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Belco's Online Banking

How Do Credit Card Reward Points Work?

access_time Posted on: December 12th, 2019

When you hear about rewards credit cards, what do you think? I’m sure points and bonuses and cash-back galore come to mind. What’s better than getting rewarded for spending money? 

While rewards credit card might seem straight to the point, you could be wondering, how do credit card rewards work? Keep reading to get all of the details about how credit card points work and how to get the most from your rewards card. 

What Are Credit Card Rewards Points?

If your credit card offers rewards points, you earn points for the money you spend with your credit card. You can then redeem those points for gift cards, cash-back, travel benefits, etc. 

The most common way to earn points is to get 1 point for every dollar you spend. Some cards will offer special incentives to earn more points if you shop specific retailers or select categories. The rewards points you earn can vary based on each card, but all in all, the more you spend on your card, the more points you earn and the more benefits you get. 

How Do Credit Card Points Work?

Depending on the credit card, there will be various ways to secure your rewards points. You may be required to spend a certain amount in a set time frame or purchase items from certain retailers or select categories. 

Some of the most common ways to earn rewards points include: 

  • Daily spending habits: These cards allow you to earn points for just about anything
  • Annual, monthly, or quarterly rewards: These cards factor in your monthly, quarterly, or yearly spending and offer bonus points or match the number of points you earn
  • New card bonuses: It’s common for credit cards to offer new card incentives where you earn a set number of points if you spend a certain amount within a few months of opening your card
  • Other reasons you might earn reward points include if you refer friends or family members or if you add authorized users to your account

All credit cards have their own rules and guidelines for earning rewards points. That’s why you must read all of the terms and conditions associated with the account before you sign on to be sure that your spending habits will make using a rewards credit card worthwhile. 

Redeeming your points

Once you understand how to earn points, you have to know what to do with them. The purpose of collecting points is to use them to your benefit. Just like there are various ways to earn points, card companies also have multiple ways you can redeem your points. 

Here are some of the more common ways points can be redeemed. 

    • Travel: Save money on airline tickets or hotel stays or take advantage of travel perks. 
    • Gift cards: You can use your points to purchase gift cards from restaurants, stores, etc. 
    • Cash: You might be able to redeem cash for your points in the form of a check mailed to your home or directly deposited into the account of your choice.
    • Credit card statement: Some credit cards will allow you to redeem the cash value of your points and apply it directly to your credit card statement to reduce your balance.
    • Shopping on the third-party sites: Redeem your points instantly on a third party site like Amazon. It will show the option to use your points during checkout and allow you to apply them directly to your balance.
    • Merchandise: Some cards will include a catalog of merchandise that you can purchase directly through the card company using your points.
    • Donation: Other card companies allow you to use your points to make donations to the organization of your choice or a list of nonprofit organizations they’ve partnered with.

As you can see, depending on your card, you can find many ways to redeem your credit card rewards points.

Two things to keep in mind when redeeming points is that one point doesn’t always equal one dollar at the time of redemption. Also, you might have to earn a set number of points before you can use them, and some points do expire if you don’t use them within a specific time frame. 

Taking Advantage Of How Credit Card Rewards Work 

If you have the opportunity to secure a credit card that lets you earn rewards, you want to make the most use of your card. 

Start by considering which credit card rewards terms best fit your needs. 

If you travel a lot, find a card that provides travel points so you can save on your flights and hotels. If you frequently purchase gift cards to buy gifts for family, friends, and colleagues, find a card that offers excellent gift card deals. If you want cash back to put towards a vacation fund or pay off debt, then get a card that offers a cash back option. 

Next, you want to think about how your spending habits can affect the rewards you earn. 

Will you spend enough on your credit card to take advantage of the bonuses? Or will you feel forced to spend more than you can afford to get the most from your rewards? Only you know your spending habits and your ability to make sound financial choices related to your spending. 

So, before you start using a rewards credit card, think about how you need to plan your spending so you’re using it enough to earn points, but not putting yourself in unnecessary debt.

Choosing The Best Rewards Credit Card

Are you thinking about getting a rewards credit card? Along with choosing the right card, you want to select the best company. 

Maybe you’ve been considering applying for one at your local bank or credit union. You’ll surely notice a different experience depending on whether you choose a credit union or bank. To learn more about what distinguishes the two, click the link below. 

Learn The Difference Between Credit Union & Bank Credit Cards

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