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Reward Cards 101

How to Pick the Best Rewards Credit Card for the Holidays

Choosing a solid rewards credit card can help you reap a slew of benefits during the holiday season, in addition to earning cash back or rewards points on purchases. But the earlier you snag a good credit card deal, the better. With holiday spending on the horizon, you can more easily meet welcome bonus requirements, plus get essential protections and perks on travel and purchases.

Here’s what to consider when choosing the best rewards credit card for the holidays, and how to make the most of it.

Aim for the Bonus

Many rewards credit cards offer a welcome bonus for new cardholders who spend a certain amount within the first few months of card opening. Holiday spending can make it easier to earn a credit card sign-up bonus because you’re more likely to spend a large amount in a short period of time.

And if you need a little more time to earn the bonus, a handful of credit cards offer a longer bonus period, such as the Discover it card which gives you up to a year to qualify.

Maxing out rewards earnings is best when you pay your full credit card balance each month. Otherwise, interest on the balance will negate the value of rewards earned.

As you shop for a credit card to use for the holidays, pay attention to the rewards program. Check if it offers rotating bonus categories for merchants where you might be buying gifts (Amazon or department stores) or gift cards (grocery stores). Flat-rate cash back rewards can also be a good choice. These cards pay the same rewards-earning rate, no matter where you shop. Just be aware of maximum spend amounts in some bonus reward categories—for example, if only the first $1,500 of category purchases are eligible for bonus cash back.

Use the Bonus for Holiday Shopping or Travel

Earning a welcome bonus quickly—easier if the bonus has a low spending requirement—gives you the opportunity to use bonus rewards for holiday travel or shopping. Even a small bonus can help offset holiday costs.

Note: It can take up to two billing cycles for the bonus to be added to your account. You’re responsible for making at least the minimum payment while you wait, and the account must be open and not in default to receive it.

Earn Rewards on Holiday Travel

If your holiday plans include travel, look for a credit card that rewards travel and travel-related expenses. Miles flown or points for airline tickets can add sizable rewards to your stockpile, but even road trips are fair game for earning travel points, since Airbnbs, hotel stays, and tourist outings are often considered travel purchases.

Make the Most of Benefits

Make the most of credit card perks and benefits, which include a range of consumer protections and waived or reduced fees.

Trip Cancellation/Interruption Insurance

Travel insurance can save you money if you have to cancel or interrupt your trip due to unforeseeable circumstances. You can file a claim to be reimbursed for non-refundable travel expenses due to covered events (such as a medical emergency), up to a certain amount for each traveler on your itinerary. This benefit can save you hundreds of dollars in trip costs.

Unless you get sick, your credit card’s travel insurance benefit probably won’t cover you for travel cancellations due to Covid-19. If you have to cancel or postpone your trip because of COVID-19, check with the airline or hotel for rebooking or cancellation options.

Waived Baggage Fees

Are you packing for a long trip or bringing gifts with you? Checked baggage fees can add up, increasing the cost of holiday travel. Look for a travel or co-branded airline rewards credit card that waives baggage fees to save on checked luggage. Several Delta credit cards offer the first checked bag free for up to nine travelers on the same reservation.

No Foreign Transaction Fees

Foreign transaction fees are charged on purchases made in currencies other than U.S. dollars, even if you’re buying a flight on an airline based in another country. If your holiday travel is taking you out of the country, look for a travel rewards credit card since most don’t charge a foreign transaction fee.

Extended Warranty

Extend a manufacturer’s warranty when you use a credit card with extended warranty protection to make qualifying purchases. This gives you extra coverage if you have trouble with your purchases after the original warranty expires.

Purchase Protection

If purchases are damaged or stolen, purchase protection can repair or replace those items for no additional charge. Purchase protection benefits may last 60-180 days past the original purchase date depending on your credit card.

Price Protection

If the price of an item drops after you’ve purchased it, credit cards with a price protection benefit can refund price differences, with restrictions. For example, the Navy Federal More Rewards American Express card protects purchases up to 30 days beyond the original purchase date, and the advertised item must be identical to the one you purchased. Other cards may offer more generous protections, up to 60 or 90 days.

Credit cards have restrictions and qualifications (that often differ between issuers) for using benefits—check the fine print on your card agreement for details. Also, be aware that you must use the card offering the benefit to purchase the item for which you want the benefit to apply.

Stack Rewards

You can get more out of your rewards by shopping through airline, hotel, credit card, or online shopping portals, which may offer additional cash back, miles, points, or discounts. Rather than go directly to a retailer’s website, start at a portal, such as Chase’s Ultimate Rewards shopping portal or Wells Fargo’s Earn More Mall.

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Reward Cards 101

Ways to Redeem Credit Card Rewards

If you pay your balance every month, you’re financially ready to make your credit card use earn flights, money, and more. After all, if you’re budgeting and spending responsibly, why not get cash back, plane tickets or overnight stays for your efforts?

There are several ways to earn and redeem rewards. In simple terms, cash-back cards earn you money when you spend money. Travel-based cards offer points or miles you can redeem for airline tickets, resort stays, hotel destinations, and more. And some cards offer both types of rewards, as well as merchandise and other options. 

And of course, it’s always a good idea to redeem rewards before your points expire.

Earning rewards and redeeming rewards are two different beasts. It can be easy to earn rewards, but there may be trouble when you want to redeem them. You may find that your rewards aren’t worth as much as you spent on the card’s fees or interest, for example, or that blackout dates interfere with your travel plans. Check the fine print and remember that a flexible attitude (and travel plans) can make or break a redemption.

Cash Back 

For no-fuss rewards on your monthly spending, you may want to redeem rewards for cash back if that’s an option. With most cards, one point is generally equivalent to one cent. So if you redeem 100 points, you’ll get $1 back.

Applying the points to your statement (a statement credit) is the easiest option, but if you don’t use the card often, you might prefer a mailed check. Typically, in this case, a set minimum is required. For example, your account must reach a 2,500-point minimum to receive a $25 check. 

While a one-cent return doesn’t sound like much, a year’s spending usually sends a decent amount of cash boomeranging back—perhaps enough for a dinner out or even an extra mortgage payment.

Flights

With co-branded airline cards, a small percentage of your spending turns into points or miles that go to your frequent-flyer account after you pay your bill. Redeem miles for a flight on the airline or one of its partners. Or you could them to upgrade to first class, or put toward a money-and-miles mix to reduce flight costs.

You’ll do this through the airline’s website. Once you log in to your frequent flyer account, search for the flight you’d like, then you will see an option that says, “pay with points” or something similar that will tell you how many miles that flight requires. You’ll usually need to pay money for taxes on the flight, and any other fees.

Before redeeming miles, you’ll want to compare the dollar value of the flight, with the miles you’re “spending” to ensure you’re getting a good deal—around 1 cent/mile. If you won’t get that much value, consider whether you’d rather pay for that flight with cash and save your miles for a better cash-in deal.

With general travel cards, you may have one or more of these options:

  • Pay for a flight with your card and use points to get reimbursed for that purchase
  • Book your flight with points through the credit card’s travel portal
  • Transfer points to an airline and use the miles in the way described above through the airline website

With the best programs, you’ll be able to transfer points to an airline program at a 1:1 ratio, with 1 point equivalent to 1 frequent flyer mile. Sometimes, you can get the best deals by using this option. That’s because you may be able to find a flight that costs significantly more in dollars than it does in miles.

Some cardholders earn more in reward transfers, or find their miles go further when booking trips through the card’s travel-rewards portal. For example, with the Chase Sapphire Preferred, your points are worth 1.25 cents each when redeemed through the Ultimate Rewards portal. The Chase Sapphire Reserve’s points are worth even more—1.5 cents each when redeemed that way.1

When exchanging points or miles for flights, you’ll possibly notice some flights require more miles on popular travel days (weekends), on heavy-traffic dates (holidays), or that there are restricted and/or blackout dates where you cannot use your miles or points for a seat. Flexibility helps when redeeming miles or points for flights. 

Hotel Stays

When you’re traveling, overnight stays can add up—and can be more expensive than flights. Many savvy card-using travelers prefer to redeem points for accommodations, whether at a luxury resort or family-friendly hotel.  

Hotel-stay redemptions are of course offered through branded hotel cards. Points can be used to cover part or all of the night’s bill. 

General travel cards also allow you to redeem points for hotel stays. This may happen in one of three ways: 

  • Book free rooms through the card portal
  • Get a statement credit, after the hotel stays occur
  • Transfer points to a hotel loyalty program 

Either kind of card may allow you to redeem points for upgrades or extra charges such as meals or spa appointments during your stays. 

If you really want to dig into the value you earn for every dollar you spend on different cards, check out our reviews of popular hotel and travel cards. You’ll find links to reviews of the top hotel cards here. And links to reviews of the top travel rewards cards here. The reviews include how much we value each card’s points.

If you’re dedicated to a hotel brand for work or pleasure and you want to earn more stays within that chain, it’s worth it to stick with the chain’s co-branded hotel card.. 

Other Travel

Some credit cards and frequent flyer programs present options to pick up free rental cars or cruises, rail travel, or refund your spending on rental cars with a statement credit. Others let you book using points using the card’s travel portal. In general, you’ll get 1 cent per point for these options, but may get more. 

Some package deals offer weeklong stays, bundling hotel and airfare for one redemption.2 While these generally require large numbers of points or miles, there may be redemption bonuses for combo packages. 

Special Experiences

Some cards let you redeem points for event tickets or special experiences, such as VIP concert tickets, seats at sporting events, masterclass packages, and more.3 

Merchandise and Subscriptions

Points can be used to buy merchandise, subscriptions, ride-shares, online restaurant ordering and other items through the rewards system or an online portal. While these options might not be ideal, if you’re not planning on a trip and your points are about to expire, a travel-magazine subscription might be just the thing. 

Online Shopping and Gift Cards

Some cards partner with retailers, like Amazon.com or Apple, and allow you to pay for merchandise with points; check to ensure that your points are worth at least 1 cent. 

Some credit cards let redeem rewards for gift cards through the rewards program. Check redemption rates, however, as sometimes you’ll get better than 1 cent per point and sometimes worse.

Charity, Payments, Transfers and Other Options 

Some cards or loyalty programs let you donate your points or miles to charities partnering with the program.4 If you’d like to give your points or miles away to another individual, family member or friend, some cards and points programs will also allow you to do so. 

As always, check redemption rates. 

Takeaway

When deciding the best way to redeem your credit card rewards, consider all of the options available to you, and settle on a strategy most valuable to you, and your lifestyle. A savvy redemption strategy for an avid traveler might look very different than one for someone who prefers the nightlife and dining out. Whichever method you use, just ensure you’re getting that 1 cent redemption rate. 

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Reward Cards 101

How to Calculate Your Credit Card Points

Rewards credit cards are a great way to get extra perks from using a credit card. You want to make sure your credit card points are worth having the credit card, especially if the credit card carries an annual fee. Calculating your credit card points also helps you compare credit cards to each other to know if you’re getting the best deal and to see the value of the rewards you’ve accumulated.

No matter how your credit card pays out rewards, whether it’s a flat rate rewards structure or a tiered system, the value of your rewards is based on the specific credit card and how you earn and redeem rewards. A point on one credit card may not be worth the same as a point on another credit card.

How Many Points Will You Earn on a Purchase

Calculating the number of credit card points you’ll earn on a purchase is fairly simple, as long as you know your rewards program and the type of business you’re shopping in. You can divide the dollar amount of your purchase by the number points you’ll earn for that transaction. For example, if your card pays two points for every dollar you spend on travel purchases, you’ll earn 600 points for a $300 airplane ticket.

Rewards are categorized based on the type of business you’re purchasing from, not necessarily the type of purchases you make.1 Food purchased from a cafe inside of a grocery store, for example, may be considered groceries rather than dining because you’re buying from a grocery store. This is important to keep in mind when you’re making credit card purchases with a card that rewards additional points for different types of purchases (dining out and entertainment, for example).

Calculating the Value of Credit Card Points

The simplest way to calculate the value of your credit card points is to divide the dollar value of the reward by the number of points required to redeem it. For example, if it takes 50,000 points to get a $650 airplane ticket, your points are worth about 1.3 cents each.

The math is simple: multiply the dollar value of the reward by 100 and divide that by the number of points. Our example looks like: (650×100)/50,000 = 1.3.

And if you earned two points for every dollar you spent, then you had to spend $25,000 to earn enough points for the airplane ticket.

Calculating the true value of your rewards requires a few more steps. You’ll have to take into account the cost of earning those rewards and any extra perks you receive from the credit card.

Calculate the fees and interest you’ve paid. Any extra costs you pay lower the value of your rewards; that includes interest, late fees, foreign transaction fees, and any annual fee charged on your credit card. Your credit card statement will include the total amount of interest you’ve paid so far this year.2 However, you may have to review each monthly billing statement individually to calculate the fees you’ve paid over the year.

Remember, you can always pay your account balance in full to avoid paying interest on your credit card. This step instantly boosts the value of your rewards.

Add up the total rewards you’ve earned. Make sure you’re comparing rewards and fees over the same time period. If you’re using the last 12 months of credit card fees and interest, then you should only consider the rewards you’ve earned over the last 12 months. Check your credit card statement to see how many rewards you’ve earned.

If you’re calculating your rewards for a period less than one year, divide your annual fee by the number of months you’re using to calculate your rewards.

Calculate the redemption rate for your rewards. The next step is to figure out what rewards are worth. You’ll need to calculate the rewards value by dividing the amount of rewards by the redemption value. You can usually get this information from your credit card issuer’s rewards portal. If a $500 airline ticket is 50,000 points, then your rewards are worth a penny each.

Redemption rates often vary for different kinds of rewards. Airline miles might have one redemption value, while merchandise purchased via your credit card’s online portal may have another. Before purchasing with points, do the math. You might be better off saving your points for a purchase with a better redemption value later.

Multiply the total number of rewards you have right now by the value of your credit card rewards. If you have 25,000 points that are worth a penny each, then you have $250 in rewards saved up.

You can optionally include the value of any additional credit card perks, as long as you can give a monetary value to those perks. Just add it to the total amount of rewards you’ve accumulated. If you receive a $200 travel statement credit each year, you can add that to the $250 you have in rewards for a total rewards value of $450.

Make the Most of Your Rewards

To get the maximum value from your credit card rewards, you should earn more rewards than you pay in fees—that includes a late fee or transaction based fee like a balance transfer or cash advance fee. That’s much easier to do once you’ve totaled the value of your rewards and perks. Simply compare the value of your rewards to the total interest and fees you pay on your card.

How do your rewards stack up? If you’re not earning enough rewards to cover the cost of your credit card, it may be a sign to switch to a different rewards credit card.

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Reward Cards 101

How Credit Card Miles Work and How You Can Earn Them

You’ve probably seen credit cards promoting their lucrative credit card miles rewards programs. You’ve read stories of people who fly around the world for next to nothing using credit card miles. It may sound like a gimmick, but it’s possible to accumulate miles and use them to take trips. The number of miles you can earn and trips you can take with those miles depends on a few factors. Once you understand how credit card miles work, you may decide it’s a benefit you’d like to have.

What Are Credit Card Miles?

Credit card miles are a type of loyalty benefit that certain credit cards give to customers as a reward for their credit card spending. The more you spend on your credit card, the more miles you accumulate. For example, a credit card might reward you with 1 mile for every $1 you spend on your credit card. 

The credit card issuer and airline partner defines a value for each credit card mile, like a penny per mile, for example. Once you’ve accumulated enough miles, you can redeem them for an award seat on one of the credit card’s airline partners.

Airlines, not the credit card issuer, set the number of miles required for a flight. Depending on the number of miles you’ve accumulated and the value of each mile, you can use your credit card miles to get the free flight. If you don’t have enough miles for a flight, you may be able to purchase additional miles to make up the difference, effectively receiving a price discount. The number of miles required for a flight depends on where you’re going and the price of the flight without miles. You might need anywhere from 12,000 to 40,000 miles for a flight.

If your credit card miles are tied to an airline’s frequent flyer program, you may be able to use your rewards to qualify for seat upgrades, priority boarding, free companion tickets, or other airline benefits. 

How Do You Earn Credit Card Miles?

With airline frequent flyer programs, you typically only earn miles on your flights. So, unless you’re actually a frequent flyer, it can take several months or even years to accumulate enough miles for a flight. The attractive thing about credit card miles is that you don’t actually have to fly to earn miles. You simply have to use your credit card.

Before you can start earning miles, first, you have to apply for a credit card with a miles rewards program. Nearly every major credit card issuer has at least one credit card with credit card miles. Review the offers from various credit cards to decide which falls in line with your spending habits and your goal for earning credit card miles. Keep in mind that you typically need to have excellent credit to qualify for the best rewards credit cards.

Credit cards with miles reward programs usually pay miles on all your credit card purchases, travel, and non-travel purchases alike. (Cash advances and balance transfers don’t earn credit card miles.) That means you can earn enough miles for a free flight much easier and faster than you could with an airline frequent flyer program. (That is, if you don’t travel.)

Some credit cards reward your travel or other categories of purchases with a higher number of miles, which is a plus if you are frequently flying. Spending more in these categories will help you earn credit card miles faster.

Credit card miles can be taken away, even after they’ve been added to your account. For example, if you return a purchase, any miles earned on that purchase will be deducted from your miles balance. You can also lose your credit card miles if you fall behind on your payments and your account is no longer in good standing.

Unfortunately, you won’t get your forfeited credit card miles back once you bring your account back into good standing. So it’s especially important to stay on top of your credit card payments on any credit card that you’ve earned credit card miles.

How Can You Check Your Credit Card Miles Balance?

If you’re saving up credit card miles for a trip you want to take, or you just want to keep up with the miles you’ve accumulated, you can check your credit card miles balance on your most recent billing statement, by logging into your online credit card account, or by calling your credit card issuer. 

It may take a few days after you’ve made a transaction for miles to credit to your account. Your credit card issuer’s customer service can answer questions about any miles that may be missing from your account.

It’s also important that you protect your credit card miles from theft. Thieves who gain access to your account can redeem your miles. If you’re not paying attention, you may not notice for several months. 

You can protect your credit card miles by ensuring you have a strong password on your credit card account. The best passwords include both capital and lowercase letters, at least one number, and one character. Avoid using your passwords across websites.

Check your miles balance often and notify your credit card issuer if you notice anything suspicious. They’ll be able to track down any missing rewards, let you know whether they were redeemed, and credit them back to your account in the event of any unauthorized use.

How Do You Redeem Your Credit Card Miles?

Once you’ve accumulated enough credit card miles, you can redeem them for an award seat on a flight. Keep your schedule flexible if you’re redeeming credit card miles for your flight. Airlines usually only have a certain number of award seats on each flight. Or the number of miles for flights may differ depending on the flight’s day and time.

Depending on the miles program, you may be able to combine credit card miles or transfer between airlines. Make sure you pay attention to the fine print with combining and transferring miles. Sometimes you may lose miles in the conversion between programs.

The exact method for redeeming credit card miles depends on the credit card you’re using. When you’re purchasing your flight through your credit card issuer’s booking tool, you’ll typically be given the option to use your credit card miles directly for the flight. You may be able to redeem your rewards on the same online site that you check your credit card balance and pay your bill. Or, your credit card issuer may have a separate website for redeeming your credit card miles.

For example, there’s American Express Travel, Chase Ultimate Rewards, and Citi ThankYou rewards points.

Check with your credit card issuer or read through your credit card benefits guide to determine the specific steps you should take to redeem your credit card miles.

Some credit cards allow you to redeem your rewards retroactively as a credit to your credit card billing statement. You have to make the redemption within a certain amount of time after the travel-related transaction posts to your credit card account.

Is Earning Credit Card Miles Worth It?

Credit card miles are absolutely worth it, especially when you consider that you don’t have to do anything extra to earn credit card miles. As long as you choose the right credit card, you can spend as you normally spend and earn miles. Most credit card miles don’t expire, and there are often no minimum redemption amounts, which give you a lot of freedom and flexibility to build up your credit card miles account then redeem your rewards when you’re ready.

If you really want to build up your credit card miles quickly, replace your normal debit card activity with your credit card. You’ll earn miles much faster than if you only used your credit card here and there. Just make sure you pay your balance in full each month, so you’re not charged any interest. Paying interest on any type of credit card offsets the rewards you’ve earned, especially on higher balances.

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Reward Cards 101

What to Look Out For

Qualifying for a rewards credit card generally depends on having a good credit score. If your credit score needs improvement, you may have a harder time getting approved for a rewards credit card.2

Rewards cards may have higher costs than other credit cards. For example, annual fees are common with rewards cards, sometimes even more than $500 per year for higher-tier rewards.3

Not only that, rewards cards often have higher interest rates than other credit cards, which means you shouldn’t carry a balance on a rewards card.

There may be stipulations for earning rewards buried in the fine print of your credit card terms. For example, a program may advertise 5% cash rewards, but there may be a limit on the rewards you can earn at a higher rate. Restrictions, caps, or minimum redemption amounts can make it difficult to redeem your rewards.

Credit card issuers might change their rewards programs without warning, so make sure you read everything that comes with your billing statement.

Not all rewards are forever. Some reward programs expire your rewards if you don’t use them within a certain amount of time. The best reward programs don’t let your rewards expire, but most programs will forfeit your rewards if you fall behind on your credit card payments.

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Reward Cards 101

Tiered vs. Flat Rewards

Rewards programs generally are structured in one of two ways. You might earn a flat rate of rewards on all your purchases. For instance, a credit card may pay a 2% cash back rewards or two points for every dollar you spend. You also may earn rewards in different amounts based on different categories of spending. Some travel credit cards, for example, pay higher rewards on travel purchases and a smaller reward on all other spending.

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Reward Cards 101

Travel Rewards

Travel rewards cards earn you miles that you can redeem for airline tickets. The number of miles you can earn varies by credit card, and the number of miles you need to purchase a flight varies by frequent flier program. You may be able to convert miles between programs, but you may lose some points in the conversion process.

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Reward Cards 101

Points Rewards

Points rewards are based on how much you spend. For example, you might earn one point for every dollar you make in purchases. Depending on the card issuer, you may be able to redeem your rewards for gift cards, cash, or even travel. Redeeming your points for gift cards may give you more bang for your buck since many merchant partners give you 10% to 20% off the gift card price. Examples of points rewards cards include auto rewards cards and hotel rewards cards.

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Reward Cards 101

Cash Rewards

Cash rewards are the most straightforward and easiest to use, but they don’t always result in cold, hard dollars in your hand. Some programs allow you to redeem your cash rewards only as a credit to your account.

Rewards paid as a statement credit reduce your balance, but the redemption doesn’t count as a payment to your account.

Other cash rewards credit cards give you the option to cash in your rewards for a check or direct deposit to a bank account. You also may be able to redeem your cash rewards for gift cards with your card issuer’s merchant partners. There may be a minimum redemption amount—$25, for example—or a requirement to redeem your rewards in certain increments.

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Reward Cards 101

Types of Credit Card Rewards

Rewards generally fall into one of three categories: cash, points, or miles. The cash rewards can help reduce your credit card balance. Travel rewards can help you earn free trips for yourself and your loved ones. You can use rewards to purchase holiday and birthday gifts. You also can invest the rewards you earn. For example, the Fidelity Investment Rewards Signature Visa puts your rewards into an investment account.1 The Wells Fargo Cash Wise card uses your rewards to reduce your Wells Fargo mortgage.