Why are Chase Ultimate Rewards points so valuable?

#

Chase Ultimate Rewards points are one of our favorite rewards program currencies, for a combination of reasons: Ultimate Rewards points are far more valuable than the average rewards point, you have many options for racking up bonus points – including several credit cards that offer generous sign-up bonuses and a diverse array of bonus categories – and your redemption options are extremely flexible.

In the rewards card world, they are known as a “flexible points currency” – meaning you can redeem points for a variety of options, including travel, merchandise, gift cards and cash back. You can also transfer them between Ultimate Rewards cards and to a large list of airline and hotel loyalty programs, giving you access to a huge network of airlines that can take you practically anywhere you want to travel.

Top Chase Ultimate Rewards cards

No annual fee

Chase Freedom Unlimited

Chase Freedom Unlimited®

Premium travel

Chase Sapphire Preferred

Chase Sapphire Preferred® Card*

Luxury travel

Chase Sapphire Reserve

Chase Sapphire Reserve®

5X points on travel booked through Ultimate Rewards

3X points on dining and drugstore purchases

1.5X points on every other purchase

20,000 points if you spend $500 in first 3 months

2X points on travel and dining at restaurants worldwide

1 point per $1 on all other purchases

60,000 bonus points if you spend $4,000 in first 3 months

3X points on travel and dining at restaurants worldwide (excluding purchases covered by $300 travel credit)

1 point per $1 on all other purchases

50,000 bonus points if you spend $4,000 in first 3 months

Ultimate Rewards points value

The value of Ultimate Rewards points varies greatly, depending on how you redeem your points. Most redemption options – including cash back and travel redemptions through the Chase Ultimate Rewards portal – are worth 1 cent, but the value can exceed 2 cents per point if you take advantage of transfer options. A few options, including Amazon.com purchases, are worth less than 1 cent per point.

Redemption Option Point Value
Sapphire Reserve travel redemption (50% bonus) 1.5 cents
Sapphire Preferred and Ink Business Preferred travel redemption (25% bonus) 1.25 cents
Regular travel redemption 1 cent
Statement credit 1 cent
Direct deposit 1 cent
Gift cards 1 cent
Ultimate Rewards portal travel 1 cent
Apple products 1 cent
Amazon.com purchases 0.8 cent
Chase Pay purchases 0.8 cent
Singapore Airlines transfer 2.17 cents
World of Hyatt transfer 2 cents
Iberia Plus transfer 1.7 cents
Southwest Airlines transfer 1.57 cents
United Airlines transfer 1.52 cents
British Airways transfer 1.4 cents
Korean Air transfer 1.4 cents
Emirates Skywards transfer 1.1 cents
Air France/KLM transfer 1 cent
Aer Lingus transfer 1 cent
Virgin Atlantic transfer 0.8 cent
Marriott Bonvoy transfer 0.8 cent
IHG Rewards Club transfer 0.65 cent

One key point to estimating the value of your Ultimate Rewards points: You get a 25% to 50% bonus on your Ultimate Rewards points if you own a premium card such as the Chase Sapphire Preferred Card or Chase Sapphire Reserve and redeem your points for travel through the Ultimate Rewards portal. So, basically, your points are worth between 1.25 and 1.5 cents (depending on which card you own) if you plan to use them for travel rewards. We value Ultimate Rewards points at 1.26 cents per point on average.

As you can see from our chart below, Ultimate Rewards points far exceed the value of the average credit card rewards point, which hovers around 1 cent per point. Compared to other loyalty programs, Ultimate Rewards points fall in the middle-of-the-pack – they are outmatched by miles-based programs, such as AAdvantage and MileagePlus, but they beat the value of similar points-based programs, such as American Express Membership Rewards and Citi ThankYou:

Point value by loyalty program

Other advantages of Ultimate Rewards points:

Ultimate Rewards points don’t expire

Your Ultimate Rewards points are valid as long as your account is open. Also, if you own a premium Ultimate Rewards card, such as the Sapphire Preferred or Sapphire Reserve cards, you can transfer your points to one of those cards or to one of Chase’s travel partners if you plan to close a card.

There’s no limit to how many Ultimate Rewards points you can earn

Though some Ultimate Rewards cards – such as the Chase Freedom card – may enforce a cap on the number of points you can earn on bonus categories, there are no overall limits to the number of Ultimate Rewards points that you can earn in a year or over the lifetime of your Ultimate Rewards membership. As long as you use your cards, you will accumulate Ultimate Rewards points.

You can redeem Ultimate Rewards points for a variety of rewards

Though travel rewards are your best bet, the Ultimate Rewards program gives you a diverse array of redemption options, including statement credits, bank deposits, gift cards and merchandise. Also, you have a lot of flexibility in how you redeem your points for travel. You can purchase travel from an outside site and redeem your points for statement credits or you can purchase travel through the Ultimate Rewards site.

 You can transfer Ultimate Rewards points to Chase’s travel partners at a 1:1 rate

One of the main advantages of Chase Ultimate Rewards is that you can transfer them to an outside loyalty program if you own an Ultimate Rewards card with an annual fee. Chase’s list of travel partners includes several major airlines and hotel chains – giving you access to a worldwide travel network. Your points transfer at a 1:1 rate, which means your points maintain their value once you transfer them.

You can redeem any number of Ultimate Rewards points at any time

You don’t have to wait to accumulate a certain number of Ultimate Rewards points to start using them. You can redeem your points starting at 1 point per 1 cent of cash back.

You can combine points and cash to book travel rewards

You don’t have to worry about collecting a large amount of points to book a travel reward. If you don’t have enough points for a particular flight, you can use cash to cover the remainder of the fare (though a minimum number of points may be required for some flights).

You can transfer Ultimate Rewards points between cards

For rewards card jugglers, Ultimate Rewards offer the valuable opportunity to combine points earned across any Ultimate Rewards cards you have open. This is a great feature that makes combining cards particularly lucrative, as you can stockpile rewards earned on different bonus categories across cards. Plus, if you have a premium card like the Sapphire Preferred or Sapphire Reserve, you can transfer points to that card to unlock a higher point value when redeemed for travel through the Ultimate Rewards portal.

One small drawback: You can’t buy Ultimate Rewards points

Unlike some rewards programs, Chase doesn’t allow you to purchase points to make up for a lack of points. However, given the program’s flexibility, paying with points is mostly an unnecessary option. You can pay with cash to make up for missing points in most cases.

*All information about the Chase Sapphire Preferred Card has been collected independently by CreditCards.com and has not been reviewed by the issuer. This offer is no longer available on our site.

Source: creditcards.com

How Does Cash Back Work?

How Does Cash Back Work?

Editorial Note: This content is not provided by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by the issuer.

Credit card companies typically offer a plethora of rewards options for their cardholders to take advantage of. But cash back has long been a favorite of many, as it gives you the chance to earn cold, hard money for making everyday purchases. If you’re confused about how cash back works, read on for a full explanation.

How Cash Back Works

At its core, cash back refers to a predetermined percentage of a purchase you make being returned to you as cash rewards. Cash back rates typically range between 1% and 5%, though there are some outliers to be mindful of. Credit card issuers will usually clearly label what types of purchases earn what level of cash back. But like anything in the credit card industry, you must read the fine print.

This is mainly because all purchases and cash back rewards are governed by merchant category codes, or MCCs. Credit card companies ultimately determine these designations, with Mastercard, Visa, American Express and Discover calling the shots. Some common codes are “restaurant,” “department store,” “airline” and “entertainment,” among others. So if you earn 5% bonus cash back at restaurants and you go to Burger King — which has a restaurant MCC — you’ll get that 5% back.

But what these limiting MCCs sometimes don’t take into account are businesses that could fit into more than one category. Included in this group are hotels, superstores like Walmart, tourist attractions like museums and other multi-faceted establishments. In turn, you could lose out on cash back if you’re confused about which category a purchase you made falls into.

As an example, let’s say your family orders room service while on vacation in The Bahamas. You pay with your credit card thinking you’ll get the advertised 3% cash back on dining. When your credit card statement comes in the mail, however, you’ve only received the base 1% earnings. This is because the MCC of your hotel is just that, a hotel, which leaves your credit card issuer blind to what you really bought.

Unfortunately situations like these often offer very little recourse, as your card’s issuer has no ability to change these codes. In fact, only the major credit companies can change their own code selections.

New cardholders will often receive cash back promotions and bonuses. These offers can either be recurring — monthly, quarterly, yearly, etc. — or simply for just one period of time, usually at the beginning of your account’s life. Hypothetically, a recurring bonus might look like this: “Earn 3% cash back at supermarkets and wholesale clubs, up to $1,500 in purchases each quarter.” On the other hand, a one-time promotion might allow for 5% cash back on airfare purchases made during the first three months you’re a cardholder.

Depending on your card, cash back may be capped or it could expire after a period of time. While some cards feature both an earnings limit and expiration dates, others may have no restrictions. All cash back cards have their own, unique system surrounding them. So it’s important to refer to your documentation whenever you have a particular question.

Using Your Cash Back Earnings

How Does Cash Back Work?

The vast majority of cash back credit cards offer variations of the same choices for redeeming rewards. Most often, you’ll see statement credits, checks, bank account deposits, gift cards and charitable donations available to you.

  • Statement credit – Instead of receiving your cash back in-hand, you can apply it to your upcoming monthly bill, saving you money in the process.
  • Check – As one of the more direct ways of redeeming cash back, checks allow you to basically do whatever you want with its value.
  • Bank deposits – Eligible accounts usually include checking accounts, savings accounts or investment accounts.
  • Gift cards – With this option, you can convert cash back into retail credit at a store or website at which you want to shop.
  • Donations – Many card issuers have open relations with charities. These partnerships open the door for you to aid your favorite causes with real money.

It’s by far the easiest to redeem cash back through your card issuer’s website that it provides. Here you’ll not only see your rewards status, you will also know every possible redemption you could make. If you’d rather talk to a real person, most companies still have rewards phone lines you can call, as well.

Those who’d rather not have to worry about where their rewards currently stand will find that a redemption threshold might be helpful. Not all cards offer this feature. But if yours does, set a threshold at which your cash back is automatically redeemed in any manner you desire. Additionally, some cards require you to attain a certain amount of cash back before redeeming is possible.

Cash Back With Each Major Credit Card Company

what is cash back

There are tons of different cash back cards, depending on your credit score you may be eligible for some but not others. While it’s impossible to give universal specifics for each credit card company, below we’ve provided overviews of some of the most popular cash back cards.

Citi Double Cash Card (Mastercard)

Cash Back Rate: 1% at the time of purchase, 1% when you pay them off

Limit or Expiration: No limit; Expires if no eligible purchases are made for 12 months

Redemption Options: As a check, statement credit or gift card

The “double cash” nature of the Citi Double Cash Card means you effectively earn cash back twice: first when you make the initial purchase and again when you pay your credit card bill. The 12-month expiration is fairly standard and the lack of limits on how much cash back you can earn is generous. Statement credits, checks and gift cards are three of the most common redemption choices, so it’s no surprise to see them offered here.

Bank of America® Cash Rewards credit card (Mastercard)

Cash Back Rate: 3% in the category of your choice, 2% on purchases at grocery stores and wholesale clubs, 1% on other purchases

Limit or Expiration: Cash back on choice category, grocery stores and wholesale club purchases is limited on up to $2,500 in combined purchases each quarter; No expiration dates

Redemption Options: Once you have $25 or more, you can redeem as a statement credit, a check or a deposit to an eligible Bank of America® or Merrill Lynch® account

Take note of the combined $2,500 quarterly limit on 3% and 2% cash back in category of choice and at grocery stores and wholesale clubs, respectively. The Bank of America® Cash Rewards credit card also requires cardholders to have a minimum of $25 in earned cash back before they can redeem.

Blue Cash Everyday American Express Card
(American Express)

Cash Back Rate: 3% on U.S. supermarket purchases, 2% on U.S. gas stations and select U.S. department store purchases, 1% on other purchases

Limit or Expiration: 3% rate at U.S. supermarkets is limited to $6,000 a year in purchases then drops to 1%; No expiration dates

Redemption Options: After earning at least $25, redeem as a statement credit in $25 increments; Gift cards and merchandise redemptions from time to time

Amex offers some of the strongest rewards cards around, and the Blue Cash Everyday American Express Card is no exception. It does come with some limits; namely the 3% cash back rate on U.S. grocery store purchases is capped at $6,000 in purchases a year. At that time, cardholders earn 1% in cash back on groceries.

Discover it® Card
(Discover)

Cash Back Rate: 5% in rotating categories like gas station, supermarket, restaurant, Amazon.com and wholesale club purchases, 1% on other purchases; Full cash back match at the end of your first year

Limit or Expiration: $1,500 cap on purchases that earn the 5% rate each quarter; No expiration dates

Redemption Options: Statement credits, deposits to a bank account, gift cards and eCertificates, pay with cash back at select merchants and charitable donations

Discover cards offer great first-year cash back matches and distinctive cash back categories. These traits are on full display with the Discover it® Card. This includes 5% cash back on purchases ranging from dining to Amazon.com. However, there are limits for this rate and you have to opt in to categories each quarter to qualify. This card also offers five redemption options — the most on this list.

Tips to Maximize Cash Back Potential and Minimize Credit Risk

  • Cash back is one of the most prolific perks that the modern credit card market has to offer. But it’s important that you don’t overspend outside of your means just for the sake of rewards. Because many cash back cards come with higher annual percentage rates (APRs), this could force you into large, unsustainable interest payments.
  • Whenever possible, swipe your card for purchases in bonus categories. Not all cards have these to offer, but most do. So make sure you know which cards in your wallet offer bonuses at places like gas stations and supermarkets.
  • Know what types of redemptions — statement credits, bank account deposits, gift cards etc. — work best for you. This will drastically narrow down your card options, making the decision process much simpler.

Photo Credit: ©iStock.com/4×6, Â©iStock.com/Pgiam, Â©iStock.com/Ridofranz

Editorial Note: This content is not provided by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by the issuer.

Advertiser Disclosure: The card offers that appear on this site are from companies from which SmartAsset.com receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). SmartAsset.com does not include all card companies or all card offers available in the marketplace.

The post How Does Cash Back Work? appeared first on SmartAsset Blog.

Source: smartasset.com