Earning

'A big missed opportunity': 31% of Americans with credit card rewards didn't redeem any points in 2020

“Credit card rewards are free money.”

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Credit card issuers have boosted perks on everyday essentials during the pandemic. You can earn cash back on groceries, gas, and even by ordering takeout. Yet about a third of Americans with credit card rewards said they didn't redeem any points last year.

That's according to a new Bankrate poll of nearly 2,500 U.S. adults, which gauged respondents' spending habits and how they use their credit cards. Nearly one in three of those with rewards didn't cash in any points, free hotel stays, or miles in 2020.

"This is a big missed opportunity, especially because this past year has been so tough for so many people," says Bankrate analyst Ted Rossman.

"It's important to note that rewards points have real value," he says. "You might be sitting on a stockpile of credit card rewards that could be worth hundreds of dollars in cash back. Cash back is the most accessible and universal reward."

How to maximize the value of credit card rewards

Before you redeem your rewards, consider the most valuable ways to use them. Start by comparing your reward options and the points required for each. Depending on the card, for example, redeeming for a $25 gift card might require fewer points than redeeming for a $25 check.

People typically use their rewards for travel, and experts say that's often where you can get the most bang for your buck. But since Americans aren't vacationing as much right now, it may make sense for you to look at the value you can get in other ways, according to Rossman.

"Travel can be the most lucrative reward if you're willing to put in the work to maximize your points and miles, but many people don't do either, especially amidst the pandemic," he says.

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How to successfully use a cash-back credit card

Video by Mariam Abdallah

With cash-back cards, on the other hand, rewards usually come in the form of gift cards or are sent via check or direct deposit into your bank account.

You could even get a statement credit toward your credit card balance. Let's say your monthly bill is $200. You could apply $20 in cash back and only have to pay $180, for example. The more you can apply, the less you'll owe out of pocket.

Don't hoard your rewards: They may become less valuable the longer you hold onto them. Cash rewards, for example, aren't earning any interest and can lose value to inflation over time. And airlines regularly tweak the number of miles required to redeem for a free flight. The Points Guy predicts airline awards could become 5%-10% more expensive in 2021.

Skipping credit card rewards is 'an expensive mistake'

Overall, nearly 60% of Americans own at least one rewards credit card, according to Bankrate. That includes 69% of baby boomers, 57% of millennials, 56% of Gen Xers, and 36% of Gen Zers.

While almost a third of cardholders didn't redeem their rewards, another 46% did capitalize on their perks for something of substantial value, such as $300 or more in cash back or gift cards.

"Many people are missing an easy opportunity to put money in their pockets by simply pulling out the right piece of plastic at the grocery store," Nick Reyes of Frequent Miler told Bankrate. "It's an expensive mistake."

Find the rewards credit card that fits your needs

Reevaluate your rewards card if your financial habits have changed during the pandemic, and check often to see if issuers have added any new benefits to the cards you already use. Most cash-back cards offer a base of 1% to 2% back, but some offer bonuses as high as 6%.

Don't forget to read the fine print, however, especially since rewards cards tend to have higher annual percentage rates and fees compared to other types of credit cards. The average APR on rewards cards is 15.8% versus 12.9% APR on low-interest cards.

Cash back is the most accessible and universal reward.
Ted Rossman
Bankrate analyst

Pay off your card in full every month. If you carry a balance, the interest will offset the cash back you've earned.

"As long as you're paying in full to avoid interest and only buying things you would have bought anyway, credit card rewards are free money," says Rossman. "Finding a windfall of a few hundred dollars or more in credit card rewards could be especially impactful for young adults."

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