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Kip Tips

Max Out Your Credit-Card Rewards Points for Holiday Shopping

You may get the most value by transferring points or miles.

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As you map out a holiday spending plan, remember that you may be able to save money by cashing in your credit card rewards points or miles. But be sure you’re getting the best “exchange rate.” With the rewards programs sponsored by major credit cards, you should aim to trade points at a rate of at least a penny apiece.

You’ll usually get the best value through travel redemptions—if, say, your card allows you to transfer points or miles to airline or hotel loyalty programs. With the Chase Sapphire Preferred and Reserve cards, points that you exchange for travel bookings through the Chase Ultimate Rewards shopping portal are worth 1.25 and 1.5 cents apiece, respectively (see The Best List).

If you’d rather use your points for shopping, consider redeeming them for gift cards, which you can hand out to recipients or use to buy gifts at the retailer. Through the American Express Membership Rewards, Chase Ultimate Rewards and Citi ThankYou Rewards programs, most gift cards are available for a penny per point.

See Also: Best Rewards Credit Cards for Your Wallet

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But redeeming points for merchandise is often a bum deal. Through the standard Citi ThankYou shopping portal, for example, electronics, luggage and other items are available at a rate of only about 0.8 cent per point, based on the items’ retail price. With Amex points, you’ll get only a half-cent per point if you choose merchandise.

If you plan to donate points to charity, don’t count on a tax deduction. Although the IRS hasn’t staked out a clear position, most tax experts agree that frequent-flier miles and credit card points are deductible only if you pay for them directly, says Mark Luscombe, principal federal tax analyst for tax and accounting firm Wolters Kluwer.

See Also: 11 Overlooked Credit Card Perks