The Worst Mistakes to Avoid When Redeeming Your Credit Card Rewards

As credit card users, we all love the idea of earning rewards for our purchases. Whether it's cash back, airline miles, or hotel points, these rewards can add up quickly and provide us with valuable benefits. However, if you're not careful, you could end up making some costly mistakes when it comes to redeeming your credit card rewards. In this article, we'll explore the worst ways to redeem your credit card rewards and provide you with expert advice on how to avoid these pitfalls.

The Importance of Maximizing the Value of Your Rewards

Before we dive into the worst ways to redeem your credit card rewards, it's essential to understand why maximizing the value of your rewards is crucial. Credit card rewards are not created equal, and some redemption options offer more value than others. By choosing the right redemption method, you can make the most out of your hard-earned rewards and get the most bang for your buck.

According to Jason Steele, a travel and credit card expert, "Reward points don't have any intrinsic value by themselves. They're only worth as much as what you can redeem them for." So, let's explore the worst ways to redeem your credit card rewards and why you should avoid them.

1. Cash Back on a Travel Card

If you have a cash back credit card, redeeming your rewards for cash is usually the best option. However, when it comes to travel cards, cash back is rarely the most lucrative redemption choice. Take, for example, the Venture Rewards Credit Card. When redeeming your miles for travel, the base value is 1 cent per mile. However, if you choose to get a statement credit or a paper check, you'll only receive 0.5 cents per mile.

While the Chase Ultimate Rewards program is an exception, offering 1 cent per point for cash back redemption, it's important to note that their travel credit cards, such as the Chase Sapphire Preferred Card or Chase Sapphire Reserve card, offer even more value when redeemed for travel through Chase or transferred to partner hotel or airline programs.

Brandon Neth, a travel expert at FinanceBuzz, learned this lesson the hard way. He cashed out all of his Chase Ultimate Rewards points for $650, only to realize later that he could have redeemed them for nearly $975 in travel. So, if you want the flexibility of cash back, stick to a cash back credit card to maximize your rewards.

2. Pay with Points

Some rewards programs allow you to use your points to shop online directly with retailers. While this option may seem convenient, it often offers significantly less value than other redemption methods. For example, using points on Amazon.com through the Chase Ultimate Rewards program will only get you 0.8 cents per point. Similarly, using American Express Membership Rewards points with select retailers like Amazon.com, Best Buy, Boxed, and GrubHub will only give you 0.7 cents per point.

However, there are exceptions to this rule. For instance, The Business Platinum Card® from American Express offers a 35% points back benefit when redeeming for flights with your designated airline, giving you approximately 1.5 cents per point. So, be cautious when using your rewards to shop directly with retailers, as it often offers poor value.

3. Using Rewards for Merchandise

While it can be tempting to use your credit card rewards to purchase the latest tech gadgets or accessories, redeeming your points for merchandise is rarely a good idea. The value you get for your points is often significantly lower compared to other redemption options.

For example, with American Express, you can get an Apple Watch Series 5 for 85,506 points or $427.53, which includes tax. This redemption offers a value of just 0.5 cents per point. Similarly, redeeming Delta SkyMiles for a Kuerig coffee maker will cost you 43,654 miles or $199.99 at Best Buy. This redemption offers a value of only 0.46 cents per mile.

To avoid losing value, Mark Jackson, a channel manager at Brad's Deals, suggests comparing the cash price of the item you want to purchase with the number of points required. By doing so, you can make an informed decision and avoid wasting your hard-earned rewards on low-value merchandise.

4. Redeeming Hotel Credit Card Rewards for Anything But Hotels

If you have a hotel credit card, it's best to use your rewards for free stays instead of other on-property credits like dining or spa services. While it may be tempting to use your points for these additional services, the value you receive is often much lower.

For example, the World of Hyatt hotel rewards program offers an average value of 2 cents per point on hotel stays. However, if you choose to redeem your points for dining, spa, or other on-property credits, the value drops to between 0.5 and 0.83 cents per point, depending on the redemption.

To maximize the value of your hotel credit card rewards, stick to redeeming them for free stays, where you can get the most out of your points.

5. Redeeming Airline Card Rewards for Anything But Flights

Similar to hotel credit cards, it's best to use your airline card rewards for flights rather than other non-flight redemptions. While it may seem tempting to use your miles for merchandise or other non-flight benefits, it often offers poor value.

For example, redeeming Delta SkyMiles for a coffee maker offers a value of 0.46 cents per mile, while redeeming them for award flights offers an average value of 1.61 cents per mile.

One exception to this rule is purchasing a membership to the Delta Sky Club, the airline's airport lounge network. However, even in this case, the value is lower, with a redemption value of just 1 cent per mile.

To get the most value out of your airline card rewards, prioritize using them for award flights rather than non-flight redemptions.

6. Transferring Rewards to Friends and Family

While some credit card rewards programs allow you to share your points with others, be cautious when transferring your rewards. Some programs charge fees for transferring points, effectively reducing their value.

For example, sharing IHG Rewards Club points comes with a cost of $5 for every 1,000 points transferred, which equates to 0.5 cents per point. Since IHG points have an average value of 0.55 cents apiece for free stays, sharing them would effectively neutralize their value.

Additionally, be aware of limitations on point transfers. Citi allows free point transfers to someone else, but there is a cap of 100,000 points per year, and shared points expire 90 days after the transfer.

So, unless there is a significant need to transfer your points, it's generally best to keep them for your own use to maximize their value.

7. Losing Rewards Due to Expired Points

One of the most common ways to lose rewards is by allowing your points to expire. While most major credit card rewards programs do not have expiration dates for points, it's crucial to verify the terms and conditions of your specific program.

For example, the Citi rewards program has cards with no expiration dates, while others expire after three or five years. If you have an airline co-branded card, you may need to have some activity on the account every 18 months to keep your miles from expiring.

To prevent losing your hard-earned rewards, consistently check the expiration dates of your points and plan your redemptions accordingly. Some programs offer ways to keep your points active, such as earning points on your credit card or transferring points into the program.

Avoiding Mistakes and Maximizing Your Rewards

While it's essential to know the worst ways to redeem your credit card rewards, it's equally crucial to understand how to avoid these mistakes and maximize the value of your rewards. Here are some expert tips to keep in mind:

1. Read the Fine Print: Familiarize yourself with the terms and conditions of your rewards program to understand the rules and limitations.

2. Plan Ahead: Research the value of your rewards and compare different redemption options to ensure you're getting the best value for your points.

3. Monitor Expiration Dates: Keep track of the expiration dates of your points and plan your redemptions accordingly to avoid losing your rewards.

4. Pay Attention to Payment Due Dates: Make timely payments to ensure your account remains in good standing and avoid losing your rewards.

5. Stay Active: If you have an inactive credit card, make sure to use it periodically to prevent the cancellation of your account and the loss of your rewards.

By following these tips, you can make the most out of your credit card rewards and avoid the worst mistakes when redeeming them.

In Conclusion

Credit card rewards can be incredibly valuable if used wisely. By avoiding the worst ways to redeem your rewards, you can maximize their value and enjoy the benefits they offer. Whether it's choosing the right redemption method, being aware of expiration dates, or staying active with your accounts, taking the time to understand the rules and make informed decisions will help you make the most of your credit card rewards. So, start strategizing and make every point count!