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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.

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.

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 programPoints for $100 cash backRedemption requirements
American Express Membership Rewards16,700
  • Minimum cashback redemption starts at 1,000 points
  • Credits appear after 48 hours or on the first billing statement following redemption
American Express cash back10,000
  • Minimum cashback redemption starts at $25
  • Credits appears on your account after 3 business days
Chase Ultimate Rewards10,000
  • Minimums may apply based on your account
  • Credits appears on your account within 5 to 7 business days
Wells Fargo Rewards10,000
  • Minimum cashback redemption starts at $25 or 2,500 points
  • Points are automatically applied to your balance when you meet the minimum
Citi ThankYou Program20,000
  • 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 back10,000
  • No minimum requirements
  • Credits typically are processed within 1 to 2 business days
Capital One miles20,000
  • No minimum requirements
  • Credits typically are processed within 1 to 2 business days
Barclaycard cash back10,000
  • Minimum cashback redemption 2,500 points for $25
  • Credits appear on your account within 5 to 7 business days
Barclaycard miles20,000
  • Minimum cashback redemption starts from 5,000 miles for $25
  • Credits appear on your account within 5 to 7 business days
Bank of America rewards10,000
  • 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

Name Product Welcome Offer Rewards Annual fee Filter values
BlockFi Bitcoin Rewards Credit Card
Up to $100 in Bitcoin rewards by earning 3.5% back in Bitcoin on all purchases in the first 90 days
3.5% back in Bitcoin in the first 90 days, up to a total of $100 in Bitcoin, then 1.5% on all purchases
$0
Earn 3.5% back in Bitcoin in the first 90 days, up to a total of $100 in Bitcoin. After that you'll earn a solid 1.5% back on all purchases.
American Express® Gold Card
60,000 points after spending $4,000 in the first 6 months
4x at restaurants including delivery and Uber Eats; 4x at US supermarkets on up to $25,000 annually (then 1x points), 3x points on directly-booked flights and 1x points on other eligible purchases
$250

Rose Gold is Back

Earn up to 4x points on select purchases, a bevy of travel perks, and a welcome offer worth up to $600 based on our valuation with this upper-mid tier travel card. Terms apply, see rates & fees
Blue Cash Everyday® Card from American Express
Earn a $200 statement credit after spending $2,000 in the first 6 months
3% at US supermarkets on up to $6,000 per year (then 1%), 2% at US gas stations and select US department stores and 1% on other purchases (redeem as statement credit)
$0
Earn a $200 statement credit after spending $2,000 in the first 6 months. This is a higher-than-average welcome offer for a card with no annual fee. Terms apply, see rates & fees
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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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