Credit Card Miles and Points: How Do They Work?

What Are Credit Card Miles?

Credit card miles are a type of currency in the world of credit card and loyalty rewards programs. When you use a miles-based credit card for your everyday spending, you earn a certain number of miles or points for every dollar you spend. Depending on the card, you may even earn bonus miles for certain purchases.

The term "miles" is typically associated with airline frequent flyer programs, but they have nothing to do with measuring the actual distance you've flown. In fact, there are some rewards programs that use "points" instead.

There are also some general travel rewards credit cards that offer miles instead of points, despite the fact that they allow you to use your rewards for far more than just free flights.
You can redeem both types of credit card miles for free travel, but you may get more flexibility or better redemption value with some programs than with others.

What's the Difference Between Credit Card Miles and Points?

Whether you're earning points or miles with your credit card, there's really no difference between the two in terms of general meaning. What really matters is the rewards program itself.

Frequent Flyer Programs

Most major airlines have a loyalty rewards program, as well as a co-branded credit card that allows you to earn miles in that program.

Hotel Loyalty Programs

If you have a hotel-branded credit card, you'll earn points instead of miles, but the idea is still the same. When it comes to redeeming those points, however, you may be limited to what the program allows, including:

• Hotel stays
• Experiences
• On-property rewards
• Shopping and dining

The same goes for other hotel loyalty programs, though the rewards rates and redemption options may differ from program to program.

General Travel Credit Rewards Programs

In addition to airline and hotel rewards programs, some credit card issuers have their own proprietary program.

You can redeem your points or miles with these programs for a wide variety of travel purchases, including airfare, hotel stays, rental cars, cruises, travel agents and more. Depending on the card, you can redeem your points or miles by:

• Booking travel directly through the rewards program's online platform.
• Booking travel with your card at any eligible third-party travel merchant, then using your points or miles to get a statement credit for the purchase.
• Transfering your points or miles to an airline or hotel rewards programs and redeeming them for free flights or hotel stays directly with the loyalty program.

In some cases, you can even redeem miles for cash back instead of travel.

How Much Are Credit Card Points and Miles Worth?

The value for credit card points and miles varies based on the rewards program it belongs to and which credit card is in your wallet.

General Travel Points and Miles

With general travel credit card miles, for example, you'll get a set value—generally, 1 point or mile is worth 1 cent when you redeem them for free travel.

The advantage of this structure is that you always know exactly what your points or miles are worth, and you don't have to worry about running the numbers every time to determine whether you're getting a good redemption value.

On the flip side, when you have a flat redemption rate, there's no opportunity to maximize the value of your rewards.

Airline Miles and Hotel Points

If you have points or miles with a specific airline or hotel loyalty program, however, their value can fluctuate based on how you redeem them. You can typically get more value, for instance, if you use an airline loyalty program to book a free flight instead of shopping for merchandise in the program's marketplace.

Even if you're booking a free flight or hotel stay, however, the value of your rewards currency can vary based on the current cash price of the booking and other factors.

Credit card rewards websites will occasionally run the numbers to provide average values for each point or mile you'd earn with various rewards programs. The value of your points or miles can vary depending on when you book your free award flight or hotel stay, where you're headed, whether you're flying coach or first class, or if booking a higher-category hotel versus a lower one.

The benefit of having a dynamic pricing structure is that it provides opportunities to get much more than the average value for your rewards. That said, it's important to keep in mind that not all redemptions are above-average. If you're not careful, you could get subpar value from your points or miles. Also, rewards earned with airline or hotel rewards programs can lose value over time if the airline or hotel brand makes changes to its loyalty program.

How to Earn More Miles and Points on a Credit Card

Credit cards offer several opportunities to maximize the number of points or miles you're earning, regardless of which rewards program you have. Here are some ideas to consider.

Apply for a New Card

Many credit cards offer big sign-up bonuses as an incentive for consumers to apply.

Use Your Card Whenever Possible

In addition to an intro offer, rewards credit cards also offer points or miles on every purchase you make. So plan to use your card whenever you can to rack up rewards quickly.

Keep in mind, too, that some cards offer bonus rewards on certain spending categories. As you're looking for your next card, think about the areas where you spend the most and consider getting a card that offers extra points or miles on those purchases.

Use Other Methods

If you're looking to rack up miles with a specific airline or hotel loyalty program, you can also earn them in other ways. For example, some brands have online shopping portals that provide bonus miles on purchases with select retailers. Simply visit the airline or hotel shopping portal, click through to the retailer's website and make your purchase as usual.

Some rewards programs also have dining rewards programs. With these, you simply register any credit or debit card and use it at one of the program's participating restaurants, and you'll get the promised rewards. You may even get bonus rewards for using the program more regularly.

Use Credit Cards Responsibly to Improve Your Credit History

Chasing points and miles isn't a bad thing, but it can backfire if you're not careful. It's always a good idea to avoid spending more than you can pay in full each month. Rewards are nice, but if you're paying interest, it'll likely neutralize their value.

Also, try to keep your balance relatively low. Your credit utilization rate—your balance divided by your credit limit—is an important factor in your credit scores, and it's best to keep it under 30% at all times.

As you use credit cards to earn points or miles, check your credit score regularly to make sure you're on track to building or maintaining a good or excellent credit history. Not only will a good credit score make it easier to get approved for more rewards credit cards in the future, but it can also save you money and provide peace of mind in so many other ways.