Redeeming Your Credit Card Rewards for Cash Back? Here Are Thousands of Reasons You Might Regret That

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Many people use rewards cards, like cash back credit cards , to earn rewards. By using credit cards like this and paying your entire statement balance in full monthly to avoid interest, you can get rewarded for making everyday purchases. These cards offer an easy way to earn rewards.

You may value cash back rewards because of their simplicity. However, your credit card issuer may offer more valuable reward redemptions. I'll explain why you may want to explore alternative redemptions beyond cash back the next time you redeem your credit card rewards.

Cash back rewards may not be the most valuable option

Many rewards credit cards allow cardholders to redeem their rewards for cash back as a check, directly to their checking account , or a statement credit to their credit card account. The idea of earning cash rewards by paying for groceries and gas with a credit card is attractive.

Before using any credit card rewards you earn, you should research which option provides the most value. Many credit card issuers offer multiple redemption choices, and the value of each redemption can vary. For example, if you have a travel credit card, you may be able to use your rewards to book travel reservations through a travel portal.

Some travel credit cards allow cardholders to transfer their points or miles to select travel partners. After doing this, you can book flights or hotel stays through airline and hotel loyalty programs. These redemption options may extend the value of your rewards. Believe it or not, you could get thousands of dollars in value from your rewards.

It pays to explore non-cash-back redemptions

My travel credit card lets me transfer my points to select airline and hotel partners. Earlier this year, I was getting ready to redeem my rewards. I considered cashing out my earnings for a statement credit to my account, but I decided to wait to redeem them for an award flight.

A few weeks ago, I made my redemption. I took advantage of a points bonus promotion offered by my credit card issuer and an airline partner. They were offering a 20% bonus on point transfers. Opportunities like this can help you maximize the value of your rewards.

I found availability for a round-trip business-class flight to Europe for 120,000 points. Because of the bonus, I only needed to transfer 100,000 points. When you book award flights this way, you're responsible for covering the taxes and fees. Ultimately, booking my round-trip journey cost me 100,000 points and just under $170 in taxes and fees.

How much would I have gotten if I had redeemed 100,000 points for cash back? $1,000. I researched the total cash price of my round-trip ticket and learned I would have spent around $3,450 on my booking without points. By transferring to a travel partner instead of redeeming for cash back, I got over $3,000 in value from my credit card points.

Know your options before you use your rewards

If cash back or a statement credit is best for you, that's fantastic. But for some, it may be beneficial to explore other redemption choices. If you like to travel, check to see if you can maximize your rewards by using them to pay for your adventures.

My story is only one example of how it can be beneficial to avoid cash back redemption. Check out our list of the best travel credit cards to learn how to earn travel rewards with a credit card.

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