Credit card reward points are increasingly popular for cardholders seeking value from their spending, particularly in categories like groceries, utilities, and entertainment. These points, which can be redeemed for vouchers, merchandise, air miles, or cash credit, typically have an expiry date, making timely redemption crucial to avoid losing value.
Using points for bill payments
Cardholders have multiple redemption options for their points:
Statement credits: These can help reduce outstanding credit balances, though the redemption rate for these is often less favourable than travel or merchandise options. Some credit card providers, like American Express, offer a 'Pay with Points' feature, enabling users to apply their points directly to cover eligible bill payments, including electricity or rent.
Gift cards: Gift cards present another way to utilise reward points. By redeeming points for gift cards, cardholders can indirectly manage regular expenses, such as groceries and fuel. While this is not a direct bill payment method, it aids in offsetting these necessary costs. Additionally, some banks allow conversion of points into cash for bank transfers, although this typically involves lower redemption values.
Travel redemptions: Financial experts often suggest that using points for travel or cashback might provide greater value compared to bill payments or statement credits. Travel redemptions tend to offer a higher return per point, with some programmes giving up to 1.5 cents per point for flights and hotel bookings. If your card offers travel perks or cashback at a higher redemption rate, you may be better off using your points for those rewards instead of paying bills.
Direct payments: Direct bill payments at select merchant outlets using reward points are available through banks. Some banks and credit card providers allow customers to use points to pay for specific bills, such as electricity, water, phone, or even rent. For instance, American Express offers a "Pay with Points" option, allowing users to use their Membership Rewards to cover eligible purchases, including bills.
Redemption options: Redemption options via e-commerce platforms are becoming increasingly popular. This trend reflects a shift in consumer behaviour, where the convenience and flexibility of e-commerce redemptions influence purchasing decisions.
While using credit card reward points for bill payments offers flexibility, cardholders should carefully consider the value offered by different redemption methods. Whether choosing statement credits, direct bill payments, or travel rewards, understanding the potential value and limitations can help guide the effective use of these points.