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Many credit card issuers allow you to purchase gift cards using points, miles or cash back — but are the redemptions worth it?
The redemption value of gift cards
The value of gift card redemption varies by credit card and whether there are additional promotions available.
Historically, gift card redemption has been seen as less valuable compared to other redemption options — which is still true in most cases. But with cards like the Citi Rewards+® Card, for example, you’ll get more value for your points when redeeming for gift cards (1 cent apiece) compared to cash back (0.5 cents a piece).
In most cases, redeeming rewards for travel offers the most bang for your buck. With the Chase Sapphire Preferred® Card, for example, you’ll earn 1.25 cents per point on travel redeemed through Chase Ultimate Rewards and 1.5 cents per point in the case of the Chase Sapphire Reserve®. Further, there’s the potential for even greater rewards value when you transfer rewards to a card’s hotel or airline partner. In the case of the Sapphire Reserve, points can be worth up to 2 cents apiece toward high-value Chase transfer partner travel, according to Bankrate valuations.
On the topic of promotions, some credit cards offer discounts on gift cards, meaning you’ll pay less than the face value. For example, a $25 gift card may only cost you $20, meaning you get to keep money in your pocket for the next person on your list.
Last year, Chase offered a 10 percent discount on gift card redemptions for brands like Macy’s and Panera. Information about these offers typically come directly to your inbox, but you can also check for updates on pages in your online account, such as Chase Offers and Amex Offers.
Why redeem rewards for gift cards?
First and foremost, you may be interested in redeeming credit card rewards for gift cards in order to cover a simple gift. Once you purchase a gift card using rewards, you can then use it to buy gifts or gift the card itself. For example, if you have a sister who loves makeup, a Sephora or Ulta gift card may be a solid birthday present. Or if you have a friend with a baby shower coming up, you can buy a Target gift card and use it to purchase the baby gift.
You may also want to buy gift cards with rewards to prevent rewards from expiring due to account inactivity. The rules regarding rewards expiration vary by credit card. For example, Southwest credit card points don’t expire as long as you have an active Southwest Rapid Rewards account. The same goes for points earned through Chase Ultimate Rewards — there is no expiration date, but you must use the points before closing your account (or you lose the points). On the other hand, rewards points earned with Wells Fargo business cards expire after five years.
Do gift cards expire?
According to a recent CreditCards.com survey, about three in 10 Americans (29 percent) don’t use a gift card before it expires, which means many people are leaving money on the table.
Fortunately, due to the Credit CARD Act of 2009, gift cards distributed by card issuers can’t expire for at least five years after the date of activation. Exact expiration policies vary by gift card merchant and card issuer and can be found in the terms and conditions.
The bottom line
Redeeming rewards for gift cards can be worthwhile — especially if there are promotions, or your card specifically states it’s valuable to do so. Though redeeming rewards for travel typically offers the most value, it’s not black and white.
If you don’t have upcoming travel plans or your points are on the verge of expiring, it may make sense to explore this route.