Understanding Credit Card Rewards: Points, Miles and Cash Back Explained
Most rewards you can earn with a credit card fall within a handful of categories — cash back, flexible travel rewards, airline miles and hotel loyalty points. These rewards all work differently since they're governed by different programs. For example, flexible travel rewards can come from programs like Amex Membership Rewards or Chase Ultimate Rewards, whereas airline miles can be earned with Delta SkyMiles or the American AAdvantage program.
Cash back earned with a credit card can also be more versatile than it sounds. After all, many cards that earn "cash back" let users redeem rewards for a check in the mail, statement credits, gift cards, merchandise or travel through a dedicated portal.
This guide explains the major ins and outs of credit card rewards, plus some of the best ways you can use them for maximum value.
Credit Card Rewards at a Glance
The main types of credit card rewards include airline miles, hotel points, flexible travel rewards and cash back.
Redemptions for rewards programs vary widely, and some cards and programs have considerably more options than others.
As you compare rewards credit cards to find the right fit, consider which cards offer more points or miles in the categories you spend the most in and how you want to redeem your rewards in the end.
What Are Credit Card Rewards — and How Do They Work?
Credit card rewards can work differently depending on where the program they're earned in originates from. For example, some credit card rewards programs are offered through credit card issuers themselves, whereas rewards earned through airlines or hotels come through their respective loyalty programs.
In any case, credit card rewards are given to consumers based on how much they spend, either through a flat rate or varying rewards amounts based on the spending category. Many top rewards credit cards also offer sign-up bonuses consumers can earn within the first few months of account opening.
Types of Credit Card Rewards
If you're interested in earning credit card rewards but you're not sure which type you need, you should think long and hard about how you might use them. Obviously, you would pick a different type of rewards credit card if you want to rack up statement credits than you would if you're hoping to travel the world.
The types of credit card rewards you can earn are detailed below.
Airline Miles
Some rewards credit cards let you earn airline miles with popular frequent flyer programs. Co-branded airline credit cards tend to come with some travel-related perks as well, which may include free checked bags, priority boarding on the plane or fee credits for Global Entry or TSA PreCheck membership. Top tier cards in this niche even include airport lounge membership as a cardholder benefit, although annual fees of $550 or more typically apply.
Hotel Points
There are also hotel credit cards that let you earn points in their respective hotel loyalty programs. Cards in this niche tend to offer on-property benefits for cardholders, including automatic elite status, early check-in, a welcome amenity during stays with the brand and more. Top tier hotel credit cards with the highest annual fees may even offer annual travel credits or airport lounge membership as cardholder perks.
Flexible Travel Rewards
Flexible travel rewards are trickier to understand since they can be utilized in so many different ways — and since options vary so widely by program. The most popular travel rewards credit cards let users redeem for a range of options including cash back, statement credits, merchandise or travel through a portal. The majority also let users transfer their points to airline and hotel partners, where those points become part of the consumer's loyalty rewards account.
Also note that annual fees for cards in this category range from $0 all the way up to $695. Cards with the highest annual fees offer premium perks like airport lounge access, automatic elite status with hotels, annual travel credits and more.
Check out our top credit cards for travel rewards.
Cash Back
Cash back earned with a credit card can come in a few different forms. Some cash back credit cards only let you redeem rewards for statement credits, whereas others let you use rewards for a check in the mail, merchandise, gift cards or travel.
Most cash back credit cards don't charge an annual fee, and many come with intro 0% APR offers that apply to purchases, balance transfers or both for a limited time.
Check out our top cash back credit cards.
Popular Credit Card Rewards Programs
If you're looking for a credit card rewards program that is affiliated with the card issuer itself, you will want to look to credit card companies like American Express, Capital One, Citi, Chase, and Wells Fargo. Here's an overview of how each of these card issuer programs works:
American Express Membership Rewards: The Amex Membership Rewards program lets members redeem points for statement credits, gift cards, merchandise or travel through the AmexTravel.com website. Users can also transfer their points to 21 different airline and hotel partners including Delta SkyMiles, JetBlue TrueBlue, Marriott Bonvoy and Hilton Honors.
Capital One Miles: Travel credit cards from Capital One offer versatile rewards that can be used for statement credits, gift cards or travel through Capital One Travel. The program also boasts 18 different airline and hotel partners of its own, including Air France (Flying Blue), British Airways, Choice Privileges and Wyndham Rewards.
Chase Ultimate Rewards: This program is one of the most versatile and easy to use, with some of the best point values for redemptions of all kinds. Users can redeem their Chase points for cash back, gift cards, merchandise or travel through Chase Travel. The Chase Ultimate Rewards program also has 14 dynamic transfer partners including Southwest Rapid Rewards, United MileagePlus, Marriott Bonvoy and World of Hyatt.
Citi ThankYou: Similar to other top credit card rewards programs, the Citi ThankYou program offers a range of redemption options. Consumers with travel credit cards from the brand can redeem their points for statement credits, gift cards, shopping, charitable donations or travel through the Citi Travel site. Point transfers are also available with partners like Aeromexico, Cathay Pacific, Virgin Atlantic and Wyndham Rewards.
Wells Fargo Rewards: Having just launched its first flexible travel credit card — the Autograph Journey℠ Card — in 2024, Wells Fargo is somewhat new to the travel rewards game. Cardholders who have travel rewards points with Wells Fargo can redeem for statement credits, online shopping, gift cards, travel through Wells Fargo or point transfers to a handful of airline and hotel partners including Air France (Flying Blue), British Airways and Choice Privileges, to name a few.
Check out our top rewards credit cards.
How to Use Credit Card Rewards: Expert Tips
Once you decide on a rewards credit card and start earning points, miles or cash back, there are steps you can take to get outsized value for your rewards.
Flexible Travel Rewards Programs Give You More Options
According to credit card rewards expert Ryan Smith, flexible travel rewards programs can give you more options once you're ready to redeem. You may decide to redeem your rewards for cash back or statement credits to cover recent travel purchases, or you can look into the best options with airline and hotel partners.
If you're looking for top value with your points, Smith says redeeming them for travel through an airline is usually the answer. As an example, transferring points to Colombia-based Avianca LifeMiles can let you book United Airlines flights in the U.S. from 6,500 miles per person.
Want cheap flights to Hawaii?
"Send your miles to Turkish Airlines to book those flights from 10,000 miles per person in economy," he said.
Look for Discounted Award Programs
Smith adds that looking for programs that provide rotating lists of discounted award travel each month can help you get more bang for your buck with airline miles. Programs that fall into this category include Singapore Airlines Spontaneous Escapes, Flying Blue Promo Rewards from Air France and KLM and Mileage Bargains from Lufthansa and its partners.
"You can find great deals on flights if you're able to travel soon, sometimes scoring as much as 50% off," he said.
Compare Point Transfer Options to Travel Portal Bookings
Rewards expert Matthew Coan of Casavvy.com says that consumers with flexible travel points will want to look at airline and hotel partners first. However, they should also compare the cost (in points) of booking the same travel through the card issuer's portal as well.
Coan points to the example of transferring American Express points to Marriott, which is offered with a transfer ratio of 1:1. If you wanted to book a Marriott stay through AmexTravel.com and the room would normally cost $300 per night, booking through the Amex portal would cost you around 43,000 points since hotels through AmexTravel qualify for a rewards value of $0.7 cents per point.
But if the room is only 20,000 Marriott points per night when booking through their rewards system, you can transfer your Amex points over to your Marriott account and pay fewer points for the same hotel stay.
"It doesn’t always work out this way, but it’s worth looking each time for a good deal," he said.
Frequently Asked Questions (FAQ)
Are Rewards Cards a Good Idea?
Reward credit cards can be a good idea if you have the discipline to pay your balance down to $0 every billing period. If you carry debt on a rewards credit card, the high variable APR you're charged will wipe out the value of any rewards you earn.
How Much Is 1,000 Points Worth?
The value of 1,000 points depends on the program they're earned in and how you redeem them. With Chase Ultimate Rewards, for example, 1,000 points are worth $10 in cash back or statement credits but can be worth as much as $20 if transferred to an airline and hotel partner.
Is Chase Ultimate Rewards Worth It?
Chase Ultimate Rewards is one of the best and most versatile rewards programs available today. Point transfer partners are easy to use for both domestic and international travel, and non-travel redemptions like gift cards or statement credits have a superior value of 1 cent per point.
