If you’re a sensible spender and always repay your outstanding balances in full each and every month – then it is well worth obtaining a credit card that comes with a points program.
In a nutshell, every time you use your credit card – whether that’s at the gas station or to buy groceries, you’ll receive a number of rewards points. In doing so, you get to exchange these points for a range of perks, such as flight tickets, hotels, gift cards, and even cash.
If this sounds like something that interests you, then be sure to read our in-depth guide on the Best Credit Cards for Points in 2019. On top of covering the best five credit cards for points, we also show you how you can maximize your potential earnings, as well as some of the things you need to avoid.
What are credit card points?
First and foremost, let’s make sure that we understand what credit card points actually are. In its most basic form, credit card points are a type of reward that the card issuer gives you for simply using your card. As we will discuss further down, this can come in a range of shapes and sizes. However, in most cases, this will either be linked to air miles (for the purpose of booking flight tickets), cashback, or gift cards.
Points are usually based on the dollar value of your transaction. For example, if the credit card offers 100 points for every $1 that you spend – and the transaction amounted to $50, then you would be awarded 5,000 points.
However, it is important to note that the specific number of points that you are awarded can depend on a number of factors. Typically, each credit card will offer different rates for different spending categories. For example, while you might get 300 points per dollar when you use your card at a gas station, you might only get 100 points per dollar at supermarkets.
Let’s take a quick look at some examples of how credit card companies might calculate rewards points when you use your card.
💳 Supermarkets, gas stations, and travel: 3x points per dollar
💳 Restaurants and Amazon.com: 2x points per dollar
💳 Everything Else: 1x point per dollar
As you can see from the above example, credit card companies will offer different rewards, depending on where you spend your card. As such, while a $100 transaction at a gas station would yield 300 points ($100 x 3), a $100 purchase at Amazon.com would only yield 200 points ($100 x 2).
Calculating introductory points offers
One of the best things about the over-saturation of the rewards credit card space is that most providers now offer very generous introductory promotions for new customers. This typically centers on an increased amount of points/dollars for a fixed number of months.
For example, a credit card provider might offer you 40,000 points when you initially spend $1,000 within the first month. Those 40,000 points can then be exchanged for a $400 gift card. However, in order to assess the value of the offer, we need to calculate what each point is worth in real money.
This is simple, as all you need to do is divide the dollar amount of the reward ($400) by the number of points required to get it (40,000). In this example, one reward point would equate to 1 cent.
What can I exchange my credit card points for?
One of the most important factors that you need to consider when obtaining a new points credit card is what you can actually redeem the points for. After all, you don’t want to go through the hassle of using your credit card with the purpose of accumulating more points, only to find that the reward is something you have no use for.
Below we have listed some of the most popular rewards that credit card points can be exchanged for.
✔️ Air Miles: There is a significant number of credit card providers that offer you air miles every time you use the card. For those unaware, air miles are essentially credit card reward points that can be exchanged for flight tickets, or flight-related perks such as an upgraded seat, or airport lounge access.
For example, let’s say that a credit card offers 10 air miles every time you spend $1. This means that upon spending $1,000, you would have accumulated 10,000 air miles. Over at the airline, 10,000 air miles is the equivalent of a flight from New York to Vancouver. As such, instead of paying for the flight with cash, you can simply redeem your 10,000 credit card air miles to pay for it!
✔️ Gift Cards: Some credit card companies will instead allow you to exchange your credit card points for a gift card. This typically includes popular retailers such as Amazon, eBay, Overstock, Wallmart, or Apple. These are fairly simple to calculate, as each gift card value will require a certain number of points.
For example, let’s say that you’re interested in a $50 Apple gift card that requires 1,000 points. If the credit card company offers you 10 points per dollar, this means that you would be required to spend $100 to get the $50 gift card (10 points x $100 = 1,000 points).
✔️ Cashback: One of the most sought after credit card points program is that of a cashback offer. Essentially, the credit card company will allow you to exchange the points for cash. The cash isn’t paid back to you per-say, as this is typically reduced from the amount that you owe.
For example, let’s say that you are offered 1 point for each dollar that you spend on your card. The credit card provider allows you to redeem $10 once you reach 1,000 points. This means that you would need to spend $1,000 to get your $10 cashback ($1 x 1,000 points = $1,000), which would be reduced from your next monthly statement.
Tips to maximize your credit card points
Before you apply for a points-based credit card, it is crucial that you understand the ins and outs of how it works. Otherwise, you stand the chance of spending more money than what the points are worth. Below we have listed some key factors to consider.
1. Always pay your balance in full
The most important thing to consider when obtaining a points credit card is that you must repay your balance in full every month. In doing so, you will never pay any interest on your purchases – irrespective of the underlying APR rate. For example, if you rack-up $1,000 worth of purchases on your card in the month of September, but you repay the entire $1,000 before the statement due date, then you won’t be accustomed to any interest.
On the contrary, if you only pay the minimum, then interest will kick-in. This will effectively make it a pointless task, as the interest payments will all-but-certainly wipe out any rewards that you might have made.
2. Use your credit card whenever you can
In order to maximize your potential earnings, you should try to use your credit card at every possible opportunity. As long as the purchase is eligible for points, you should proceed to use your card. Whether it’s to buy your weekly groceries or your monthly parking pass, use your points credit card!
Ultimately, as long as you plan to pay the balance off in full every month, this will allow you to earn the maximum amount of points possible. However, it is also important to note that you should never use your credit card to buy things that you wouldn’t have otherwise bought with cash. For example, don’t go and purchase a new TV just because you want to earn the 3x points that the credit card offers!
3. Make sure eligible purchases are things you typically buy
It is also important that you spend some time assessing what purchases qualify for points, and at what rate. For example, it is all good and well if the credit card offers triple points when you use your card at a gas station. However, if you don’t drive, then obtaining a points credit card of this nature would be a pointless task!
Instead, focus on credit cards that come with eligible purchases on things you always buy. This should cover everyday consumer spending, such as in supermarkets, utilities, transportation, and eating out.
4. Understand what rewards you are going to get
As we briefly noted earlier, it is also important for you to understand what your credit card points can be exchanged for. In this sense, you want to find the perfect balance between eligible purchases, and the rewards themselves.
For example, if you find yourself spending heaps of money every year on flights, then you are best off focusing on an air miles credit card. Alternatively, if the vast bulk of your money goes on groceries, then attempt to find a points card that allows you to redeem your points for a supermarket gift card, such as Wallmart.
Criteria used to rank the best credit cards
❓ How the rewards are paid (cashback, points, air miles, etc)
❓ What purchases are eligible
❓ What introductory rate the card comes with
❓ Whether there is a limit on the number of monthly points you can earn
❓ The real-world value of each credit card point
❓ Eligibility requirements
A points credit card refers to a credit card that awards you points every time you use the card to make purchases. These points can then be exchanged for a number of benefits, such as cashback, gift cards, or flights.
If your credit card provider offers you points in the form of air miles, then this means that the points can only be used on flight-related purchases. On top of paying for flight tickets, they can also be redeemed against airport lounges, hotels, or business class upgrades
This will vary depending on the credit card you apply for. While some cards allow you to earn points on any purchases, some will specify a specific category such as travel or dining.
The simple answer to this is ‘no’. As long as you always pay your monthly account balance in full every month, then you won’t need to worry about interest. On the contrary, if you don’t pay your balance in full, then you will pay interest and thus, this will cost more than the points are worth!
On the one hand, the best points credit cards are only available if you have good or excellent credit. However, a number of bad credit lenders are now offering rewards, albeit, these are usually secured credit cards. This means that you will be required to put up a security deposit.
The costs associated with a points-based credit card will vary wildly depending on the issuer. This can range from nothing, up to a whopping $450 per year! If you do need to pay an annual fee, you need to assess whether the points rewards are lucrative enough to make the fee worthwhile.