Stop making these 4 mistakes when redeeming your credit card rewards

I’ve been seriously collecting and spending travel rewards points for almost 20 years, so I have a lot of experience figuring out the best way to earn and redeem rewards for the maximum value.

I also advise other credit card users who want to maximize their rewards on credit card travel, which always starts with a review of how they spent their rewards points and miles. Over the years, I’ve noticed that many credit card users make the same costly mistakes.

These are the biggest mistakes you make when redeeming credit card rewards

When I first review an award travel customer’s spending and redemption habits, I often hear that they recently redeemed 100,000 points or more of their credit card rewards for an airline ticket.

I always ask, “How did you redeem those miles?” The most common answer is that they simply called the card issuer or went to the website to redeem the points for a reservation. Others will redeem their points for gift cards or merchandise.

Here are the ways I’ve discovered they make costly mistakes when it comes to how they redeem their rewards, and what you can do instead to get the most value.

1. Not transferring rewards to get a higher value

When my customers say they redeemed their points for a plane ticket through the issuer, their 100,000 points from American Express, Citi or Capital One got them a $1,000 plane ticket. That’s 1 cent for each point.

But they could have done much better by converting their credit card rewards into airline miles.

Points transfers allow you to transfer your credit card points to an airline or hotel brand’s loyalty program, where they are often worth more than the standard 1 cent per point.

For example, you can transfer 100,000 American Express Membership Rewards points to ANA airlines from Japan and redeem them for a round-trip business class ticket from North America to Europe operated by a Star Alliance airline such as United, Air Canada, Lufthansa and others.

Basically it comes down to this question: “Would you rather have $1,000 or a business class ticket to Europe?”

2. Not understanding the value of redeeming a credit card through the travel portal

On the other hand, there are times when it makes sense to redeem your points directly with the credit card company’s travel agent, but only if you get much more than a penny per point.

For example, Chase Sapphire Reserve® cardholders can redeem their points for 1.5 cents each for travel booked through Chase Travel℠, thanks to the 50% points redemption bonus. This is a decent value, especially when you consider that you can also earn miles on the tickets you book through Chase.

For perspective, if you had those 100,000 American Express points on the Chase Sapphire Reserve, they would be worth about 150,000 points.

Another card-specific one you’ll want to redeem through an issuer portal is with The Business Platinum Card® from American Express. Cardholders receive a 35% points discount when they book business or first class tickets through AmexTravel.com and when they book economy class tickets with the airline they select for their $200 annual credit.

With this 35% discount, Membership Rewards points redeemed through Amex Travel are worth just over 1.5 cents each (up to 1,000,000 bonus points per calendar year), which can also be a valuable way to redeem your rewards.

3. Transferring rewards to low-value partners

Unfortunately, most credit card rewards programs offer some partners very low value rewards. Not all transfer partners are equal. Check the value per point you get before initiating a transfer.

For example, you’re unlikely to get much more than half a cent in value per point from some hotel programs like Hilton and Marriott. A common mistake I see is transferring valuable points, such as Chase Ultimate Rewards or American Express Membership Rewards, to one of these programs at a 1:1 ratio.

Cardholders can ultimately redeem 100,000 points for a hotel that would have cost $500 per night, which is less than a penny per point. To calculate your value per point, divide the dollar cost by the point cost. In this case $500/100,000, which is half a cent.

4. Don’t shop around

Another common mistake credit card users make when redeeming their points is not looking for better, cheaper alternatives.

For example, you can find a good deal on an award seat on a United flight for 12,500 miles. However, if you find a comparable flight for $49 on another airline, spending 12,500 miles on the other airline would be a poor use of your rewards.

Even if United sells that flight for $200, you’re actually only receiving $49 in value, the price of the competing airline’s ticket. That’s why you’re better off paying cash and saving your miles for an award that offers you much more value per mile redeemed.