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Is redeeming rewards for gift cards a good idea?

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Numerous credit card issuers offer the option to redeem points, miles, or cash back for gift cards, but the value of these redemptions varies. It depends on several factors.

The redemption value of gift cards

The worth of gift card redemptions is contingent on the specific credit card and the presence of any ongoing promotions.

In the past, redeeming gift cards was generally considered to offer less value compared to other redemption choices, a notion that still holds true in many instances. However, some cards, such as the Citi Rewards+® Card, now offer greater point value when you choose to redeem for gift cards (1 cent per point) as opposed to cash back (0.5 cents per point).

Typically, when it comes to redeeming rewards, travel offers the best value for your points. Take the Chase Sapphire Preferred® Card, for instance; you can get 1.25 cents per point when redeeming for travel through Chase Ultimate Rewards. The Chase Sapphire Reserve®, on the other hand, offers 1.5 cents per point for travel redemptions.

Additionally, there’s the potential for even higher rewards value when you transfer points to a hotel or airline partner affiliated with the card. In the case of the Sapphire Reserve, points can be valued at approximately 2.0 cents each when used for high-value travel through Chase’s transfer partners, based on assessments.

Promotional offers

As for promotions, certain credit cards provide discounted rates on gift cards, allowing you to purchase them for less than their face value. For instance, you might obtain a $25 gift card for just $20, leaving you with some extra savings for future expenses.

In the previous year, Chase introduced a 10 percent discount on gift card redemptions for brands like Macy’s and Panera. Usually, information about these offers is communicated directly through your email inbox. Alternatively, you can stay informed by checking for updates on dedicated pages in your online account, such as Chase Offers and Amex Offers.

Why redeem rewards for gift cards?

To start with, your primary consideration might be to utilize your accumulated credit card rewards to acquire gift cards to obtain a modest gift. After obtaining a gift card through your rewards, you can use it to either purchase gifts or present the gift card itself.

For instance, if you have a sister who has an affinity for cosmetics, a Sephora or Ulta gift card could make an excellent choice for a birthday present. Alternatively, if you’re preparing for a friend’s upcoming baby shower, you could acquire a Target gift card and employ it to buy the baby gift.

Additionally, you might consider purchasing gift cards using your rewards as a strategy to safeguard against rewards expiration resulting from account inactivity. The guidelines pertaining to rewards expiration differ from one credit card to another. For instance, Southwest credit card points remain valid as long as your Southwest Rapid Rewards account remains active.

Similarly, points accrued through Chase Ultimate Rewards do not come with an expiration date, but they should be utilized before closing your account, as they will be forfeited otherwise. Conversely, rewards points obtained through Wells Fargo business cards have a five-year expiration period.

Do gift cards expire?

As per a recent survey conducted by CreditCards.com, roughly 29 percent of Americans do not make use of a gift card before its expiration, resulting in unclaimed funds for many individuals.

Thankfully, thanks to the Credit CARD Act of 2009, gift cards issued by card providers are not allowed to expire for a minimum of five years from the activation date. Specific expiration policies may differ depending on the gift card merchant and card issuer, and these can be found in the terms and conditions.

The bottom line

Exchanging your rewards for gift cards can prove to be a worthwhile choice, particularly when there are ongoing promotions or if your card explicitly emphasizes its value. Although redeeming rewards for travel often provides the highest return, the decision isn’t straightforward.

If you currently lack imminent travel plans or if your points are close to expiration, it might be a sensible option to consider.

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