How to Maximize Your Credit Card Reward Points

Credit card reward points can offer significant savings and perks if you know how to use them effectively. Whether you’re new to the points game or looking to refine your strategy, this guide will show you how to evaluate and maximize the value of your credit card points. We’ll cover how to measure the value of your points and explore seven ways to redeem them for maximum benefit.

Part One: Measuring the Value of Credit Card Points

To determine the value of your credit card points, we use a unit of measure called cents per point (cpp). This is similar to how a GPA measures academic performance or a thermometer measures temperature.

Formula to Calculate Cents Per Point:

Cents Per Point (cpp) = (Cash Value / Points Used) * 100

For example, let’s say you find a flight from Boston to New York City that costs $100 if paid in cash. Alternatively, you can use 10,000 points to book the same flight.

Calculation:

$100 (cash value) / 10,000 (points used) * 100 = 1 cent per point

A value of 1 cpp is considered the baseline. If you get less than 1 cpp, it’s not a great deal. If you get more, you’re getting outsized value for your points.

Part Two: Seven Ways to Redeem Your Credit Card Points for Maximum Value

1. Shopping Portals

Using points to shop directly through your credit card’s shopping portal often provides poor value. For instance, if a MacBook costs $1,698 in cash but requires 339,500 points, you get a value of only 0.5 cents per point. This option is generally best avoided.

2. Statement Credit

Applying points as a statement credit can seem convenient but typically offers low value. For example, if 1.67 points cover $1 of your statement, this translates to 0.6 cents per point. While this is slightly better than shopping portals, it’s still below the baseline.

3. Covering Specific Charges

Using points to cover specific charges on your statement allows more strategic use but still offers limited value. For example, a $24.24 T-Mobile bill covered by 4,137 points results in a value of 0.6 cents per point. This option provides flexibility but not great value.

4. Gift Cards

Redeeming points for gift cards can sometimes offer better value but often falls short of the 1 cpp baseline. For example, a $10 Starbucks gift card costing 1,428 points yields 0.7 cents per point. While better than previous options, it’s still not optimal.

5. Pay with Points at Checkout

Using points at checkout (e.g., Amazon, PayPal) offers moderate value. For instance, a $33.99 item costing 4,856 points results in a value of 0.7 cents per point. This method is convenient and slightly better than using points for statement credits.

6. Travel Portal Bookings

Booking travel through your credit card’s travel portal generally offers good value, often around 1 cpp. For example, a $276 flight costing 27,600 points yields 1 cent per point. This is an acceptable way to use your points.

7. Transferring Points to Travel Partners

Transferring points to airline or hotel partners can offer the highest value, often exceeding the baseline significantly. For instance, a $1,150 flight booked for 60,000 points plus $64.50 in taxes and fees results in a value of 1.81 cents per point. In another example, a $25,100 first-class flight booked for 150,000 points plus $533 in taxes and fees gives a value of 16.3 cents per point. This method can provide exceptional value and is often the best use of your points.

Conclusion

Maximizing the value of your credit card points requires strategic planning and understanding the best redemption options. By measuring the value of your points using the cents per point formula, you can make informed decisions and get the most out of your rewards. While options like shopping portals and statement credits offer convenience, transferring points to travel partners often provides the greatest value. Use these insights to make the most of your credit card rewards and enjoy substantial savings and perks.