Analysis

The 5 Worst Ways to Redeem Travel Credit Card Rewards

It’s exciting to start using travel credit cards. Most of these cards have big welcome bonuses, so it probably won’t take long before you have a large number of points or miles amassed. When you’re ready to redeem those rewards, you’ll have more options to do so than you would with a cash back card.

Here’s the tricky part: They aren’t all good options. Some of the ways you can use your rewards offer far less value than others. If you choose wrong, you won’t get nearly as much from your points. Before you do anything with your travel rewards, you should know about which redemption options to avoid.

Some travel cards give you the option of using your rewards at checkout with online merchants. For example, you may be able to connect your rewards to Amazon and pay with points there. PayPal is another common option — you may have the option of paying with points at stores that offer PayPal checkout.

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This might seem convenient, but it’s a bad deal. Points are typically worth much less this way. For example, with Chase Ultimate Rewards points, you can get $0.0125 to $0.015 per point when you use them for travel bookings, depending on which Chase card you have. At that value, 100,000 points would be worth $1,250 to $1,500.

You can also pay with Chase points at checkout, but you only get a value of $0.008 per point. Those same 100,000 points would be worth $800, so you’d lose $450 to $700 in value.

2. Getting cash back

Most travel cards let you turn your points into cash back as a statement credit on your credit card. Once again, you’re usually giving up value when you do this. For example, with American Express Membership Rewards points, you only get $0.006 per point on cash back redemptions.

If you want to earn cash back by using a credit card, then it’s not a good idea to open a travel card. Check out cash back credit cards instead.

3. Buying merchandise or gift cards

Your travel card’s rewards program may include a shopping portal where you can use your points to buy merchandise, such as Apple products. And most rewards programs give you the option of buying gift cards with your points.

The problem is, you guessed it, value — or lack thereof. This is another type of redemption where you don’t get much for your points. The normal rate is $0.006 to $0.01 per point, depending on the card you have.

4. Transfers to a travel partner before knowing what you want to book

Many of the most popular travel credit cards let you transfer points to airline and hotel partners. For example, Chase points are transferable to over a dozen partners, including United Airlines and Hyatt Hotels.

Transfers are one of the best ways to use travel points. It’s often possible to get $0.02 to $0.03 per point or more this way. I almost exclusively transfer my travel points.

But transfers are irreversible, so you should only transfer your points when you know exactly how you’ll use them. Don’t transfer 50,000 points to United because you think you’ll fly with that airline at some point in the future. Do it if you’ve already found airfare you want to book with United, and it costs 50,000 miles.

5. Hoarding them

Alright, this isn’t exactly a way to redeem travel rewards. It’s the opposite. But it’s worth mentioning, because it’s another common mistake.

Some people are great at earning travel points, but not so great at using them. They either don’t end up traveling all that often, or they want to save those points in hopes of eventually using them for some amazing deal.

Travel rewards don’t do you any good when they’re sitting around unused. It’s not like money in a high-yield savings account earning interest. They’re just points, and they only have value when you use them for travel.

The most important rule: Use your travel rewards for traveling

If there’s one thing to remember, it’s that you’ll get the most out of travel rewards when you use them for travel redemptions. That usually means either using them to book travel through the card issuer’s travel portal or transferring them to travel partners. You can safely ignore non-travel options, such as paying with points at checkout or getting cash back. They won’t get you nearly as much bang for your buck — or in this case, your points.

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