Credit Card Points: A Guide

First Republic Bank
August 23, 2022

  • Credit card points — a feature of many rewards credit cards — enable you to earn points as you spend. 
  • You can redeem credit card points for travel or gift cards, among many other things.
  • In some cases, you can earn bonus points by spending in certain categories or with a signing bonus when you open your card.

You’ve probably heard of the perks of credit card points, but what are credit card points, and what types of credit card rewards and benefits can come from spending money with a card? Plus, how do credit card points work? The answer depends on your personal finance habits and what kind of rewards card you’re using.

There’s a lot to know about credit card reward points, and understanding each element of earning through redemption will help you get the most out of these perks. 

What are credit card points?

Credit card points are a type of credit card reward you accrue as you spend money on your card. The more you spend, the more points you can earn. These are different than the other two main types of credit card rewards (cash back and airline miles). 

What can you spend card points on? Depending on the credit card company, you generally have multiple options, such as shopping or travel.

What Is a Rewards Credit Card?
A rewards credit card enables you to earn credit card rewards points as you spend.

How do credit card points work?

With credit card points, you earn as you spend money on your card. The more money you spend, the more points you’ll earn, which can be redeemed later.

The number of points you’ll be able to earn will vary depending on the credit card reward program you’re a part of. For example, some cards offer bonus categories that yield greater rewards on certain purchases, whereas others only offer point rewards at a flat rate.

Other core features — such as redemption options, point value and whether you can earn bonus points — can vary significantly among rewards systems. Your card issuer will set the terms of your rewards program.

Credit card points can sometimes come in other forms, too, including miles and cash back.

Do Credit Card Points Expire?
In most cases, credit card points don’t expire. However, terms for each card issuer are different, and it makes sense to check in with your financial institution to make sure your points don’t have an expiration date.

Other types of credit card rewards

The other two types of credit card rewards are mile rewards and cash back rewards. These don’t come in the form of flexible rewards, as general credit card points do; instead, they’re meant to be specifically redeemed for travel and cash, respectively.

Mile rewards

Mile rewards credit cards enable the cardholder to earn travel miles based on their spending. Similar to other types of credit card points, the more you spend, the more points you earn. While general credit card points may be able to be redeemed for travel rewards, miles reward programs usually focus on redemption options like airfare, hotel stays and other travel-based incentives. 

Cards that provide miles rather than points are often specifically associated with brands, such as airlines, and can be a good fit for frequent travelers who can redeem their miles for more travel.

Cash back rewards

Cash back credit cards are cards that return a percentage of your spending in cash, redeemed as either a direct cash award or a statement credit. With these cards, you do not earn points; instead, you earn cash back at a specific rate (or rates if your card has particular bonus categories). While points rewards cards are different than cash back cards, it is possible to redeem your credit card points for cash back in some instances.

How do you earn credit card points?

Generally, you earn credit card points as you spend money, often at a fixed rate. However, in addition to daily spending, cardholders may have access through their credit card issuers to other ways or deals to acquire ample reward points.

Bonus categories

Many rewards credit cards appoint specific categories (or sometimes specific stores) where users can earn bonus points when they spend within them. For example, a card may offer additional cash back or a higher points reward rate on gas specifically or at a specific retailer. You can maximize points by making purchases in these bonus categories. 

Some cards also provide rotating bonus categories or allow you to choose categories from a list where you most frequently spend, which can enable you to earn more points.

Sign-up bonuses

Some credit card issuers offer sign-up incentives, where you can earn a fixed number of rewards points upon opening your account. Sometimes these points kick in immediately when you open the card; in other cases, you have to make your first purchase before they show up in your rewards points balance.

Credit card referrals

In some instances, if you refer a friend or family member to sign up for a card with your card issuer, you may earn bonus points if they open an account.

How do you redeem credit card rewards? 

Redeeming credit card points is generally done through an online rewards portal at your card issuer’s website. You will be able to see your rewards points balance and choose how much you would like to redeem. You can redeem all your points at once or choose to redeem a certain number of them. You will be presented with options for types of redemption and then see what value your points have in each specific category.

What can you spend credit card reward points on?

Many credit cards offer flexible redemption, which means you have many options to choose from when spending credit card points once they are earned. These include: 

  • Gift cards: Many card issuers offer the ability to redeem credit card points for gift cards to certain stores.
  • Merchandise: Some card issuers also have their own marketplaces, enabling you to directly redeem your credit card points for goods.
  • Travel purchases: You may have the option to redeem your points for travel rewards, such as flights or hotels.
  • Statement credit or cash back: You can often redeem points for cash value, which you can receive as a cash award (often as a cash gift card) or as a credit toward your statement balance.

How to choose a rewards credit card

When you’re evaluating credit card options, you’ll want to choose a rewards credit card based on your spending habits and the types of redemption options and value you’re looking for as a cardholder. Tips for choosing a rewards credit card include:

  • Look at card-associated fees: Some rewards credit cards have an annual fee, so be sure you know whether the card you are looking at will require a yearly payment to keep the account open.
  • Review your spending habits: If you tend to spend heavily in one category, such as groceries or gas, you may be able to find a rewards card that gives you bonus points for these types of purchases.
  • Compare card reward redemption values: Some cards value points differently upon redemption, so you’ll want to look at which cards provide the best return rate on credit card points.

No matter which rewards card you choose, you’ll be able to enjoy extra perks by spending money with your card. But remember, while credit card perks could be great, it is also important to keep your expenses within budget, as it can be easy to fall into a reward-chase trap.

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