What are credit card points & how do they work?
What are credit card points & how do they work?
Credit card issuers and banks typically offer rewards programs through which you can earn points to redeem for rewards, discounts and other perks. From loyalty programs to cash back points that offer flexible redemption options, there are quite a few different ways you may be able to begin earning and redeeming points.
>>More: Starting to build credit? Freedom Rise® offers cash back on each purchase.
What are credit card points?
Points are incentives that you may be able to earn through your credit card's cash back, rewards or loyalty programs. These points are typically earned by making purchases with your credit card in specific categories, are updated each billing cycle and may be viewed or redeemed on the credit issuer, hotel or airline's online portal. When applying for a credit card, you may want to consider what type of bonus rewards the issuer offers and whether the set of approved purchases and selected retailers align with your lifestyle and spending habits.
Keep in mind that some credit cards charge an annual fee. This fee may be worth it to you when you consider the rewards and perks that come with the card. Be sure to consider the annual fee and the types of perks you will actually benefit from before applying for a specific card.
Types of credit card reward points & how to earn them
Reward points can be earned through bonus promotions or by making purchases in certain categories.
Rewards points
Rewards points are a type of incentive earned through making purchases in select categories. Points can be earned through bonus promotions or by making purchases in specified categories, such as restaurants, grocery stores, gas stations and more. Keep in mind that some credit cards offer higher rewards points for certain categories than others, so be sure to do your homework and consider how you'll be using your rewards card.
With a rewards credit card, you may be able to earn 1 point for every $1 spent. Your rewards credit card may also offer more generous point earning options, such as 2-5 points for every $1 spent on travel, dining, at grocery stores and more.
Miles
Miles are a type of reward commonly earned through making travel-related purchases. Travel credit cards or airline-branded credit cards may offer mile rewards point programs. These can typically be earned by making select airline purchases through travel credit card or loyalty programs and can be redeemed toward free or discounted flights or hotel stays. Generally, you can earn 1-2 miles for every $1 spent on travel related purchases, but some travel or loyalty cards offer 2-5 miles for every $1 spent.
Cash back
Cash back rewards are earned as a percentage of the purchase amount. They can result in either cash back toward your monthly statement or in rewards points to be used at your discretion. While most cash back credit cards offer at least 1% cash back for all purchases, some cards may offer 5% cash back on purchases made in select categories, such as purchases made at grocery stores or gas stations. You may find that some credit cards also offer up to 5% cash back on travel or on categories that rotate each month. Cash back points may be able to be redeemed as a statement credit, credit toward participating online purchases or gift cards.
What is the best way to redeem credit card points?
Cash back and rewards points may be able to be redeemed as a statement credit for your monthly bill, online purchases or by check. Miles and travel-specific points may be able to be redeemed for discounted flights and hotel rooms through travel booking portals or through their respective partner brand toward flight tickets.
Are credit card points worth it?
Your lifestyle and spending habits will influence whether a credit card that offers rewards points are worth it to you. There may also be opportunities to earn cash back points by making your regular purchases on a rewards credit card. Frequent travelers may find it convenient and worthwhile to book hotel rooms and flights through select travel booking sites to earn miles or points or enroll in co-branded loyalty programs for exclusive point accumulation. Bonus promotions (which typically have spending requirements) could also offer additional ways to earn points, depending on the promotion being offered.
