How do credit card points work? A beginner’s guide

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If you have a credit card that earns points, you might be excited about the potential to gain rewards when you spend, but you may not be certain on how to actually make the most of your points. Earning and redeeming credit card points is easy once you know how credit card point systems work.

Here’s a quick overview of what credit card points are, how to use them and how to maximize the value of your points to get the most bang for your buck.

What are credit card points?

Credit card points are a type of credit card reward. Unlike cash back rewards, which yield a percentage of cash back on certain purchases, credit card point systems give you a number of points per dollar spent.

The point value may differ depending on the type of purchase you make and some credit card issuers change their point system to reward certain purchases more than others on a monthly or quarterly basis.

Travel credit cards often offer more points or miles per dollar for travel-related spending. For example, a top rewards credit card will offer a points multiplier on certain categories of purchases (such as gas or dining out) and at least one point per dollar on all other purchases.

How do you earn credit card points?

When it comes to earning credit card points, there are a few things you can do to expand your earning potential besides making purchases with your credit card on a day-to-day basis. Here are some examples of what you can do to earn valuable points.

Maximize specific spending

In most cases, you earn credit card points by making specific purchases using your credit card. Many credit card issuers offer different point rates for certain types of purchases. For example, if you’re an avid traveler and spend a significant amount on tickets and hotel rooms, the Platinum Card® from American Express offers 5x Membership Rewards® points on flights booked directly with airlines, 5x points on flights and prepaid hotels booked on American Express Travel, compared with 1x points per dollar on all other purchases.

Sign-up bonuses

Many credit card issuers offer a sign-up bonus that allows you to earn a large number of points at once. Typically, you have to meet a certain spending minimum within the first few months of opening the card before you can claim the bonus, so make sure this spending minimum will be able to work with your budget before signing up.


Some issuers offer referral bonuses to current cardholders who get a friend or relative to apply for the card. Generally, you’ll refer a friend via a link and receive a certain amount of points for the referral. The number of points will depend on the issuer’s specific bonus.

Types of credit card rewards points

Credit card points can be redeemed for everything from statement credits to online shopping. A typical rewards credit card will let you redeem points for any or all of the following:

Cash back

Cash back credit cards give you a percentage of your purchase price back. Some flat-rate cash back cards reward all purchases while others give you higher cash back but only on eligible purchases, such as groceries, dining out, travel or gas.

Statement credits

Some rewards cards will allow you to redeem your rewards as a statement credit. With a statement credit, the issuer will deposit the cash value of the redeemed rewards points directly into your account balance. Not every issuer offers this option, so if that’s how you plan to redeem your rewards, make sure this perk is available to you before applying.

Travel purchases

With a travel rewards card, you can generally redeem the points and miles you earn on every qualifying travel expense, such as a plane ticket or a hotel room. Many travel cards also offer luxurious perks, like airport lounge access. It’s common for credit cards to let you transfer your rewards to travel loyalty programs, which means you could turn your credit card points into hotel points or airline miles.

Gift cards

Gift cards are a common way to redeem your hard-earned rewards. You can choose from a slew of options, including everything from entertainment to restaurants. Issuers may offer different gift card options, so if you have multiple cards from different issuers you may have multiple options or brands to choose from.

Online retailers

Some issuers allow you to redeem your points with online retailers, like Amazon. While this seems like a convenient way to use your rewards, it may not be the most lucrative as specific issuer restrictions can come into play.

Charitable donations

Select issuers will allow you to donate your points to a charity or a nonprofit organization. You can check if your issuer provides this option by logging onto the redemption portal of the website.

How much are credit card points worth?

Credit card points have different values depending on the issuer’s points system and the way the points are redeemed. One point is often equivalent to one penny, though credit card issuers may adjust that value at any time.

Your point value might also change depending on the way you use your points. If you earned the 100,000-point sign-up bonus on the Chase Sapphire Preferred® Card (by spending $4,000 in the first three months), for example, those points would have a base value of $1,000. However, you can increase the value of your Chase Sapphire Preferred points by 25 percent if you redeem them for travel through Chase Ultimate Rewards, which means that your 100,000 points could be worth as much as $1,250.

Read your credit card’s fine print to learn how much your points are worth—and pay attention to whether point values go up or down depending on how they are redeemed.

How do you redeem credit card points?

Once you’ve got a stash of points saved up, it’s easy to redeem them online by logging into your credit card account. You can also redeem credit card points through issuer-specific portals. If you have an American Express card that earns American Express Membership Rewards, for example, you can redeem your points by logging into your card account or by visiting the Membership Rewards portal. From there, you can book or upgrade travel, use points to cover credit card purchases and transfer your points to participating travel loyalty programs, as well as being able to take advantage of other convenient features.

It’s important to be strategic about how you redeem your credit card points. If your points are worth more as cash back than they would be if you redeemed them for gift cards, why not choose cash back? Likewise, if your credit card increases your point value when you redeem for travel purchases, it makes sense to save up your points for your next big trip. The better you understand how your credit card points system works, the more you’ll get out of your credit card rewards.

Do credit card points expire?

Depending on the issuer and the type of card that you have, your hard-earned points could expire. Typically, if you have a regular rewards card and not a branded travel card, your points are less likely to have an expiration date as most of the major issuers have no-expiration policies. If you have an airline or hotel card, however, your points and miles usually expire within the specific issuer’s timeline.

Make sure to check with your card issuer to keep up with the potential expiration dates, so you don’t miss out on redeeming your points for valuable upgrades, perks and redemption opportunities.

Written by
Hanneh Gundersen
Student loans reporter
Hanneh Gundersen specializes in everything related to student loans and helping you finance your next educational endeavor. She aims to help others reach their collegiate and financial goals through making student loans easier to understand.
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