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Is it worth using reward points to pay off credit card debt?

Use statement credits and cash back to get back on track in the new year.

Updated

Fact checked

If you blew your budget during the holidays and have vowed to get back on track in the new year, you may be able to use those rewards to trim down your debt. Credit card rewards can be turned into statement credit if you’re paying interest on your balance.

How can I use reward points to pay off credit card debt?

Most reward credit cards allow you to redeem points for cash back to your account. How this is done depends on your card, but generally involves the following steps:

  1. Log on to your credit card account, or your reward account if they’re separate.
  2. Search for Cash back or browse the rewards categories. The account credit option is usually included in categories for Gift cards and cash, Use points for charges or Other rewards.
  3. Select the amount of cash you’d like to redeem with your rewards.
  4. Follow the prompts to complete your redemption.

Once your redemption is processed, allow several business days for the cashback reward to be credited to your account.

Our pick for a rewards credit card

Citi® Double Cash Card

  • Earn 2% on every purchase with unlimited 1% cash back when you buy, plus an additional 1% as you pay for those purchases.
  • To earn cash back, pay at least the minimum due on time.
  • Balance Transfer Offer: 0% intro APR on Balance Transfers for 18 months. After that, the variable APR will be 13.99% – 23.99%, based on your creditworthiness.
  • Balance Transfers do not earn cash back.
  • If you transfer a balance, interest will be charged on your purchases unless you pay your entire balance (including balance transfers) by the due date each month.
  • There is a balance transfer fee of either $5 or 3% of the amount of each transfer, whichever is greater.
  • The standard variable APR for Citi Flex Plan is 13.99% – 23.99% based on your creditworthiness. Citi Flex Plan offers are made available at Citi's discretion.
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How much cash back will I get for my reward points?

The amount of points required for a cashback reward varies by reward program. Below, we’ve outlined what’s required to redeem $100 worth of cash back through all the major credit card reward programs.

Rewards program Points for $100 cash back Redemption requirements
American Express Membership Rewards 16,700
  • Minimum cashback redemption starts at 1,000 points
  • Credits appear after 48 hours or on the first billing statement following redemption
American Express cash back 10,000
  • Minimum cashback redemption starts at $25
  • Credits appears on your account after 3 business days
Chase Ultimate Rewards 10,000
  • Minimums may apply based on your account
  • Credits appears on your account within 5 to 7 business days
Wells Fargo Rewards 10,000
  • Minimum cashback redemption starts at $25 or 2,500 points
  • Points are automatically applied to your balance when you meet the minimum
Citi ThankYou Program 20,000
  • Minimum cashback redemption starts at $10 for statement credit and $50 for cash
  • Points appear on your statement credit within 2 billing cycles
Capital One cash back 10,000
  • No minimum requirements
  • Credits typically are processed within 1 to 2 business days
Capital One miles 20,000
  • No minimum requirements
  • Credits typically are processed within 1 to 2 business days
Barclaycard cash back 10,000
  • Minimum cashback redemption 2,500 points for $25
  • Credits appear on your account within 5 to 7 business days
Barclaycard miles 20,000
  • Minimum cashback redemption starts from 5,000 miles for $25
  • Credits appear on your account within 5 to 7 business days
Bank of America rewards 10,000
  • Minimum cashback redemption starts at 2,500 points for $25
  • Credits appear on your account within 3 business days

Table information is valid as of December 2018 based on provider websites.

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What other factors should I consider?

Before using reward points to pay off your credit card balance, make sure you consider the following details:

  • Point value. Depending on your reward program, cash back may not give you the best bang for your buck. Compare the value of cash back against other reward options.
  • Airline credit cards. If you have a credit card that earns airline miles, you may not be able to redeem them directly for cash back or statement credit.
  • Minimum payments. Cash back is usually applied to your minimum monthly payment. This means you’ll still need to pay at least the minimum amount listed on your statement to avoid penalties.
  • Reward processing. Allow anywhere from two to 30 days for your reward to show up on your account. Continue making payments to avoid interest and potential late penalties.
  • Other redemption options. Compare the value of a cashback redemption with other options like gift cards. In some cases you could get a $100 gift card for fewer points than a $100 statement credit would cost you.
  • Consider your long-term expenses. Use your points for travel if you have an upcoming trip to save money on your airfare.

Should Milla redeem her reward points for cash back or gift cards?

At the start of December, Milla was approved for a new American Express credit card that offered 1x point per $1 spent and 20,000 bonus points if she spent $2,000 in the first three months she had the card.

Milla ended up spending $4,000 in December and started the new year with 24,000 points and $4,000 debt.

While Milla wants to pay off her credit card, she also wants to get good value out of her rewards. So she considers her options:

  • Cash on her account: If Milla used these points for cash, she could get $144.
  • Gift cards: Or Milla could use her points to get a $240 worth of gift cards.

Based on this comparison, Milla decides to redeem her points for a $240 gift card. She uses this to pay for dining and retail and puts the money she’d normally spend on these categories towards paying off her credit card balance.

Compare rewards credit cards

Data indicated here is updated regularly
Name Product Welcome offer Rewards Annual fee Filter values
Blue Cash Preferred® Card from American Express
$300 after spending $3,000 in the first 6 months (Offer expires 12/10/2020)
6% on select US streaming services, 3% on transit and US gas stations, 6% at US supermarkets on up to $6,000 annually, then 1% after that and on all other purchases
$0 intro annual fee for the first year ($95 thereafter)
Perfect for families: Get up to 6% on everyday purchases and a welcome offer worth $300. This heavy-hitter rewards card has uncontested value. Rates & fees
Blue Cash Everyday® Card from American Express
20% at Amazon.com up to $200 back in the first 6 months, plus $100 after spending $1,000 in the same timeframe
20% at Amazon.com up to $200 back in the first 6 months, 2% at US gas stations and select US department stores, 3% at US supermarkets on up to $6,000 per year, then 1% after that and on all other purchases
$0
This everyday cashback card is ideal for Black Friday and holiday shopping with 20% back at Amazon.com up to $200 back in the first 6 months. Rates & fees
Chase Freedom Flex℠
$200 after spending $500 in the first 3 months, plus 5% cash back at grocery stores on up to $12,000 in the first year
5% back in rotating categories up to $1,500 combined each activated quarter (then 1%), 5% on travel purchased through Chase, 3% on dining and drugstores, and 1% on all other purchases
$0
Get up to 5% cashback in rotating and newly added everyday categories. The refreshed Freedom Flex card has lots of earning potential.
Chase Sapphire Preferred® Card
60,000 points after spending $4,000 in the first 3 months, a value of up to $750 through Chase Ultimate Rewards
5x points on Lyft, 2x points on travel and dining and 1x points on all other purchases
$95
Earn a signup bonus worth $750 with this popular travel card. Combine with other Chase Ultimate Rewards cards for even greater value.
Citi® Double Cash Card
N/A
Up to 2% cash back on purchases (1% when you buy plus 1% as you pay)
$0
Earn up to 2% on every purchase with no annual fee. This is the highest flat-rate cashback card on the market.
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Bottom line

Redeeming your reward points for cash back to repay your credit card balance isn’t always the most valuable way to use your points. However, it could help make a dent in repaying smaller debts.

If you want to clear your debt without gaining interest and want to save your points for a different reward, consider a 0% balance transfer credit card could be a good idea.

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Images: Shutterstock.

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