Rewards points and miles are a powerful tool in credit card companies’ marketing arsenal. Ads show people vacationing in exotic locales, kicking back in first-class airline seats or enjoying a pricey gadget. But in today’s economy, consumers are using their rewards for much more down-to-earth pursuits.
According to the Capital One Rewards Barometer, more customers are redeeming rewards this quarter. And nearly 40 percent of them are turning cash back rewards into statement credits, while another 23 percent are funneling their rewards into a savings account.
The other big use for rewards is holiday shopping, with 28 percent of respondents saving their rewards to use toward holiday spending. This far outweighs the nearly 6 percent who are funneling their rewards toward college payments.
Among those using their rewards for holiday-season spending, just under 16 percent say they’ll cash in their rewards for gifts; nearly as many say they’ll spend their rewards on holiday travel. For those using their rewards to buy gifts, gift cards are far and away the most popular gift option; around 55 percent of respondents say they’ll use their points to buy gift cards for holiday presents.
This frugality underscores an important point: If you’re in the process of selecting a new credit card and want a rewards card, choose one with rewards you’ll be able to maximize based on your lifestyle. It’s easy to picture yourself jetting off somewhere on a free flight, but if you have a college savings account that needs bolstering or a lot of relatives who expect presents when the holidays roll around, take that into consideration. Cards marketed as a specific type of rewards card tend to offer a better redemption rate for that kind of reward.