Personal Finance

Money at 30: What Are You Waiting For with Your Credit Card Rewards?

Over the past few years, I’ve written a lot about credit cards, with an emphasis on the rewards and benefits they can offer. Yet, while I’ve continually tried to improve how efficiently I’m earning points and cashback, it occurs to me that I haven’t actually spent many of these rewards (aside from using some for a hotel reservation I later canceled and trying out Chase’s Pay Yourself Back program). Flash forward to this weekend when my wife and I were mulling a purchase. After going back and forth on whether or not we should do it, I suggested we proceed but cash in some of our credit card points to do so.

This got me thinking: is it better to make redemptions now or later? And, if you are holding off, what are you waiting for? Well, let’s take a look at some of the pros and cons.

The case for cashing in quickly

Devaluation

You know recent inflation means that your money doesn’t go as far as it did even a year ago. Well, the same thing can happen to credit card points. However, while inflation is impacted by a number of economic factors, point devaluation can occur on the whim of a given company or brand. After all, there’s nothing that says you’re frequent flier points will be worth the same amount forever.

Of course, in this case, I’m mostly speaking to credit card point currencies and, especially, those that can be transferred out to different partners. Meanwhile, cashback earnings may be more straightforward. Still, devaluation and inflation may be things to consider when deciding whether to hoard or redeem your rewards.

Reduce your monthly bill

If you enjoy saving money near-instantly, then it may make sense to redeem your rewards ASAP. In some cases, you may even be able to redeem your points for cashback in the same month that you earn the points (a few card products actually require this or do it automatically as well). This way, you’ll be able to lower your monthly balance and feel like you’re really saving.

As far as downsides, this plan only works if you’re getting a good exchange on statement credits. In the case of American Express Membership Rewards points, for example, you’ll only get 0.6¢ per point with this option. Thus, you’re usually better off looking for other options, even if it means waiting a while to redeem.

Why not?

Lastly, if you don’t have something you’re saving up your points or cashback for, you can use them now because…well, why not? While it can be nice to use points for specific purchases like we did this past week, the truth is that it doesn’t really matter as it’s money all the same. In other words, don’t feel like you need to wait for a rainy day when a sunny day works just as well.

Why you might want to wait

Make larger redemptions

Perhaps the most obvious reason why you might want to hold onto your points is because you’ll be able to cash them in for a larger goal later on. This might not matter much when you’re talking cashback but could definitely come into play with travel redemptions and points transfers. For example, if you really want the experience of flying business class but only have enough points for economy, you likely won’t be able to split the difference in cash. Instead, you’ll need to keep saving until you can make your perfect redemption. Because of this, if you have a dream redemption in mind, it may be worth building up your bank for that purpose.

Nab promotional offers

In addition to some point currencies rewarding certain types of redemptions more than others, there may be times when you can get even more from your points. Personally, I’ve seen promotions that make my Amex points worth up to 30% more when transferring to certain partners at select times. Elsewhere, I’ve also encountered offers that enable me to get additional discounts on Amazon purchases when cashing in rewards. Although these promotions may be hard to time or foresee, being ready to take advantage of them can definitely be beneficial.

Earmark for something special

Finally, as I mentioned earlier, you might be wanting to save up your rewards to cover a specific purchase. While this item might be a necessity, I’m more willing to bet that it’s a splurge. That was the case for us and, honestly, I’m in favor of this approach. If you’re using your credit cards to gain rewards, then why not use your points for something fun you might not otherwise let yourself buy? If that’s the way you prefer to use your cashback and points too, then I think that’s a-okay.

Figuring out the best time to redeem your credit card rewards can be difficult. Furthermore, the types of cards you carry and the points you’re earning can also play a role in what path you take. Yet, despite the pros and cons, at the end of the day, it’s really up to you. Plus, this is definitely an instance where “good enough” will likely suffice in place of “perfect.” So, I’ll ask again, when it comes to your credit card rewards, what are you waiting for?

Also published on Medium.

Other Articles by Kyle Burbank