How Do Credit Card Points Work? A Simple Guide for Consumers

Most credit cards offer rewards like cash back or travel, but how do credit card points work? This simple guide will help you understand the fine print.

Would you like to know how do credit card points work?

One of the advantages of having a rewards card is that you get a lot of benefits for being a card member. Alaska Airlines has a rewards card that allows you to get a $99 companion fare, plus a lot of ways to earn miles.

The issue with having all of those points is that many go unused. Some estimates have up to 31% of people who have credit card rewards don’t redeem them.

Most of the time it’s because they don’t know how. Don’t be like them. Instead, read on to find out how you can use your rewards in full.

How Do You Earn Rewards?

Depending on the card that you have, you’ll see credit card rewards in a few forms. You can earn a small percent in cash back, you can earn airline miles, or you can earn points.

With these programs, you can only get approved if you have a relatively high credit score. There’s also an annual fee involved, which can be $75 or more.

These rewards programs will often have a sign-up bonus where you can earn 50,000 points or more if you spend several thousand dollars in the first three months.  

If you do spend thousands of dollars, it’s best if you pay off your card in full. Remembering to pay your bill in full every month might inspire you to create your own payment app. This way, you avoid interest charges. 

Want to know the best rewards programs around? Check out CardGuru for the best reviews. 

How Do Credit Card Points Work?

How do credit card points work? Depending on the program, you earn one point or one mile for every dollar you charge to the card.  

Miles are usually redeemed on certain airlines, like Southwest if you have a Southwest Airlines branded card.

Points can be redeemed for a variety of things. You can get gift cards, use them on travel, or for specific items in an online mall.

When you have enough points accumulated, you just have to redeem them. The process isn’t that difficult. You just have to log into your credit card account and transfer your miles to your preferred airline.

You can also redeem points by going shopping at your card provider’s online mall.

Don’t Get Left Out—Use Your Rewards!

How do credit card points work? Banks offer incentives to get you to sign up for a credit card program. They partner with retail brands and airlines in the hopes that you’ll sign up and carry a monthly balance.

Then, they can earn interest to make the programs profitable. Banks realize that some people just won’t use their rewards, which makes the programs more profitable.

Don’t let the banks take advantage of you. After all, you earned those rewards by spending your hard earned money.

Want to know more about the financial industry? Take a look at this article about the banking industry’s response to Millennials’ expectations.