Redeeming Credit Card Rewards For Gift Cards: Know This!
Before you redeem your credit card points for gift cards this holiday season (or anytime), make sure you read this first. Most rewards credit cards today come with a variety of redemption options. These options include gift cards and travel rewards to unique experiences and merchandise. Still, you can often find great values when you trade in your points for gift cards. Before you get ahead of yourself cashing in those rewards points or cash back, here are a few pointers to maximize the value.
Particularly around the holidays, you may find gift card rewards through your credit card go on sale at a deeply discounted rate. A $25 gift card to your favorite restaurant may normally go for 2,500 points. But this time of year you may catch it on a limited time sale for only 2,000 points. If you earn 1 point per dollar on spending, that means the gift card only costs you $20, or 20% off! These sales, or extra rewards, are usually offered on gift cards for retail partners of your credit card company. And they’re not uncommon.
Calculating the Value of Your Rewards
Before you exchange your credit card rewards for a gift card, grab your calculator and make sure you’re getting a good deal. With most cards, a reward point is worth $0.01. But beware of gift cards or offers that will give you less than that.
Here’s an example: You want to redeem your points for a Best Buy gift card to give as a present. You can redeem 5,000 points for a $50 gift card or 3,200 points for a $25 gift card. In the first scenario, your points are worth $0.01 each. If you get the $25 gift card, however, your points are worth a measly $0.007 or about 30% less.
Look for Co-Branded Gift Cards
If you have a rewards credit card from a retailer, chances are you’re earning much higher rewards when you shop at the store versus anywhere else. This also means your rewards will be much higher in you redeem for gift cards at that store rather than Mastercard or Visa gift cards that can be used anywhere. In this case, your rewards points may be worth around 1.8 cents each, compared to only 1.1 cents if you’re using a travel rewards card.
Don’t Try to Stockpile Rewards if they Expire!
Finally, it’s really important to check the fine print of the rewards program on your credit card to make sure the points don’t expire. If you’re trying to save up for a $250 gift card, for example, you may log in one day and find out that 8,000 hard-earned rewards points have expired and vanished overnight. If you don’t spend a lot annually and there’s an expiration on your rewards, cash them in regularly for smaller gift cards instead. Also remember that in most cases you don’t have to redeem your rewards for gift cards, and can claim a statement credit or cash back in some cases. Even though this may devalue your points, something is better than nothing.
Where to Redeem Your Credit Card Points For Gift Cards
So, where do you go to redeem your points for gift cards? Here are the programs from all major card issuers.
Chase: The Ultimate Rewards Program is where you go to exchange those points for gift cards. In general, your points will have a value of $0.01 each per point, so a $50 gift card will cost 5,000 points.
Capital One: Redeem your rewards with their Rewards Program (formerly “No Hassles Rewards”). You’ll see your points at the top right of the screen so you simply need to select the gift cards tab and make your choice.
American Express: Redeem points through the Membership Rewards program. Simply log in and click the “Redeem now” button once you’ve made your choice. You’ll need to confirm delivery by entering your card number as well as the security code on the back of your card. Fortunately, your points won’t expire so you can save up if you want.
Citi: To redeem your ThankYou rewards, log into the program’s website and select your reward. You can combine your points from various Sponsor accounts, as long as the owner is the same. This means you can combine the rewards from a Citibank consumer checking account, your credit card rewards and any linked banking services you have to get the most bang for your buck.
Discover: While your Cashback Bonus can be used for cash, you can get more if you redeem for partner gift cards. Log into your Cashback Bonus account and view their available gift cards from partners like Lowe’s, Shell, Kohls and Red Lobster.
Best Cards for Earning Gift Cards
Want to accumulate points for gift cards as fast as possible? The best card will depend on your spending and credit score, but the following are some of the best options. The Chase Freedom is one of the best all-around rewards cards if you have great credit. You’ll earn a $150 sign-up bonus after you spend $500 within the first 3 months. And you’ll earn 5% back on rotating bonus categories that change each quarter. All other spending earns 1% back. The Chase Ultimate Rewards program allows you to redeem for cash back, cash back rewards at Amazon, or you can use your rewards for gift cards with a full 1:1 value. If you don’t want to bother with bonus categories, the Citi Double Cash Card is a good choice. The card has no annual fee and earns you 1% back on all purchases, plus another 1% back when you pay off the purchases. There is no limit to what you can earn, and you can redeem your rewards for gift cards, among other things.
Check your rewards program for limited-time deals on gift cards.
Always calculate how much your rewards points are worth before you redeem and never accept less than $0.01 per point.
Co-branded or store-specific gift cards often have the better value than Visa or Mastercard gift cards.
If your rewards points have an expiration date, mark it on your calendar and don’t let them go to waste.
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