Credit Card Issuers Really Want Us to Redeem Our Points for Gift Cards


I’ve noticed something lately. Credit card issuers really want you (and me) to use your valuable credit card points for things that are not so invaluable.

For instance, I receive e-mails all the time urging me to redeem my lucrative credit card rewards for gift cards. Gift cards? Seriously? Why would I want a gift card?

Shoot, I probably had to buy gift cards at some point to get those credit card rewards to begin with. Yep, that’s one of the many ways you can meet minimum credit card spend without spending needlessly on things you don’t want or need.

So there’s a good chance I won’t want more gift cards. Even worse, some credit card issuers actually give you a less than 1:1 ratio for your points when you redeem them for gift cards.

As I pointed out in this post, gift card redemptions can be good, bad, and flat out ugly. Some will give you a bonus amount over the card value, such as Discover, while others, like American Express, will give you a redemption as bad as 2:1.

In other words, your points might be worth only a half a cent each, which is a terrible value considering what else is out there for the taking.

Even Chase will urge you to redeem your Ultimate Rewards points for gift cards, despite the fact that you can just cash them out. Why would you get a gift card if you could just get cash instead, then buy whatever you want, including gift cards (at a discount)?

It’s Probably Cheaper for Credit Card Issuers

My guess is that certain redemptions are a lot cheaper for the credit card issuers than others. Perhaps the most expensive are the transfers to frequent flyer and hotel loyalty programs, seeing that you can get tremendous value.

We’re talking 2+ cents per point if you want to be conservative about it, and potentially a lot more if you find some good award space.

I’m not sure what it costs the card issuers, but I’m guessing there’s a reason they’d rather you redeem your points for a blender, or ear buds, as opposed to cash and airline miles.

You never hear or see them insisting that you transfer your points to an airline so you can fly first class. Or push you to cash out your points for money. I doubt they’re keen on writing you a check.

Heck, they probably earn a referral fee or get a reduced rate if and when you redeem your points for gift cards or random merchandise from a catalog.

The worst part is that they give you the poorest redemption rate on something that probably costs them the least amount of money. That’s kind of a slap in the face.

Ultimately, this is just another trap the credit card issuers hope you’ll fall into. Redeeming your points for less than their potential value. That, along with overspending and paying interest, is why they offer these mega bonuses to begin with.

So be sure you research the card in question and determine exactly what you plan to do with the points beforehand to assess their true value to YOU. Otherwise you might get less than your bargained for.

By Colin Robertson

Colin created this blog after spending several years in a job that required him to scour credit reports on a daily basis. His goal is to help individuals better understand their credit and get the most out of credit cards.

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