How Minimum Redemptions Can Devalue Credit Card Rewards

Depending on your card's rules, you may have to spend hundreds or even thousands of dollars before you can redeem the miles, points or cash back you earn.

Claire TsosieJune 17, 2020

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Think of it as a Zen koan: If you’ve earned rewards on your credit card, but you can’t redeem them, are they rewards at all?

A minimum redemption — a requirement that you earn a certain amount of rewards on your credit card before cashing in — can make it hard to get your money's worth on earned points, miles or cash back. Depending on a card's rewards rate and minimum redemption, you may have to spend thousands of dollars before you can redeem any rewards.

The problem is, minimum redemption terms can be difficult to find when you're looking to apply for a card. While credit card issuers are required by law to prominently disclose APRs and fees in what's called a Schumer box, they aren’t obligated to disclose minimum redemptions the same way. Sometimes, you need to contact the issuer directly to find out.

Why minimum redemptions matter

Minimum redemptions on credit cards aren't necessarily deal-breakers, but in some cases, they can lower the effective rewards rate on your credit card.

Take the Blue Cash Preferred® Card from American Express, for example, which has a minimum redemption of $25. If you stopped using the card when your rewards balance was at $10, you wouldn't be able to cash in on those earnings unless you spent at least $250 more. That’s assuming you could earn the card's highest possible rewards rate on all your purchases. You might have to choose between losing out on those rewards, or holding onto a card that no longer fits your spending habits.

For big spenders or people who use a particular card regularly, such a restriction probably wouldn't be an issue. But for people who spend more slowly, restrictions on redemptions can make the card less valuable.

Minimum redemptions: Key findings

NerdWallet identified the minimum redemptions on more than 30 credit cards by looking at the cards' terms and conditions or contacting customer service representatives. We then calculated the minimum amount of spending you'd have to put on each card to before you'd be able to redeem your rewards.

Here’s what we found:

  • Discover and Capital One have no minimum redemptions for cash-back rewards and travel statement credits.

  • Among cards surveyed, the highest minimum redemptions required were $25 or 5,000 points.

A full list of our findings and methodology is below.

Minimum redemptions on cash-back cards

Minimum redemptions on other cards

The bottom line

Before choosing a rewards credit card, ask yourself whether a steep minimum redemption might prevent you from cashing in on all the rewards you've earned. Consider your exit strategy, that is, what you'll do with your rewards if you decide to stop using the account. If you think a minimum redemption could keep you from your rewards, consider another credit card.

Remember, a high rewards rate on a credit card is only the beginning of a story. Its minimum redemption is the often-overlooked, but crucial, next chapter.

Methodology

In this survey, we focused our search on cards that offer cash-back or travel statement credit options. After identifying the minimum redemptions on these cards, we divided the minimum redemption amount by the highest possible rewards rate to find the minimum spending needed to redeem rewards. We excluded sign-up bonuses and limited time offers.

For the Blue Cash Preferred® Card from American Express, for example, which has a $25 minimum redemption and offers 6% cash back at U.S. supermarkets on up to $6,000 in spending, the math is as follows:

($25 / 0.06) = $416.67 minimum spending needed to redeem rewards.

Note that if you made purchases that weren't supermarket purchases, you'd have to spend more before earning enough rewards for a redemption.

Information about the Amex EveryDay® Credit Card has been collected independently by NerdWallet and has not been provided or reviewed by the issuer of this card.

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