Travel Rewards, Explained

This mini-guide is part of our Beginner’s Guide Series, see the full Beginner’s Guide guide here.

Identifying and signing up for the right credit cards and travel programs can result in the accumulation of large point & mile bonuses. When redeemed, those bonuses can lead to incredible vacations that would have otherwise been impossible to afford.

Redeeming an award is typically either very cheap (you might have to pay a small fee to book an award plane ticket) or completely free (most hotel redemptions). For example, this dream vacation for two to Hawaii would cost you just $172.40 with reward redemptions — but has a price tag of over $3,975 if paid in cash. Imagine if every trip you took was that affordable?


The final step before getting started is to understand the various types of travel points and the different methods to accrue them.

There are many types of travel points, which can be confusing for beginners. The last thing you want is to accumulate different kinds of points that don’t add up to anything of significant value, so it’s helpful to know the difference between them:

Airline Miles and Hotel Points

Airline miles are the reward type that you might be most familiar with, they’re also known as frequent flyer miles. In addition to earning miles by flying on an airline, they can be earned through a sign-up bonus when signing up for the airline’s credit card, and then for every dollar spent on that card (usually one mile for every dollar spent). The same concept applies to hotel loyalty programs, where the cardholder is rewarded for stays at any of the hotel brands under a particular hotel group.

These mile and point rewards are tied to a rewards program account, (frequent flyer accounts for airlines, and loyalty programs for hotels) so the cardholder must have an account with the airline or hotel they plan on redeeming them with. The accounts are free and can be created in minutes. Once created, connecting the accounts to the credit card is very easy and ensures all spending is properly rewarded and any signup bonus is added to the total reward balance.

Miles and points earned on a credit card will be deposited into the corresponding rewards program account soon after the statement close each month. At that point, the earned rewards are independent from the credit card — so even if the card is canceled the rewards will still be valid for as long as the program allows (some programs set expiration dates, others don’t let them expire).

Once a cardholder has enough miles accumulated to redeem a free flight, they should review the airline’s award chart to identify the best deals and eligible travel dates. They may also redeem flights on partner airlines; airline alliances allow mile transfers within the participating airlines in the alliance. However, transferring miles between airlines that have no partnership is usually not allowed, so it’s helpful to understand the airline alliance ecosystem before planning any mile transfers.


Similarly, once a cardholder has enough hotel points for free night(s), they can easily see their options with an award search on the hotel’s website. Large hotel groups (such as Marriott and Hilton) have many different brands under them and free nights can be redeemed at any of the brands under the group’s portfolio, with the cost of a free night varying primarily by the luxury level of the brand, the location, and the time of the year (among other factors). Transferring points to another hotel group is normally not possible.

Hotel Nights

Rather than reward new users with a point bonus for signing up for their credit card, some hotel groups offer free nights outright. The typical reward is for two free nights at the hotel group’s properties and with some limitations on what hotels they can be redeemed at (usually excludes the very premium properties). This perk could be incredibly valuable, since you may be able to redeem free nights at hotels that would otherwise require an unattainable point total.

A great example is the Ritz-Carlton card, which gives new cardholders two free nights at any Tier 1–4 Ritz-Carlton hotel worldwide; the nights could be used to book two reward nights at the Ritz-Carlton Half Moon Bay, where rooms start at over $600 / night! Staying at a hotel of that level would require a large point balance that would be tough to accrue if just using a point-based sign-up bonus, making the night-based rewards really valuable for luxury stays. Conversely, for those interested in booking several nights at lower tier hotels, a points-based redemption would make more sense.


Many hotel cards will also reward their cardholders with a free night on the cardholder’s anniversary (once they’ve paid the annual fee for the card). This is a valuable perk, and makes most hotel card annual fees worth it, but like the sign-up bonus it tends to come with limitations on what hotels the free nights can be redeemed at. For example, some hotel groups rank their hotels on a scale of 1 to 8 and limit the free anniversary night redemption to hotels level 1–4.

Fixed Value Bank Points

Offered by banks for some of their rewards credit cards, fixed value points can be redeemed for a fixed dollar amount of travel rewards. The monetary value of each point earned is usually one or two cents, so in a one-cent program 10,000 points would equal $100 worth of potential travel redemptions.

There are significant pros and cons to these types of points. On the positive side, they provide flexibility in how rewards are redeemed, letting the cardholder choose any airline or hotel without blackout dates. Blackout dates are especially prevalent in domestic economy flights, making the points useful for such flights. Additionally, because this is essentially a cash purchase, frequent flyer or hotel loyalty points can be accrued for redemptions — this is ordinarily not the case with miles or hotel-point redemptions.


The main downside of fixed value points is their…. fixed value, which removes the possibility of finding great deals for award redemptions. This is particularly unfavorable for international flights, long haul domestic flights, premium cabin domestic flights, or luxury hotel stays, where the monetary cost is high and fixed value points likely won’t be enough. For example, flights from New York to Hawaii can cost as little as 45,000 United Airlines miles (+$11.20 in fees) via Saver Fares on United’s award calendar. The United MileagePlus® Explorer Card is currently offering a 50,000 miles sign-up bonus, which is enough to cover the full cost of that flight. However, the same flight would cost $748 if paid in cash. With a premium fixed value point card, such as the Barclaycard Arrival Plus™ World Elite MasterCard® offering 50,000 bonus points for signup at a value of $0.01 per point (equal to $500), that flight would require an extra $248 out of pocket. In this situation, fixed value points would provide a much lower value than the more dynamic mile alternative. An additional con, caused due to the points being tied to the credit card account and not a frequent flyer or hotel rewards program, is the likelihood that the points would be forfeited if not used before the card is closed.

How points are redeemed varies by bank, with some simply issuing a statement credit when a user makes a purchase and others requiring the booking to be done in the bank’s own booking portal.

Flexible / Convertible Points

The most premium bank credit cards and rewards programs, such as American Express Membership Rewards and Chase Ultimate Rewards, offer convertible points. These are highly sought after points thanks to the way they can be redeemed, which includes both the fixed value model where each point is worth a monetary amount, and also the convertible model where points can be transferred directly to the program’s airline and hotel transfer partners.


Convertible points can really open up the door to accumulating large point balances on one airline or hotel program, allowing the cardholder to make a large or luxurious redemption, or to simply transfer a few points to their frequent flyer program when they’re close to redeeming a free flight. For example, a user who had signed up for the Chase Sapphire Preferred and received the 50,000 Ultimate Reward point sign-up bonus, and then also signed up for the United MileagePlus® Explorer Card (50,000 points as well), could transfer the Chase points to United for a total of 100,000 points. With a balance that high, the cardholder could redeem — with plenty of miles to spare — a round-trip flight from New York to Sydney, Australia for 80,000 points and $200 in fees. That same flight in cash would cost almost $1,400!

As great as convertible points are, there are a couple of downsides. Like fixed points, convertible points can be forfeited if the card is closed, so it’s important to know the bank’s rules and to transfer or redeem the points before closing the card. Moreover, convertible points can only be transferred to the program’s transfer partners. For instance, Chase Ultimate Rewards can be transferred to United and Hyatt, but not to to Delta and Hilton — the opposite is true for American Express Membership Rewards.

The freedom to choose between fixed and flexible redemptions makes these points very valuable. They provide a redemption option for almost any situation, and their cards tend to come with a collection of other perks to sweeten the offering.

There’s a variety of ways to accrue points and miles, and you can benefit from all of them. By knowing the different ways, you’ll reach your goals quicker and avoid missing out on great opportunities to earn rewards:

Sign-up Bonuses

Sign-up bonuses are the crème-de-la-crème when it comes to travel rewards. They can often be enough to redeem an international flight or a stay at a luxury hotel.

Depending on the card, bonuses may be rewarded in the form of points, miles, or hotel nights. To receive the bonus, the cardholder simply needs to meet the minimum spend requirement in the established timeframe. For example, the Chase Sapphire Preferred offers new users 50,000 points once they spend $4,000 in the first three months of account opening.

Points For Spend

To encourage cardholders to actively use their card, rewards programs award users for every dollar they spend. A typical reward is one point for every dollar spent; with certain categories (like spend on travel and dining) awarding more points per dollar.

Beyond the spend itself, there is nothing the cardholder needs to do to redeem the points. The points will automatically post into the rewards account a few weeks after each transaction and be ready for use.

Annual Bonuses

Most of the best rewards cards have an annual fee (although some cards waive the fee for the first 12 months), leading many cardholders to cancel their card once they have claimed the sign-up bonus and before the second year fee kicks in.

To prevent this, some credit cards — particularly hotel cards — will offer users with a bonus upon the payment of the annual fee as an incentive to keep the card open. The cash value of a free night is usually higher than the annual fee, which makes the bonus a good reason to keep the card active.

Flying / Spending Nights

The main reason airlines and hotel groups offer rewards credit cards is to encourage users to become long-time loyal customers of their brands. As an incentive, they will offer their cardholders points or miles for every hotel booking or flight taken.

The size of an airline mileage reward will vary based on the distance traveled or cost of the flight (different airlines calculate it differently), while hotel rewards are usually determined by the cost of each night. For travelers that who loyal to one airline or hotel, particularly those on frequent business travel where expenses are covered by company dime, the rewards can really add up.

Additionally, most travel credit cards will provide an incremental number of points/miles for every dollar spent on purchases directly with the hotel or airline the card is associated with. For example, the Starwood Preferred Guest® Credit Card rewards users with 5 points for every dollar spent on Starwood Hotels bookings vs. the 1 point per dollar it rewards on everyday purchases. This means that cardholders who book hotel stays using their branded card will earn points both via the credit card multiple, as well as for the cost of the stay.

Shopping Portals

Recent surveys show that shoppers are now making more of their purchases online than in-store. Realizing this growing opportunity, many banks, airlines, and hotel groups are offering shopping portals on their site where users can earn extra points for shopping directly on the portal. The model is fairly simple: retailers will partner with the portals by placing their brand and shopping links on the site, and then pay the portal a percentage of the purchases made. To incentivize shoppers to make their purchases directly through them, portals will provide rewards for every completed purchase made via the portal.

Point rewards can fall within a wide range, with certain stores/products offering as high as 20 points per dollar (sometimes even higher for seasonal deals), or be given as a cash-back incentive. Next time you’re making a purchase, take a look at your card’s shopping portal for lucrative deals that could get you a little closer to your goal. And look out for seasonal deals like the ones Chase’s shopping portal offered for Mother’s Day:


Dining Programs

The majority of rewards credit cards offer users additional points per dollar spent at restaurants, with two points per dollar being a common reward rate. This is a nice benefit of dining out, and it’s fortunately only a part of the potential dining perks available through credit card spending. Many airline and hotel groups also offer dining programs, where users who register their credit cards earn additional points per dollar spent at participating restaurants (participating restaurant lists are usually pretty comprehensive).

Dining programs are an easy way to tally up points. They don’t require a specific credit card to claim points — you could use your United Airlines credit card on the American Airlines dining program, for example — and let you register multiple cards in the program. Airline programs generally offer up to 5 points per dollar, with hotel programs going up to 8 points. Keep an eye out for special offers, as programs will often offer sign-up bonuses, such as 3,000 points for signing up and dining 3 times at participating restaurants within 30 days (as seen in Delta’s current offer below).


Although dining programs likely won’t pay for an entire trip, they are yet another simple way to rack up extra points on the airline or hotel that best fits your needs.

Visit for guides and tips on how to get the most out of credit card points and travel rewards!

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Editorial Disclaimer: The opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities. Neither the editorial content nor the comments on this site are provided by the companies whose products are featured.