you earn exclusive perks ranging from:

  • Free or reduced flights
  • Free or reduced hotel accommodations
  • Free or reduced rental cars
  • Late check-outs
  • Lounge access and privileges
  • Priority boarding
  • Automatic upgrades

Sometimes, simply signing up for the card grants you access to all the perks that come from being affiliated with a particular hotel or airline company.

For example, if you sign up for the American Express Hilton Honors Ascend Card, you’ll receive automatic, complimentary gold status through Hilton.

You can also use your credit card points to earn stays and receive even more bonus points for cash back or future stays.

Earn Cash Back

Who doesn’t want to improve their financial health or net worth? Whether you’re looking to grow your emergency fund or pay some bills, credit card points can help you do just that.

Many credit card companies allow you to “cash out” your accrued credit card points after reaching a certain amount.

For example, if you have the Citi Double Cash card, you can earn cash back twice on every purchase and cash out with a $25 minimum redemption. That’s just for your everyday spending purchases!

If you have the American Express Charles Schwab Platinum Card, you can “transfer” any American Express Membership Rewards to cash out to an existing Charles Schwab account at 1-1.25 ratio. This means that if you “transfer” out 1000 MR points to a Schwab account, you’ll actually earn $12.50.

Small amounts can add up fast, especially if you’re earning credit card points on sign-up bonuses.

Statement Credits

Some companies offer cash back options, and some offer statement credits, which essentially offsets your credit card bill.

You’ll want to make sure that you are getting an even exchange if you use your credit card points for this, as you might be able to get a better value if you book for travel.

However, if you’re really in need of some spare cash, this tends to be a straightforward, obvious answer.

Gift Cards

If you have a favorite retailer in mind, you might want to consider cashing out your points on gift cards.

Even if the redemption value isn’t as lucrative as travel, it will still tend to be better than redeeming for straight cash.

The Discover IT portal allows you to cash out accrued points to purchase gift cards at a minimum of 10% less than their cash value.

That means it’ll only cost you $45 to purchase a $50 gift card for your favorite restaurant, department store, or movie theater.

If it’s holiday or wedding season, everyone knows that these cards make for great gifts to give to loved ones. Use your credit card points to help foot the bill!

Buy Merchandise

As most companies offer travel, cash back, and gift card options, many also offer merchandise awards.

These can vary from high-end electronics to fancy kitchen gadgets to designer handbags, and each portal offers different selections.

With that said, they don’t always have the best value, and it’s important to do some comparison shopping to make sure that you are actually scoring a deal.

You want to make sure that you are at least getting a 1:1 ration (meaning if you have 10,000 points, it shouldn’t cost you more than $100 for the item you want to purchase).

Buying merchandise may not always be the most profitable redemption, but if you really have your eyes on the tangible prize, this may be the option for you.

Final Thoughts on Maximizing Credit Card Points

Anyone who says that credit cards are the root of all evil clearly doesn’t understand the powerful benefits that come from sign-up bonuses, points, and travel benefits.

With that said, it’s important to stay on top of your finances and do your appropriate research before signing up for anything!

Stay informed and stay aware!