Credit Card Rewards 101: Getting the Most Out of Your Credit Card
Groceries, streaming services, transportation — everyday spending can add up, as most people’s monthly credit card statements can attest. And while paying bills is no fun, using a rewards credit card can help make some of those expenditures pay off.
Rewards credit cards pay cardholders back based on a small percentage of what they spend. There are differences in the types of credit card rewards that cardholders can earn and how they can redeem those rewards though. This means it may take a little research — and a basic understanding of how credit card rewards work — to find the best rewards card for your circumstances.
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Types of Credit Card Rewards
What credit card rewards are, specifically, depends on the type of rewards your specific credit card pays out. The credits earned for making purchases can come in the form of cash back, points, or airline miles.
For cash-back rewards cards, earnings are based on a percentage of the amount charged to the card. The rate of earnings can typically range from 1% to 6%.
Calculating what the rewards rate actually amounts to in the form of money back can be simple for cash rewards: Just apply the cash-back percentage to total spending on the card. For example, if you had a credit card that offered 2% cash back on all purchases, you’d earn $2 back for every $100 you spent using your card.
Some rewards credit cards offer tiered earnings, meaning the percentage back will vary depending on the category of spending or the total amount spent during the year. For others, cardholders will earn a flat rate across all purchases made with the card.
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As the name suggests, this type of rewards credit card allows you to earn airline miles in exchange for your spending with the card. You can either get a card affiliated with a specific airline or a more general travel rewards credit card.
It’s possible to earn a fixed rate of miles for every dollar spent, or you might earn more miles through spending in certain categories. For instance, you might earn a mile per every dollar spent. Or, you could get 1 mile per $1 in all purchase categories with the exception of travel costs, where you’d earn 3 miles per dollar spent.
While they’re called miles, these rewards don’t translate to airline miles traveled. Rather, you redeem the miles you’ve earned to help cover the cost of flights or other travel-related expenses, such as hotel stays.
Unlike cash-back rewards, where the value is pretty straightforward, the valuation of airline miles can vary by card, which is something to consider when weighing a preference for credit card miles or cash-back rewards. The value of an airline mile can range from just under 1 cent per mile up to around 2 cents.
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Another way to earn credit card rewards is by getting a certain number of points for every dollar spent using the card. You can then redeem those points in a variety of ways, such as in the form of cash back, merchandise, travel purchases, gift cards, and even events.
Credit cards that reward cardholders through credit card points will pay out a certain number of points for every dollar spent on the card. They might offer bonus categories, where cardholders can earn more points for every dollar spent in that particular category.
For some cards, earned rewards points may have a set redemption value — for example, every 10,000 points might be worth $100 in flight or merchandise redemptions. However, redemption rates can depend on the type of reward you choose. For instance, there might be different points requirements for flights as opposed to merchandise.
As such, cardholders may have to be more strategic — considering the type of reward they select and the actual cost of their selections — to get the best bang for their buck.
Cash in on up to $300–and 3% cash back for 365 days.¹
Apply and get approved for the SoFi Credit Card. Then open a bank account with qualifying direct deposits. Some things are just better together.
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How to Optimize Credit Card Rewards
It’s clear that the returns you can earn when using a rewards credit card can vary tremendously. But in addition to choosing a rewards card with the best earnings rate, there are other ways to take maximum advantage of credit card rewards.
Find the Best Card Based on Individual Spending Habits
While some rewards cards accrue points on a flat-rate basis — meaning points or miles are awarded at the same rate regardless of what an individual charges to their credit card — others offer higher levels of earning for different spending categories.
Some cards may offer more points per dollar spent on groceries or gas. Other rewards credit cards may provide more miles back when an individual spends on flights or hotels. For people who tend to concentrate spending on specific categories, some cards may offer added value back.
Before signing up for a card, it’s worth taking the time to assess the different types of credit cards you may qualify for.
Max Out Available Promotions
Some rewards credit cards offer higher introductory earning rates, meaning you’ll earn more points than usual for a set amount of time or up to a specific spending threshold. Other promotions may be offered as well, such as greater earnings during a specified time period. Enjoying credit card bonuses like these is key to making the most of credit card rewards.
For instance, you may want to time big-ticket items and other purchases to take advantage of those greater returns. (One important caveat: While offers to earn more rewards certainly seem attractive, it’s wise to ensure that spending is within your budget. That’s because carrying a credit card balance may incur interest and/or penalties that can cancel out the value of any increased earnings — avoiding interest on credit cards requires paying off your balance in full.)
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Be Strategic About Redemptions
Given the variability in the value of rewards points, it’s a good idea to crunch the numbers before redeeming — especially because fluctuating prices and redemption promotions can help to stretch earned rewards further.
For example, although a $200 short-haul flight may not optimize the value of points, booking that same route at the last minute may be considerably more expensive. In such a case, points may yield considerably more value.
Similarly, taking advantage of redemption promotions or redeeming for the highest-value choices can yield greater returns.
Redeeming Credit Card Rewards
Once you’ve racked up some credit card rewards, it’s time to redeem them. Here’s how:
1. Log into your credit card app or portal. You can usually find your rewards listed somewhere on the main page, though the exact placement depends on your credit card issuer.
2. Click on your rewards balance. You should be able to see your total available rewards, as well as your options for redemption.
3. Choose how you want to redeem your rewards. Options for redemption may include a statement credit, a check, merchandise, gift cards, or travel, depending on your specific credit card.
4. Move ahead with redeeming your rewards. Once you select the option to redeem your rewards, that amount will get deducted from your balance. How long it takes to receive your rewards will depend on how you chose to redeem them.
Do Credit Card Rewards Expire?
It is possible for credit card rewards to expire. However, whether your rewards will expire — and how soon their expiration date will arrive — depends on the type of credit card rewards and your credit card issuer.
Airline miles and hotel points often expire (though not always). Points or cash back earned through your issuer’s program are less likely to expire. In some cases, your rewards might even get automatically credited to your account if you forget to redeem them or haven’t used your account in a while. Check your credit card’s terms and conditions to find out how your credit card works and what the rules are for your credit card rewards.
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Getting rewards — whether in the form of cash back, points, or travel miles — when you spend money is an attractive proposition. However, when it comes to how to take advantage of credit card rewards, you’ll need to do more than just swipe your card. You’ll want to be strategic about redeeming your points and also make sure to max out any promotions that are available.
Additionally, it’s important to find a rewards credit card that fits your particular needs. The SoFi Credit Card, for instance, offers 2% unlimited cash-back rewards when redeemed to save, invest, or pay down eligible SoFi debt. Cardholders earn 1% cash-back rewards when redeemed for a statement credit.1
For a limited time, new credit card holders† who also sign up for a SoFi Checking and Savings with direct deposit can start earning 3% cash back rewards on all eligible credit card purchases for 365 days*. Offer ends 12/31/23.
†SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS PROSPECTIVELY BASED ON MARKET CONDITIONS AND BORROWER ELIGIBILITY. Your eligibility for a SoFi Credit Card Account or a subsequently offered product or service is subject to the final determination by The Bank of Missouri (“TBOM”) (“Issuer”), as issuer, pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated. Please allow up to 30 days from the date of submission to process your application. The card offer referenced in this communication is only available to individuals who are at least 18 years of age (or of legal age in your state of residence), and who reside in the United States.
*You will need to maintain a qualifying Direct Deposit every month with SoFi Checking and Savings in order to continue to receive this promotional cash back rate. Qualifying Direct Deposits are defined as deposits from enrolled member’s employer, payroll, or benefits provider via ACH deposit. Deposits that are not from an employer (such as check deposits; P2P transfers such as from PayPal or Venmo, etc.; merchant transactions such as from PayPal, Stripe, Square, etc.; and bank ACH transfers not from employers) do not qualify for this promotion. A maximum of 36,000 rewards points can be earned from this limited-time offer. After the promotional period ends or once you have earned the maximum points offered by this promotion, your cash back earning rate will revert back to 2%. 36,000 rewards points are worth $360 when redeemed into SoFi Checking and Savings, SoFi Money, SoFi Invest, Crypto, SoFi Personal Loan, SoFi Private Student Loan or Student Loan Refinance and are worth $180 when redeemed as a SoFi Credit Card statement credit.
Promotion Period: The Program will be available from 10/1/22 12:01 AM ET to 12/31/23 11:59PM ET
Eligible Participants: All new members who apply and get approved for the SoFi Credit Card, open a SoFi Checking and Savings account, and set up Direct Deposit transactions (“Direct Deposit”) into their SoFi Checking and Savings account during the promotion period are eligible. All existing SoFi Credit Card members who set up Direct Deposit into a SoFi Checking & Savings account during the promotion period are eligible. All existing SoFi members who have already enrolled in Direct Deposit into a SoFi Checking & Savings account prior to the promotion period, and who apply and get approved for a SoFi Credit Card during the promotion period are eligible. Existing SoFi members who already have the SoFi Credit Card and previously set up Direct Deposit through SoFi Money or SoFi Checking & Savings are not eligible for this promotion.
The SoFi Credit Card is issued by The Bank of Missouri (TBOM) (“Issuer”) pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
1See Rewards Details at SoFi.com/card/rewards.
New and existing Checking and Savings members who have not previously enrolled in direct deposit with SoFi are eligible to earn a cash bonus when they set up direct deposits of at least $1,000 over a consecutive 25-day period. Cash bonus will be based on the total amount of direct deposit. The Program will be available through 12/31/23. Full terms at sofi.com/banking. SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC.
SoFi members with direct deposit can earn up to 4.00% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 1.20% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 3/17/2023. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet
SoFi cardholders earn 2% unlimited cash back rewards when redeemed to save, invest, or pay down eligible SoFi debt. Cardholders earn 1% cash back rewards when redeemed for a statement credit.1
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.