Absolute Best and Worst Ways to Redeem Credit Card Rewards

Love earning credit card rewards? You’re not alone. Tons of people redeem credit card rewards and enjoy the process of racking up points.

My perspective is that if you can use credit cards wisely and avoid debt, why not take advantage of credit card rewards? It should go without saying that some of the best rewards credit cards are reserved for people with above-average credit anyway.

Now, if you’re wondering how to redeem credit card rewards for maximum benefit you’ve come to the right place. Credit card rewards can be a great thing if you know how to maximize your points or cashback. In this post, I’ve rounded up some of the best and worst ways to redeem credit card rewards.

Worst Ways to Redeem Credit Card Rewards

Let’s start with the worst and save the best for last. There are dos and don’t to maximizing credit card rewards. Below are some of the worst ways to cash in your points or cashback. Some of these options will leave you with way less money than you could have leveraged with your points.

Merchandise

Some credit cards allow you to redeem your points for merchandise through their partners. Some of these online partners include popular retailers and places that you would probably shop at anyway.

However, redeeming points this way is a bad idea. One year, I redeemed points by shopping through my credit card company’s partners and I found while it was convenient to shop with my points, the point to value ratio was not good. For example, credit cardholders may have to spend thousands of points on an item that would likely retail for just $40 – $50. When you read about some of the better ways to redeem credit card rewards further down, you’ll realize that you’re not getting a fair trade with this option.

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Pay With Points or Statement Credit

Most credit cards will allow you to use your rewards points as a statement credit. I know American Express also allows you to pay for things with points. For example, you may be able to buy things like concert tickets or purchases on Amazon with your AMEX points. This isn’t the best option because again, the point value doesn’t go far with this redemption method.

Plus, you should be able to pay your credit card off in full each month if you want to rack up rewards. Don’t rely on rewards points to help you pay your credit card bill. Odds are, you won’t have enough points to cover hundreds of dollars on your balance. Only spend what you can afford to repay. Then, the rewards will seem like a bonus.

Cash Back on a Travel Card

I love cashback cards, but one thing I’d never do is redeem cashback on a travel card. It’s best to use travel cards on travel expenses which will stretch your reward points a lot further. For example, the points you earn on your Southwest Rapid Rewards card should be used Southwest flights.

Travel can be costly, and if a card is offering you 50,000 reward points which can be redeemed for $500 in travel costs, it would be wise to take the offer. You can always use cashback rewards cards specifically for cashback which is something I’ll explain below.

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Best Ways to Redeem Credit Card Rewards

Now that we’ve gone over some of the absolute worst ways to redeem credit card rewards, let’s talk about some of the better options to get the most bang for your buck.

Earn Unlimited Cash Back

Now, I like a cashback credit card as much as the next person, but some of those cards that have certain spending categories and add caps just confuse me. Yes, the average person wants to have a competitive cash back percentage. However, cards like Discover that offer 5% cash back only do so in select categories and limit your rewards to $1,500. One thing I do like about this card is that they match your rewards for the first year.

After a few years though, you may want to look into a more long-term option like a Citi cash back card. While the Citi Double Cash card only awards 1% cash back on purchases, this includes all purchases and you get an additional 1% when you pay off those purchases by paying your bill. There are no caps or limits on what you can earn either. I personally like using my cash back credit cards to provide extra money for holidays, birthdays, and other expenses.

Cash Back via Direct Deposit

The best way to redeem cash back is via direct deposit. Some cards offer to give you a statement credit or to receive a gift card. In my experience, it just best to get the money deposited into your account so you can spend it however you please.

Make sure your card offers a reasonable redemption timeframe like 5-7 business days. I’ve seen some cards offer a 30-day waiting period which is pretty ridiculous.

Flights and Hotels

There are some really great travel rewards credit cards out there to take advantage of. Even if you just plan to take one vacation per year, redeeming your credit card points for travel can save you a ton of money.

In the past, I’ve used credit card reward points to save $500 on cruises. I like using the IHG Rewards credit card to earn points on hotels. Another perk of this particular card is that the 4th night you book is free. Plus, you get a free anniversary night each year that you have the card. All of these perks justify the moderate annual fee.

What are some of your favorite ways to redeem credit card rewards?