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Award travel might be your preferred redemption option (it should be) but should you ever redeem rewards points for gift cards or statement credits?
When Gifts Cards and Statement Credits Make Sense
Let’s first discuss when you should redeem your rewards points for gift cards or statement credits instead of award travel.
Generally, if you have a cash rewards or fixed value credit card, gift cards and statement credits will almost always be the best (and only) way to redeem your points. When you own a flexible rewards card, your points can be more valuable by transferring them out a loyalty program. A good example of a fixed value card vs a transferable credit card can be found here.
The Point Redemption Value is Higher Than Travel Rewards
Each credit card program values rewards points differently. For some, your points are worth the same amount for travel, gift cards, and statement credits. It doesn’t matter how you spend your 10,000 points, they are always worth $100.
Other credit cards, like cash back cards, might give you a redemption bonus when you redeem your points for statement credits. For example, your points might be worth 1 cent each for a statement credit but only 0.75 cents each for other rewards.
Even with a travel rewards card, it can sometimes be more lucrative to get a gift card, take the Amex Platinum for example. You can redeem 10,000 Membership Rewards points for $100 for award flights, Uber rides, and gift cards, but these same points are only worth $70 for hotel nights and cruises.
When Gift Cards Go On Sale
Periodically, your credit card program might put gift cards on sale. In December, Chase Sapphire Preferred members have the opportunity to buy discounted gift cards with their Ultimate Rewards points.
Instead of paying the usual 100 points=$1 in gift cards, they pay 90 points per $1 because each point is worth 1.10 cents. You won’t get that same discount if you were to buy the same gift card in the store.
When you don’t want to spend the cash and have the extra points to spend, redeeming points for gift cards can be a better choice for your wallet at the moment.
You Need The Cash
Having multiple redemption options can be a blessing when you need the cash more than the points. If you spent more than usual this month and can’t afford your current balance, redeeming your points for a statement credit can make a world of difference.
No late fees, interest, or a damaged credit score. Even if your points aren’t as valuable, keeping your credit intact can be well worth the tradeoff.
You Need To Cancel Your Card ASAP
When you cancel your credit card, you immediately forfeit any unused rewards points. If you can’t use them to book a trip, redeeming them for cash or gift cards is better than nothing at all. You might consider this option when your credit card rewards program is planning on devaluing their rewards program.
This situation will be the least common, but it’s something to keep in mind when your travel habits change and you no longer benefit from paying an annual fee to earn credit card rewards you never use.
When Travel Rewards Are Better
Most times travel rewards are still the most valuable redemption option, especially if you have a travel rewards credit card.
You Earn a Travel Redemption Bonus
Flexible travel rewards cards like the Chase Sapphire Preferred value rewards points at 1.25 cents each (10,000 points=$125) when you redeem them for award travel. Each point is only worth 1 cent each for gift cards and statement credits.
Even a flat rate travel rewards card like the Barclaycard Arrival® Plus World Elite Mastercard® offers a 5% redemption bonus when you redeem your rewards point for travel purchase credits. Yes, it’s a “statement credit” but there are statement credits and then there are travel statement credits. See the difference?
See the terms and conditions for the Barclaycard Arrival® Plus World Elite Mastercard®.
You Can Transfer Your Points Directly to Travel Partners
One of the best tips for some credit cards is the ability to transfer points directly to a travel partner, especially on a 1:1 basis. At first glance, you might not see think transferring your points is a good value. In reality, your rewards points can be worth more than any other redemption options.
Here’s an example where direct transfers are more valuable. A one-way Southwest flight that costs $141 can also be purchased with 7,915 points. With a Chase Sapphire, you can transfer the points directly to Southwest and have them be worth 1.7 cents each. If you were to book the same flight through a credit card travel portal, you need to pay as much as 14,100 points if each point is only worth 1 cent each.
Four different credit cards offer 1:1 point transfers to your favorite airlines and hotels:
- Chase Sapphire
- American Express Platinum
- American Express Premier Rewards Gold
- Starwood Preferred Guest Credit Card
As a disclaimer, 1:1 point transfers are not always the best option. Only transfer points when you can’t get a better redemption value through your credit card.
You Get Points Back From the Airline or Hotel
Some loyalty programs will give you a redemption bonus when you book award travel through their program. These points will be redeposited into your frequent flyer or hotel loyalty account (not your credit card), but any point redemption bonus means you can afford your next reward trip sooner.
You Own a Co-Branded Travel Credit Card
When you own a co-brand credit card that earns points for a specific airline or hotel, it’s almost always better to redeem your points for award travel. This is because you need to redeem your points through the airline or hotel loyalty program, not the Chase Ultimate Rewards Mall or the Amex Membership Rewards store.
For example, a $25 iTunes gift card through IHG can cost 11,000 points. Your IHG points are only worth .002 cents each. But, those same 11,000 points can be redeemed for a room that costs as much as $200 a night and they are worth between 1.0 and 1.8 cents each.
If your co-brand credit card earns airline miles or hotel points always redeem them for travel. Otherwise, you will be redeeming your points at some of the worst redemption rates ever.
Before you redeem your rewards points for gift cards or statement credits, you need to check the redemption value for each type of reward. If there’s a notable difference in redemption value of at least 10%, save your points for the most valuable redemption option. But at the end of the day, they are your points, and you can redeem them how you like.
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Editorial Note: The editorial content on this page is not provided by any bank, credit card issuer, airlines or hotel chain, and has not been reviewed, approved or otherwise endorsed by any of these entities.