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 to see that you’re earning them on your purchases but still unsure what you’re supposed to actually do with them. 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 for your spending.

What are credit card points?

Credit card points are one type of credit card rewards. 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; 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 and at least one point per dollar on all other purchases.

How do you earn credit card points?

In most cases, you earn credit card points by making purchases on your credit card. Many credit card issuers offer different point rates depending on the type of purchase; The Platinum Card® from American Express, for example, offers 5x Membership Rewards® points on flights booked directly with airlines, 5x points on flights and prepaid hotels booked on, and 1x points per dollar on all other purchases.

Many credit card issuers offer a sign-up bonus that allows you to earn a large amount of points at once. Some issuers also let you purchase credit card points through your online account or through a credit card rewards portal. This can be useful if you’re hoping to use your points to book travel, and you need just a few more points to cover the cost of your trip.

How do you use credit card points?

You can usually use your credit card points as soon as you’ve earned them. Even a small number of points can be turned into a statement credit, which is one way to bring down your credit card balance. If you earn enough points, you can redeem them for bigger-ticket items like flights or hotel rooms.

It’s up to you to decide when to use your credit card points. Some people use their points as quickly as possible, redeeming them for statement credits or cash back every month. Other people save up their points until they have enough for a big purchase.

What can you get with credit card 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
  • Statement credits
  • Travel purchases
  • Gift cards
  • Online retailers
  • Charitable donations

Many credit cards will also let you transfer your rewards to travel loyalty programs, which means you could turn your credit card points into hotel points or airline miles.

How much are credit card points worth?

Credit card points have different values depending on the card issuer, the point 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 60,000 points 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 $600. 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 60,000 points could be worth as much as $750.

Read your credit card’s fine print to learn how much 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, 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 charges, transfer points to participating travel loyalty programs and more.

Remember to be strategic about redeeming your 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 more you know about the way your credit card point system works, the more you’ll get out of your credit card rewards.