How do credit card points work

How do credit card points work? A guide

Credit cards often have rewards programs tied to your account. These points allow you to earn rewards based on your spending habits. 

What are credit card reward points?

Many credit card issuers offer additional incentives to spend money on the card with the addition of a credit card rewards program to your account. These credit cards offer you some sort of reward, such as earning cashback, for every dollar you spend.

There are three main categories of point systems:

  1. Cash back
  2. Airline miles
  3. Points

For example, cashback rewards give you a certain percentage back per dollar you spend on the card. All of these systems work in similar ways, giving you money back, or points and miles per dollar spent.

One of the most popular credit cards on the market is the Chase Sapphire Preferred Card. This card awards one extra point per dollar spent on travel purchased through Chase’s travel website, and the more expensive version (Chase Sapphire Reserve – with a pricey $550/year fee) gives even more (up to 10x points) for booking hotel stays.

To receive the big bonuses for signing up to the new card product (“sign-up bonus”) there is usually a spending requirements of $3,000-5,000 in the first 90 days. Some purchases (like gift cards) may not count towards those spending requirements (of course, terms apply – conditions too.) 

However, for those spending about that amount per month, it may be no sweat to switch cards, receive the big bonuses, and save money with card features like no foreign transaction fees, saving real money for traveling cardholders.

It is important to note that not all rewards are created equal; the rate you get back may change based on the type of purchase you make. Others use a fixed rate for points, while others have bonus categories or reward certain types of purchases higher than others.

How do credit card points work

Do credit card points expire?

The best way to answer the question of if question points expire is this: it depends. Typically, rewards cards that are not branded by another retailer or company, such as an airline company, are less likely to set expiration points on their cards.

Most of the major credit card issuers have no-expiration policies on their rewards points. 

How to earn credit card points: Maximizing your rewards earnings

Although the terms and conditions of earning credit card points vary from card to card, simply speaking, the way to earn points is to spend money on the card. However, be sure to always pay off your card at the end of every month in full to avoid accruing interest and spend wisely.

In addition, there are many ways that you can maximize the amount of rewards points you can potentially earn on your card. They are as follows:

Maximize spending in the bonus category

Many credit cards will outline specific spending categories that earn additional cashback during a set period of time. This can include things like travel purchases or different products and services such as gas or restaurants. They may even include purchases from certain places or online retailers, such as Amazon. 


Some credit card issuers offer rewards for cardholders who refer their family and friends to apply for a card. These work by sending the potential person a link. The bonus will vary from card to card and you will only receive those points once the referral link is sent and the person applies for a credit card. 

Sign-up bonuses and applying for new cards

Another way to maximize your rewards potential on your credit cards is to apply for new cards that offer a point bonus when you sign up for the card. This allows you to earn a lot of points at once after you meet a spending minimum on the card by a set date. 

It is important to note that you need to make sure that spending will fit into your budget – going into debt for credit card points is just not worth it.

Use your card when possible

As stated earlier, you earn points on the dollars you spend on the card. Using the card for your regular purchases – within your budget, of course – will help you rack up those reward points.

How can you redeem rewards?

Redeeming your points varies from card to card; some even give you the option to redeem points directly through their mobile app.

Rewards may include statement credits, gift cards, redemption options for travel such as flights, hotel rooms, etc. Before applying for a credit card, check the reward perks each card offers to get exactly what you want out of the credit card. Also look out for higher interest rates and annual fees, as rewards credit cards are more likely to include these. The following outlines the most common credit card rewards:

Redeem for travel

Travel credit cards earn points based on your spending, with additional incentives to use these cards for your travel purchases – you often earn more points per dollar spent on travel purchases. These points can then be redeemed for travel necessities like hotel rooms or plane tickets. 

Many cards also offer access to airport lounges or can be converted into hotel points or airline miles for different airlines or hotels. 

Statement credits

Statement credits are deposited directly onto your account balance based on the cash value of the reward points. 

Many consumers love the benefits of the Platinum Card from American Express when they use their points for cash back. Each point is valued at 1¢ per point when used as a statement credit. When a cardholder buys airline tickets directly from the airline, they earn 5 cash back on those purchases giving the American Express cardholder an effective rebate of 5¢ per dollar spent off their bill.

Charitable donations

Many credit card companies do not offer this as a reward option, but some will allow you to donate your points’ monetary value directly to a chosen charity or nonprofit. 

Online retail

Credit card issuers may also allow you to redeem your points at certain online retailers, giving you a credit to spend. However, this redemption option can be very limiting due to restrictions set by the issuer.

Gift cards

Many issuers use gift cards as their main way of point redemption for their customers. These gift cards cover a wide range of industries and stores, from restaurants to entertainment and more. However, gift cards are often not the greatest way to spend your points, as they often give your points the lowest value.

A number of cardholders misappropriate rewards by improperly utilizing the gift card redemption feature. Value for these types of redemptions are shortsighted, and do not help the cardholder realize their full potential or most substantial valuation. Exceeding the basic rate for which gift card redemptions can be made is of the utmost priority for those looking to get the most from their experience, and investment. 

Consider that gift cards lock the redeemer into spending money only at the establishment listed on the card which takes the cardholders flexible reward (can be used at a variety of venues, locations or even converted to cash) and instead limits their redemption to just one location.

The value of credit card points

This is another question that is answered by the phrase: it depends. Credit card point systems vary greatly from issuer to issuer. In addition, the way you redeem your points may change the value of your points. 

In addition, your issuer can adjust the rate at which you earn points at any time. Always read the terms and conditions of the card to understand the true value of your points – this will also give you insight on how to maximize the value of credit card rewards. 

Other things to note

When you sign up for a rewards credit card, there are a few important things to keep in mind about earning and redeeming your rewards:

  • Only purchases earn points – Things like interest fees, cash advances or other non-purchase charges will not earn rewards points. 
  • Bonus categories expire – Bonus offers and promotional point categories often only last for a certain period of time. This should be outlined in the fine print and let you know what the terms and conditions of the bonus are.
  • Rewards rates vary from issuer to issuer – Different issuers will allow you to earn rewards differently, with different values associated with their points programs.
  • Maximize rewards earned by spending in promotional categories – Many credit card issuers will give you additional rewards points in predefined categories. These can be used to maximize the amount of rewards you own and can be optimized to fit your spending habits.
  • Rewards can often only be redeemed if you pay the minimum on your card for that month.


One of the most important things to remember when chasing points, use your credit cards responsibly and make sure your spending fits into your monthly budget. The incentive for credit card rewards is great, but if you are accruing interest, the value of these points will dramatically decrease. 

Credit card points and your redemption options vary from credit card to credit card. Make sure to remember to read the fine print to understand how your credit card’s points system works to get the most out of your points. If you’d like to explore how to repair your credit at the lowest rates online, Cambio can help you repair your credit.

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