What Are Credit Card Reward Points and How Do They Work?

Some credit cards have rewards programs that let you earn points you can redeem for cash back, gift cards, travel and more. How you earn and redeem reward points can differ depending on the credit card, card issuer and the points’ conversion rate.

While certain reward options are common – like cash back – there may be other redemption opportunities based on your credit card. For example, some cards may let you donate points to a cause that’s important to you.

Learning the ins and outs of credit card rewards doesn't have to be complicated! Here, we'll break down how reward points work, including how to earn and redeem them.

How do credit card reward points work?

You typically earn points by making purchases with a rewards credit card. While rewards structures can vary, many cards have tiered spending categories. For example, a card may offer 2x points per dollar spent at supermarkets and 3x at gas stations, while another may offer 3x points for travel spending, like car rentals or hotels. Some cards offer a consistent rate – for example, 2x points per dollar on all spending.

An issuer may offer several rewards cards with different earning structures tailored to different types of spending. If you’re shopping around for a new card, keep an eye out for one that matches your spending habits.

How do you redeem credit card rewards points?

Typically, you can redeem rewards points through your credit card’s redemption platform. These platforms may allow you to select the rewards you want – like gift cards or plane tickets – and use points as a payment option. If you’re shopping with an issuer’s affiliated partners, you may be able to use your reward points as a payment option at checkout.

If you're using a Citi credit card, you may be earning ThankYou^® Points. You can redeem ThankYou Points in many ways, including travel through the Citi Travel^℠ portal, or at ThankYou.com for cash back, gift cards, and more.

What are credit card reward points worth

How much a reward point is worth depends on how it’s redeemed. For example, you might be able to redeem points at a certain rate for gift cards and a different rate for flights.

When you redeem points, your issuer may automatically show the redemption rate (for example, 100 points = $1 cash back). If not, simply do the math: Take the dollar value and divide it by the number of points required.

What can you redeem reward points for?

You may be able to redeem your credit card rewards points for airfare, hotels, car rentals, gift cards, shopping, statement credits and more. Check your card’s rewards policy to see all your redemption options.

What is a credit card rewards rate?

A rewards rate is the number of points you'll earn for every dollar spent.

A card can have a flat rewards rate. For example, the Citi Double Cash^® Credit Card lets you earn unlimited 2% cash back on your purchases (1% when you buy, 1% as you pay). Other cards let you earn more in certain categories. For example, with the Citi Strata Premier^® Card, you earn 10x points on hotels, car rentals and attractions booked through CitiTravel.com; 3x points on air travel and other hotel purchases, restaurants, supermarkets, gas stations and EV charging stations; and 1x points on all other purchases.

Tips for earning credit card reward points

Here are some tips for making the most out of your rewards credit card:

Big and small purchases add up: Planning your wedding? Big, one-time expenses may help you earn a significant number of credit card reward points, which you might use on flights, hotels, or other expenses to make your honeymoon more affordable. Even routine expenses, like filling up your gas tank for your commute, may help you accumulate reward points over time.

Choose a card that lines up with your spending: Finding the right rewards credit card – one that matches your spending habits – will help you earn points on purchases you're already making.

Look for bonus and sign-up offers: Bonus offers from your credit card issuer can help you accrue rewards points faster.

Pay attention to category spending caps: Some rewards credit cards offer higher point multipliers in specific spending categories — like groceries or dining — but only up to a certain limit. Once you hit that cap, the rate may drop. Be sure to understand how your card’s rewards structure works so you can plan purchases accordingly.

Consider interest: Keep in mind that, if you don’t pay your balance in full by the payment due date each month, it may incur interest. Interest can outweigh the value of the points you earn.

What to consider when choosing a rewards credit card

Here are a few things to remember when picking a rewards credit card:

• For most cards, only purchases earn rewards points. Balance transfers, cash advances, interest, fees and other non-purchase charges typically won't earn points.
• Some cards have promotional bonus offers, often for new cardholders who spend a certain amount within a specific timeframe. However, these offers have important conditions. If you have a promotional bonus offer, read the fine print to know when your offer expires and what you need to do to earn those bonus points.
• Some purchase categories might offer higher rewards rates.
• Some redemption options may have better credit card point values. Your points may be worth more, for example, if you redeem them for gift cards than cash back.
• If you travel abroad, find out whether your credit card charges foreign transaction fees. Foreign transaction fees are an amount (usually a percentage) charged on purchases made in a foreign currency or processed through a foreign bank. These can offset the value of any points you earn on purchases made abroad.

The right credit card rewards program for you is out there. Start your search with Citi credit cards.

Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.