Using credit card points at checkout just got too easy

Jravel and cash back are the most touted ways to redeem your credit card rewards, but over the past decade another redemption option has emerged: the ability to pay with points at select merchants.

It’s quite an attractive feature. You plan to shell out the cash for the purchase anyway, but you can use points to knock a few dollars off the price with minimal effort. At the height of the pandemic, when travel points sat idle, it was a way to get some short-term value out of them.

When shopping on Amazon, for example, you can link your rewards program account to your Amazon account, and in the future you’ll have the option to redeem points at checkout. PayPal also allows you to redeem points from cards you’ve linked to your PayPal account, once you’ve enrolled those cards in its Payments with Rewards feature.

It’s part of an ongoing effort to create a frictionless checkout experience, which is a fancy way of saying “easier to spend money.” In an August 2021 survey by The Wise Marketer, a newsletter for marketers, 47% of respondents said “consumers’ desire to maximize convenience and reduce friction” was the most important trend. affecting the credit card loyalty market.

But just because paying with points is easy doesn’t mean it’s a good idea. Credit cards already make it easier to spend. “Neural Mechanisms of Credit Card Spending,” a February 2021 MIT study, found that with “new payment methods” (currently credit cards, but other payment methods like digital wallets at future), you are less constrained in your spending compared to when you use cash. Add to that the ability to throw points towards your purchase to reduce the cost, and you’ll get that buying dopamine hit, but there’s a big reason to avoid doing so.

Paying with points reduces the value of your rewards

When you redeem statement credit for your points from a cash back card or redeem travel card points for a vacation booking, you’re making the most of those rewards. Expect the points to be worth around 1-1.5 cents each, depending on which card you’re carrying.

But if you pay with points at the cashier, you potentially lose, depending on the cards you use. Here’s why:

• Your points may be worth less: They can be worth as little as half the price when redeemed for purchases. However, there are a few exceptions where points are worth 1 cent each.
• You’ll eat into your travel rewards budget: If you were hoping to cash in travel rewards to get a deep discount on your next trip, snacking on your rewards for purchases could rob you of the cash you need to book reward travel.

Here’s a look at what a point is worth when redeemed at checkout at two popular merchants:

How to avoid accidentally paying with points

You’ll encounter a lot of on-screen text at checkout, some of it in fine print, so you might be paying with points without intending to. If you share your credit card and online shopping accounts with other members of your household, they can use points for their purchases without you knowing (until you try to book reward flights and find out you don’t have enough points to do it, that is).

The ability to save multiple cards to your online accounts is handy, but if you want to avoid accidentally using points, you’ll need to shop around a little more carefully. When you add cards to your account, do not link the rewards accounts of these cards so that the option to pay with points does not exist.

If you want your rewards accounts linked but don’t want to use your points too often, pay close attention to the payment method selected at checkout. If there is a checkbox to pay with points, make sure it is unchecked. Even though checkout will take a few moments longer, it’s time well spent making sure you know exactly how you’re paying for a purchase. Discuss this with other family members who use the same cards and accounts so everyone agrees.

Still want to pay with points? Do it thoughtfully

Paying with points results in lower point values ​​in many cases, but that doesn’t mean using points this way is bad. If this is how you prefer to cash in your rewards, you’re reaping the benefits in a way you care about. Here are some more optimal ways to pay with points:

• Budget points like you budget money: Keep track of your points on a spreadsheet, especially if you have multiple credit cards from different issuers. You can budget for points by mentally setting aside an amount you need for, say, an upcoming vacation. The remaining points would be free to use for other redemptions, such as paying with points.
• Use these last points: When you close a credit card, you often lose any remaining rewards. Paying with points might be the best way to use up a small amount of points before canceling a card.
• Use cards that offer a higher value per point: Some cards, like Discover cards and Capital One cash back cards, allow you to redeem points at checkout for a value of 1 cent each.

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