Stop Making These 4 Mistakes When Cashing In Your Credit Card Rewards

I’ve been serious about collecting and spending travel rewards points for nearly 20 years, so I have plenty of experience strategizing the best way to earn and redeem rewards for the maximum value.

I also advise other credit card users who want to maximize their credit card travel rewards, which always begins with a review of how they have been spending their rewards points and miles. Over the years, I’ve noticed that many credit card users make the same costly mistakes. 

These are the biggest mistakes you’re making when redeeming credit card rewards

When I first review an award travel client’s spending and redeeming habits, I often hear that they recently redeemed 100,000 points or more from their credit card rewards for an airplane ticket. 

I always ask, “So how did you redeem those miles?” The most common answer is that they simply called the card issuer or went to its website to redeem the points toward a reservation. Others will redeem their points for gift cards or merchandise.

Here are the ways I’ve found they’re making costly mistakes when it comes to how they redeem their rewards, and what you can do instead to get the most value.

1. Not transferring rewards to get a higher value

If my clients say they redeemed their points for an airline ticket by going through the issuer, their 100,000 points from American Express, Citi or Capital One got them a $1,000 airline ticket. That’s getting 1 cent for each point.

But they could have done much better by transferring their credit card rewards to airline miles.

Point transfers let you move your credit card points into an airline or hotel brand’s loyalty program where they are often worth more than the standard 1 cent per point.

For example, you could transfer 100,000 American Express Membership Rewards points to ANA airlines of Japan, and redeem them for a round-trip, business class ticket from North America to Europe, operated by any Star Alliance carrier such as United, Air Canada, Lufthansa and others. 

Basically, it comes down to this question: “Would you rather have $1,000, or a business-class ticket to Europe?”

2. Not understanding the value of redeeming through a credit card’s travel portal

On the other hand, there are times when it does make sense to redeem your points directly from the credit card issuer’s travel agency, but only when you get much more than a penny per point. 

For example, Chase Sapphire Reserve® cardholders can redeem their points for 1.5 cents each for travel booked through Chase Travel℠, thanks to its 50% point redemption bonus. This is a decent value, especially considering that you can also earn miles from the tickets you book through Chase. 

For perspective, if you had those 100,000 American Express points on the Chase Sapphire Reserve, they would be worth about 150,000 points.

Another card-specific instance you’d want to redeem through an issuer portal is with The Business Platinum Card® from American Express. Cardholders receive a 35% points rebate when they book business or first-class tickets through AmexTravel.com and when they book economy-class tickets on the airline that they have selected for their $200 annual fee credit. 

With this 35% rebate, Membership Rewards points redeemed through Amex Travel are worth just over 1.5 cents each (up to 1,000,000 bonus points per calendar year), which can also be a worthwhile way to redeem your rewards. 

3. Transferring rewards to low-value partners

Unfortunately, most credit card rewards programs offer some partners with very low-value rewards. Not all transfer partners were created equal -- check the per-point value you’d get before you initiate a transfer.

For example, you’re unlikely to get much more than half a cent in value per point from some hotel programs like Hilton and Marriott. A common mistake that I see is transferring high-value points like Chase Ultimate Rewards or American Express Membership Rewards to one of these programs at a 1:1 ratio. 

Cardholders end up redeeming 100,000 points for a hotel that would have cost $500 a night, which is less than a penny a point. To figure out your per-point value, divide the dollar cost by the point cost. In this case, $500 / 100,000 which is half a cent. 

4. Not shopping around

Another common mistake credit card users make when redeeming their points is not shopping around for better, low-cost alternatives. 

For example, you might find a good deal on an award seat on a United flight for 12,500 miles. However, if you found a similar flight for $49 with a different carrier, spending 12,500 miles for the other would be a poor use of your rewards. 

Even if United is selling that flight for $200, you’re actually receiving just $49 in value, the price of the ticket from the competing carrier. Therefore, you’d be better off paying cash and saving your miles for an award that offers you much more value per mile redeemed.