Pay With Points: What Issuers Offer It, How It Works

As more lenders embrace the credit card redemption option Pay with Points, it’s getting easier to effortlessly pay for purchases with your rewards.

Depending on the lender, you can redeem points by clicking a button on your screen during online checkout, tapping your phone in-store or by using your card and getting reimbursed.

Not sure if your card issuer offers it? If it’s a big, nationwide lender, chances are it does.

A growing number of lenders are embracing Pay with Points

Just in the past year, for example, several lenders have adopted the redemption option, including:

• Capital One: As of December, Capital One cardholders can shop on Amazon using their rewards points. Other lenders that let you use your points to pay for Amazon purchases include Chase, Citi, American Express and Discover. Some travel rewards programs, such as Hilton Honors, also allow members to shop with points.
• Discover: The lender announced in November it would let PayPal Wallet users pay for online purchases using their Discover miles or cash back.
• American Express: The upscale issuer also announced in the fall of 2019 that it would let members use their rewards at checkout when they pay for purchases through PayPal. Citi and Chase have also started letting cardholders use PayPal’s wallet to redeem points.
• Citi: In June, Citi announced cardholders could redeem their ThankYou points by requesting a statement credit for a wide variety of eligible purchases, including groceries, gas, clothing, dining, entertainment and even utility payments.
• Goldman Sachs (Apple): The new Apple Card, which launched in August, allows cardholders to use cash back earnings at checkout when they use their Apple wallet.

See related: Statement credits: What they are and how to apply rewards towards one

Convenience — with a price

According to Beverly Harzog, shopping with credit card rewards points is an appealing option for busy cardholders who value the convenience.

“You can probably get a better point value with other redemption options,” says Harzog, a credit card expert at U.S. News & World Report.

Many rewards cards, for example, value points redeemed for gift cards or travel more highly than they value points redeemed at checkout.

“But I’m a big believer in getting what you want,” she says.

If you prefer quick and easy transactions and aren’t interested in higher value redemption options, such as travel, Pay with Points may be the right choice for you.

You can probably get a better point value with other redemption options. But I’m a big believer in getting what you want.

-Beverly Harzog, credit card expert at U.S. News & World Report

How to pay with points

Steps will vary, depending on the issuer and service you are using. However, in many cases, you just need to link your card to a participating merchant or payment company, such as Amazon or PayPal, and an option will automatically appear at checkout to pay with points. Some lenders will also allow you to purchase merchandise through their rewards portals.

For example, Chase lets rewards cardholders pay for Apple products with their points when purchasing directly from Ultimate Rewards.

Other lenders will simply reimburse you for qualifying purchases. Citi allows you to select which purchases you want to pay for with points and then gives you a statement credit. If you opt in, it will also notify you in real-time when you’ve made purchases that qualify.

Harzog says she often uses Pay with Points herself to fund her holiday shopping.

“It’s just a simple way for me to budget my holiday expenses and it’s very convenient,” she said.

If you’re the type of cardholder who likes squeezing as much value as possible from your points, though, you’ll likely want to steer clear. Although point values vary between issuers, Pay with Points programs are often criticized for offering dramatically lower redemption values than other redemption options.

An American Express Membership Rewards point redeemed through PayPal may be worth as little as 0.7 cents per point. Similarly, a Chase Ultimate Rewards point redeemed through Amazon will only be worth 0.8 cents per point.

A Membership Rewards point redeemed for travel, by contrast, could run as high as 1.9 cents per point – or even higher if you transfer them to any of American Express’s travel partners – according to CreditCards.com estimates. Meanwhile, Chase Ultimate Rewards points could be worth on average 1.26 cents, and as much as 2.29 cents per point when transferred to any of Chase’s travel partners, giving you substantially more buying power.

Not all Pay with Points redemption options are valued poorly, though. Depending on the issuer and the retailer you’re buying from, your rewards could be worth at least 1 cent each.

See related: Unused points and miles: You have options

How to tell whether you’re getting a good return

Lenders don’t usually advertise the value of a card rewards point. However, you can often find out how much points are worth by scanning the terms and conditions or rewards disclosures. Most lenders value points differently, based on how you redeem them. For example, gift cards may be valued at one cent per point, while merchandise is valued at just half a cent per point.

Another way to figure out redemption values is to do some simple math: Divide the cost of a purchase (or your best estimate) by the number of rewards an issuer is charging for the transaction. For example, if a purchase costs $50 in cash or 6,000 rewards points, your rewards will be valued at $0.008 per point.

You can often get a better return just by asking for cash

When you’re redeeming your rewards points, “the standard rate you want to shoot for, at a bare minimum, is 1 cent per point,” says financial planner and The Ways to Wealth founder R.J. Weiss. If you accept anything less, you’re essentially leaving money on the table.

Depending on the card, you may be better off requesting cash or a statement credit instead of paying with points at checkout. Many issuers, for example, will give you cash back or a statement credit at a one-to-one value, says Weiss, giving you the flexibility to use your earnings however you want.

If you value getting a good return on your points but aren’t interested in travel, consider requesting cash or a statement credit for a penny per point and investing the money instead. For example, you could put your earnings in a high yield savings account or transfer it to a portfolio. Or, if you have high-interest debt, you could use your earnings to pay down your balance, says Weiss.

“Then your points have an even greater return, mathematically,” he notes.

But paying with points is usually easier

Motivating yourself to log into your rewards account and request a statement credit or cash back is often easier said than done, though, say some Pay with Points users – especially when you can simply click a button at checkout to redeem your rewards.

Most services, such as Amazon’s Pay with Points and PayPal’s point redemption service, make paying with points exceptionally quick and painless: Once you link your card, a button will simply appear on your screen when you’re ready to pay, along with a reminder of how many points you have available.

For cardholders who appreciate being able to breeze through checkout as quickly as possible, that could make the lower redemption value worth it.

“For some people, it makes them happy to make sure they get the highest point value possible,” says Harzog. “But you can also end up with something you don’t need.”

“I think about how much my time is worth,” she adds. A reward’s monetary value isn’t the only thing that’s important. When you’re evaluating redemption options, “think about what’s saving you time and what’s decreasing your stress level,” says Harzog.

Michelle Meredith of the Bright Color Mom blog says she frequently pays for Amazon purchases with her Chase Ultimate Rewards points, even though her points would be worth more if she redeemed them for cash.

With cash back, “I have to remember to go into my Chase account to request the credit or transfer,” says Meredith. “It’s just easier to tap that button on Amazon while I’m checking out. Most of the time I’ve forgotten I even had the points to use until I get to checkout.”

How to pay with points with different card issuers

Issuer	How to pay with points
American Express	Pay with points online when you link your card to PayPal and use PayPal to check out. Or pay with American Express checkout. You can also use membership rewards points to pay for purchases from: Amazon, BestBuy.com, Boxed, Dell.com, Expedia, Grubhub, JustGiving, NYC Taxi, Newegg.com, RiteAid, SaksFifthAvenue.com, Staples.com, Ticketmaster and Walmart.com. In most cases, you’ll just need to link your card to an online account and a button will appear when it’s time to check out. When you take a NYC taxi, or visit your local RiteAid, use your card and you’ll be given the option to pay with points. For Ticketmaster, call 1-800-AXP-EARN.
Bank of America	You can’t use points at checkout. But the Bank of America Premium Rewards card does let you get reimbursed for select travel purchases.
Capital One	Link your Capital One card to Amazon. Travel card holders can also use Purchase Eraser to get a statement credit for qualifying travel and UberEATS purchases.
Chase	Link your Chase card to PayPal or Amazon. Or use Chase Pay.
Citi	Link your Citi card to Amazon, LiveNation, Expedia or PayPal. Or use your Citi card at any store, then log into your account and request a statement credit for qualifying purchases.
Discover	Link your Discover card to Amazon or PayPal. Travel card holders can also request a statement credit for select travel purchases.
U.S. Bank	FlexPerks cardholders can activate “real-time rewards” and request a statement credit for a range of qualifying purchases, including travel and groceries.
Goldman Sachs (Apple Card)	Use Apple Pay at checkout and tap your cash card instead of other cards in your wallet.

Paying with points may also be more satisfying

Paying with points also makes Meredith feel as if she’s gotten a deal on her purchases since the cost is reduced once she’s applied her points.

Asking for a statement credit or cash deposit, by contrast, doesn’t always provide the same feel-good experience.

According to Lauren Stearn of the loyalty rewards provider Rymax, consumers are often more attracted to merchandise rewards than they are to gift cards or cash back, in part because of the instant satisfaction they get from redeeming a tangible reward.

That feel-good satisfaction could be important: If, like many people, you tend to forget about your rewards or put off redeeming them, the instant gratification you get from quickly paying for purchases with your rewards could help motivate you to actually use them.

See related: Cash back vs. points: Which is better?

You may be more likely to use your rewards before they expire

Multiple surveys have found that credit card holders often fail to use the rewards they’ve earned. A January 2020 Bankrate survey, for example, found that more than a quarter of cardholders (28%) haven’t redeemed any of their rewards in the past year.

However, an internal Citi survey found that people were much more likely to use up their rewards points if they could instantly redeem them. According to a CNBC report, for example, Citi executive Mary Hines said at a recent Pay with Points launch event: “We recently did a survey of 1,000 consumers, and 86% said that they would be more likely to redeem their points if they could do it in real time. That number rose to 94% with millennials.”

A Mastercard survey also found that almost 70% of cardholders would redeem their points at checkout if they could, said Mastercard executive Chris Reid in a related news release.

If you’re the type of cardholder who gets easily intimidated by complicated redemption rules – or if you tend to forget about your rewards altogether – shopping with points could be a good solution.

Bottom line

Redeeming points at checkout may not be the most valuable way to spend your rewards. But it’s often the most convenient.