Guide to Redeeming Credit Card Rewards

Q: When should I redeem rewards on my credit card?

There’s no best time to redeem your credit card rewards. Some people prefer to redeem them whenever they can in order to put them toward a purchase, while others save them up for something special like a trip.

Q: Can I convert my reward points to cash?

Some credit card rewards programs allow you to redeem your points or miles for cash back, but others don’t. There are also programs that allow you to redeem your points for statement credit for certain purchases, which is similar to getting cash back.

Q: How long does it take to convert my reward points to cash?

If you convert your points to cash back in the form of a statement credit, it can be instantaneous. Cash back that’s deposited into your bank account, may take a day or two. If you opt to receive your cash back as a check in the mail, it can be 10 to 14 days.

Q: Should I convert my miles to cash back?

Cash back is by far the most flexible option, because you can use it to pay for things like groceries or clothes. However, if you’re able to receive more valuable rewards for your miles, as is sometimes the case, it may not be worth converting them to cash back.

Jason SteeleUpdated August 4, 2022

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.

For many people, earning and redeeming rewards is an important perk of using a credit card. As you’re making purchases with your card, you can have the satisfaction of knowing that your rewards are likely adding up, and that eventually you may be able to use them to help get something you really want, like a vacation. How do you redeem credit card awards? To make the most of them, you need to know the type of rewards program you have and how it works. Read on to learn about the different kinds of rewards offered and the best way to redeem yours.

What Are Credit Card Rewards?

Credit card rewards can come in different forms but they are generally points, miles, and cash back you earn by using a credit card. The top rewards credit cards can offer hundreds of dollars’ worth of rewards each year.

How Credit Card Rewards Are Earned

Credit card rewards are one of the benefits of credit cards, and there are several ways you can earn them. The most common way is through spending. You can also earn rewards by opening up a new credit card, or through promotions like adding an authorized card user to your credit card account.Recommended: How Credit Cards Work

Types of Credit Card Rewards

There are three primary types of credit card rewards, which is something to take into consideration when you’re choosing a credit card, based on the kind of perks you prefer. The first is cash back, meaning you earn money back based on your spending. There are also points and miles rewards, which you accrue as you use your card for purchases. The top travel rewards credit cards offer points that can be redeemed for different types of rewards, or they can be transferred to airline and hotel partners to put toward a trip. Here are the particulars of each type of reward.

Cash Back

Cash-back credit cards give you a percentage of your spending as cash. The top cash back credit cards can offer you as much as two cents per dollar of purchases, and even more for items in certain spending categories such as gas or groceries.

Points

Points are awarded based on your spending. Some credit card loyalty programs offer points you can redeem for travel, among other things. For example, Bank of America rewards credit cards can offer points that can be redeemed for travel reservations, gift cards, or cash back.

Miles

Miles are also offered by credit card loyalty programs. Traditionally, miles have been given out by airlines, but there are now several credit card issuers that reward with miles. They are typically given for travel-related perks like flights and hotels.

How to Redeem Credit Card Rewards

Redeeming your rewards depends on the program and type of reward you’ve earned. Here’s how to do it.

Redeeming Point-Based Rewards

Points-based rewards programs can offer many options including cash back, gift cards, travel reservations, merchandise, and transfers to other loyalty programs. You can typically redeem rewards points online (just log into your account and follow the instructions), but occasionally you might have to call.

Redeeming Travel and Miles Rewards

When it comes to travel and miles rewards, how you redeem them, online or by phone, often depends on the type of card you have — for instance, whether you have a traditional credit card or a hotel or airline card. Log into your account online to find out more information.

Redeeming Cash-Back Rewards

Cash back rewards can come as a statement credit, a deposit in your bank account, or as a check in the mail, depending on the card. With some cash-back credit cards, you can set the account to automatically redeem cash back every month, while others require you to go online each time to request it.

Tips on Maximizing Credit Card Rewards

When you’re ready to redeem your credit card rewards, there are typically a number of options to choose from and you’ll want to consider them carefully before you decide. One of the most important things to be aware of is that the value of the rewards you redeem will vary greatly, depending on the option. For instance, some credit card loyalty programs offer points you can transfer to airline and hotel programs. When you transfer the points and can redeem them for expensive flights or hotel rooms, you can often receive several cents in value per point or mile. With other types of credit card rewards, many programs offer you one cent in value towards cash back, merchandise, gift cards, or travel reservations. In this case, you're better off redeeming the rewards for cash back, and using that cash to shop around for the best deal on the merchandise or travel you want to purchase.

Things to Avoid When Redeeming Credit Card Rewards

Most credit card rewards programs have many low-value options for redeeming your points or miles. For example, you may get less value if you choose to pay for new purchases with points, but you’ll get one cent or more in value towards other options like cash back. To figure out the value you’re getting on your points, divide the value of the reward by the amount of points or miles needed to get it.Also, be skeptical of the value of the award that’s being offered. It may appear that you’re receiving one cent in value per point redeemed, but the value may be based on the suggested retail price of the item. If you can purchase the item for less yourself, choose another option for redeeming your rewards.

The Takeaway

Earning credit card rewards and receiving something back for the purchases you make, can be a great perk, but you need to know all the facts about your rewards program. By understanding the basics about redeeming your points, miles, and cash back, you can avoid some common mistakes and maximize the value of your rewards. Rewards are just one thing to consider when choosing a credit card. Annual fees and rates are also very important. When you’re weighing credit card rates, Lantern by SoFi can help you explore all the options so you can choose the credit card that’s best for you.

Frequently Asked Questions

When should I redeem rewards on my credit card?

Can I convert my reward points to cash?

How long does it take to convert my reward points to cash?

Should I convert my miles to cash back?

Photo credit: iStock/JoeLena

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About the Author

Jason Steele

Jason Steele has been writing about credit cards and award travel since 2008. One of the nation's leading experts in this field, he has contributed to dozens of personal finance and travel outlets and has been widely quoted in the mainstream media.

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