Never Redeem Credit Card Points for These 6 Things

Editorial Note: Any opinions, analyses, reviews, or recommendations expressed on this page are those of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any card issuer.

The points and miles you earn from your credit cards can be incredibly valuable, but many people just try to focus on earning rewards, which can be a big mistake. What they forget is that how you redeem your points and miles is at least as important as how you earned them. In fact, airline, hotel, and credit card reward programs offer numerous ways to redeem your rewards, but most of these represent a poor value.

Here are six things that you should never redeem your credit card rewards for:

Credit cards, airlines, and hotel programs love to offer you ways to redeem your rewards for merchandise, but these never are a good option. First, most programs will only offer you about one cent in value per point or mile redeemed...and may offer you even less. For example, you can redeem United miles for anything from watches to bicycles to bottles of wine. And you can redeem Chase Ultimate Rewards points for an astonishingly small 0.7 cents each toward any purchase from Amazon.com. In addition, those values will be based on the item’s full retail price, which savvy shoppers never pay. When you compare the discounted prices that most merchandise is actually sold for, you’ll probably get even less than a cent in value for each point redeemed. Finally, you have to consider the value of the cash back or other rewards that you could have earned if you purchased it with a credit card, instead of redeeming your points or miles.

Here’s another example of a reward that typically offers poor value. Most frequent flyer programs will allow you to redeem your miles for hotel stays, but they only offer about one cent per mile redeemed. To put this in perspective, you can often realize two cents per mile or more when you book expensive last-minute flights or those in business or first class. Each point or mile from each frequent flyer program is worth a different amount, just like currencies from different countries. However, airline miles will always be worth the most when redeemed for the most expensive airline tickets, not for hotel reservations that the airline has to pay for itself.

Just like the airlines would love for you to redeem loads of your miles for hotels, the hotel programs frequently offer options for flights. However, your hotel points won’t go very far toward these options. Sometimes, they’re worth less than half a cent each. In general you should be looking to receive at least a half a cent from your points from Hilton, Marriott, and IHG and better than 1.5 cents in value from your Hyatt points.

Sometimes a credit card rewards program will offer statement credits, which can sound like a great way to save money on existing purchases. But when statement credits are one of several options, it’s usually one of the worst. For example, American Express Membership Rewards will let you apply your points for one cent each as statement credits toward some travel purchases, but you’re better off transferring your points to airline miles, and redeeming them for flights, where they can be worth up to several cents per point. For example, 100,000 points can be redeemed for $1,000 toward airfare booked through American Express. But if you transfer those points to miles with Virgin Atlantic, you could redeem those points for a roundtrip business class ticket to Europe, which is worth several thousand dollars. And with Chase Ultimate Rewards, you’ll get one cent per point redeemed for statement credits, but 1.25 or 1.5 cents per point when redeemed for travel reservations using your Sapphire Preferred or Sapphire Reserve, respectively.

Like statement credits, redeeming your points or miles for gift cards can seem like a good idea but rarely is. At best, they can sometimes be offered for one cent per point or mile redeemed, but the value you receive will always be less than other options.

Not only will airline, hotel, and credit card rewards programs offer poor value for rental car rewards, there’s also one big thing you’ll miss out on. When you pay for your rental car with your credit card, you’ll usually receive rental car insurance at no extra cost. But when you redeem your points or miles for a rental car award, then you’ll have to find another way to insure car. You could receive coverage through your personal car insurance policy, or you could pay a lot of money extra to buy the optional coverage. Neither are great options, and you’ll be better off saving your rewards for other things.