Rule of Thumb for Redeeming Credit Card Points

It's generally best to redeem credit card rewards points for as much value as you can get. After all, your points are a currency just like cash, albeit in a different and unofficial form. When choosing your options, the rule of thumb is to stick with redemption options where your points are worth at least 1 cent each. 

But how can you tell which redemption options give you the most value? Some redemption options—like gift cards and merchandise—are notoriously bad ways to redeem your points compared to options like travel or cash back. We'll help you figure out which redemption options to go for—and which to avoid.

What Is the Rule of Thumb for Redeeming Credit Card Points?

The rule of thumb for redeeming credit card points is to aim for a redemption value of at least 1 cent per point. 

This means if you can earn more than 1 cent per point, you're doing pretty well. If you're earning less than that, you're probably not getting good value out of the deal, and it might be worth seeking out a different redemption option or even another rewards credit card.

How Does the 1-Cent-Per-Point Rule Work?

Some credit cards, like the Citi Double Cash Card, only give you one option for redeeming your rewards: cash back. And these cards can offer good value. The Citi Double Cash Card, for example, offers 2% cash back on all of your purchases, which is higher than the 1.5% cash back offered by most flat-rate cash-back rewards cards. 

But most rewards cards—especially those that work on a points- or miles-based system—offer multiple ways to redeem your rewards, including:

• Cash back
• Airfare
• Hotel stays
• Merchandise
• Gift cards

Each of these options might be more or less valuable, depending on the rewards program.

We tested the 1-cent-per-point rule by looking at the likely ways most consumers might redeem points with rewards credit cards. Then we generated an average point value from among the 220 rewards cards in our card database. The average redemption rate for typical redemption options among the rewards cards in our database is 1.20 cents each, which beats the rule of thumb. 

In general, here's how much value you can expect to get—on average—if you choose each of these redemption options:

Some redemption options are particularly bad, like merchandise and gift cards, so we don’t include them in our database averages. Still, you can check the points value for merchandise and gift cards by logging in to your card’s rewards portal and doing some math. 

Here are a couple of examples of how this would work, using points pricing from a popular travel rewards portal and the manufacturer’s suggested retail price:

• A Weber portable grill costs 25,000 points on the portal and retails for $69.99 on the manufacturer's website. The math: ($69.99 / 25,000) * 100 = 0.28 cent per point
• A Ring security alarm kit costs 57,500 points and retails for $199.99 on the brand's website. The math: ($199.99 / 57,500) * 100 = 0.34 cent per point

This is also how you calculate the per-point value of gift cards, although the process is a little easier since you already know the dollar value of the card:

• A $25 Amazon gift card costs 10,000 points: ($25 / 10,000) * 100 = 0.25 cent per point
• A $100 Lowe's gift card costs 30,000 points: ($100 / 30,000) * 100 = 0.33 cent per point

As you can see, redeeming your points for merchandise and gift cards can (and often does) return a fraction of the value of other options. 

How Can I Calculate the Value of My Points?

You can calculate the value of your points by dividing the value of your reward (in dollars) by how many points it takes to earn. 

The value of your points can be easy to calculate in some cases, like for cash back. For example, if it takes 10,000 points to earn $100 in cash back, your points are worth 1 cent each ($100 / 10,000 = $0.01). 

But in other cases—like with airline tickets—you may need to look up the value separately. For example, let's say you want to book a flight to Las Vegas that costs 15,000 points. If you look up the price of the flight on the airline's website and find that tickets on that same flight are going for $300, then your points are worth 2 cents each ($300 / 15,000 = $0.02), which is a good deal.

Grain of Salt

Redeeming your points for at least 1 cent each is a good rule of thumb, but it's not a rule you need to stick to necessarily. 

If you don't have enough money for a vacation and you'd personally get a lot of fulfillment by going, it might be worth spending the points to go even if it's not a "good" value on paper. In some cases, you might need to close a card out right away without worrying about the best redemption value—you need to use the points or you’ll lose them. Or you might not be interested in the best available option—not everyone is able or interested in travel, for example. 

But in general, if you stick to this as a rough guideline, you'll be sure to get the most value for your points.