As a credit cards writer, it’s easy for me to think that everyone earns and uses credit card rewards as strategically as my team does.
But it turns out that quite a few U.S. adults don’t have a rewards credit card. And for those who do, nearly a quarter didn’t redeem rewards in the past year.
According to a new Bankrate survey, almost 1 in 4 rewards cardholders (23 percent) didn’t redeem their rewards in the past year, although roughly 3 in 5 (61 percent) redeemed for cash back or gift cards. Two in 5 Americans (40 percent) don’t have a rewards card at all.
As long as you pay in full to avoid interest, credit card rewards are free money.
— Ted Rossman, Bankrate senior industry analyst
Key insights on credit card rewards in 2024
- American credit cardholders are leaving money on the table. Among people who have a rewards credit card, 23 percent didn’t redeem rewards in the past year (since November 2023).
- Cash back is the most popular rewards option. Sixty-one percent of rewards cardholders redeemed rewards for cash back or gift cards in the past year, compared to 17 percent who redeemed for a free flight and/or hotel stay.
- Rewards card ownership increases with income and age. Eighty percent of Americans earning $80,000+ annually and 70 percent of baby boomers (ages 60-78) have at least one rewards card.
Nearly 1 in 4 rewards cardholders didn’t tap into redemption options in the past year
If someone handed you a wad of cash or a flight voucher, would you tuck it in a drawer and forget about it? It seems a number of Americans might. In fact, new Bankrate data shows that almost a quarter of rewards cardholders (23 percent) didn’t redeem any rewards over the past year.
Credit card rewards might feel similar to gift cards — out of sight, out of mind. But leaving that rewards stash untouched is missing out on free money. Plus, rewards tend to lose their value over time.
“Similar to what we saw in our unused gift cards survey, a sizable number of Americans are missing out,” Rossman explains. “Rewards points and miles are great, but they don’t get more valuable over time. They actually lose value to inflation and program changes. It’s smart to earn and burn rewards strategically.”
Here’s how the people we surveyed did redeem credit card rewards this year:
- Less than $300 in cash back/gift cards: 39 percent
- I have not redeemed my rewards in the past year: 23 percent
- $300 or more in cash back/gift cards: 22 percent
- Free hotel stay: 11 percent
- Free flight: 10 percent
- Other: 5 percent
Interestingly, higher income brackets are more likely to have redeemed rewards in the past year. Thirty percent of people who earn less than $40,000 annually haven’t redeemed rewards within the past year, compared to 22 percent of those making $40,000 to $79,999 and just 18 percent of people earning $80,000 or more a year.
“Failing to redeem your rewards is a major missed opportunity,” says Rossman. “While the best rewards can be subjective, the worst reward is getting nothing at all.”
High earners and older generations are more likely to have a rewards credit card
Forty percent of Americans don’t have a rewards card, but the likelihood of having a rewards card rises with income. Forty-four percent of those who earn less than $40,000 annually have at least one rewards credit card, compared with 63 percent who earn between $40,000 and $79,999 and 80 percent who earn $80,000+.
High earners may have more experience with earning rewards and better chances at being approved for credit cards. Because rewards cards offer higher value than other credit cards, they can be tougher to qualify for. But even credit cards for bad credit can offer rewards for everyday spending. As long as you use credit responsibly, it’s a good idea to earn cash back, points or miles on purchases you already make.
Rewards credit card ownership also increases with age — from 42 percent of Gen Zers (ages 18-27) to 58 percent of millennials (ages 28-43), 60 percent of Gen Xers (ages 44-59) and 70 percent of boomers.
When it comes to rewards popularity, cash back is king
In this new Bankrate survey, we asked cardholders about the best feature of the rewards credit card they use most often. We wanted to know whether they prefer certain types of rewards versus perks like low fees and rates.
Interestingly, cash back rewards won by a landslide, with 50 percent of rewards cardholders calling it their favorite feature. None of the other features we polled cracked double digits.
Cash back rewards are often straightforward and have a wide-ranging appeal, Rossman notes. “Who couldn’t use more cash, right? Especially given the toll that inflation has taken these past few years,” he says.
Tying for a distant second place for the best card feature were travel rewards points/miles and widespread card acceptance, both at 9 percent.
“Travel rewards can be more lucrative[,] but they’re more work,” Rossman continues. “Not everyone likes to travel or has the flexibility to travel on the optimal dates. It takes more effort to figure out the best travel redemptions.”
Eight percent said their favorite feature is their card’s low interest rate, followed by 5 percent who said low fees, 4 percent who said travel perks and 3 percent each for those who said customer service, retail perks or something else.
Preference for cash back rises with age, peaks with middle income earners
While all types of rewards cardholders agree that cash back is a favorite feature, older generations are even more likely to favor it. Fifty percent of Gen Xers and 55 percent of boomers say cash back is their favorite feature, compared to 43 percent of Gen Zers and 45 percent of millennials.
Gen Zers and boomers — though vastly different in age — agreed on widespread acceptance of the card as their second favorite card feature (13 percent and 10 percent, respectively). But millennials and Gen Xers chose travel rewards second (11% and 12%, respectively).
Meanwhile, the middle household income bracket ($40,000 to $79,999 annually) has the strongest preference for cash back at 54 percent. That’s compared to 50 percent of rewards credit cardholders who earn $80,000+ annually and 46 percent who earn less than $40,000.
It’s also worth noting that the preference for travel rewards points/miles jumps from 5 to 9 percent to 12 percent with each rising income bracket. After cash back, the highest earners lean toward travel rewards and perks, while the lowest earners favor features like low interest rates (10 percent) and wide acceptance and low fees (both 7 percent) behind cash back.
Frequently asked questions (FAQs) about credit card rewards
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The best rewards card for you depends on how you want to use your rewards. Travel points or miles tend to have more value than cash back, especially when used with a card issuer’s transfer partners. But if you don’t travel often or have more use for cash back, then the latter might make more sense.
When looking for cash back, keep an eye out for either a flat rate of 2 percent or more, or rotating bonus categories that earn 3 percent or more. The best cash back cards can even offer 5 to 10 percent on certain purchases.
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Despite the survey results above, it’s best not to sit on your cash back as it can lose value over time due to inflation. To put your cash back rewards to work today, consider redeeming them and stashing the proceeds in a high-yield savings account or using them for debt repayment.
If you want to get a little more fun out of your cash back, redeem it for a gift card or spend it through your card issuer’s shopping portal.
Or, if you have a travel rewards card with the same issuer, you may be able to transfer your cash back to the travel card and redeem it as points or miles. Generally, travel points or miles are worth more — so if you have a trip coming up, you’ll get more bang for your buck.
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Because the best rewards credit cards offer high value, they usually require good to excellent credit, like a 670 or higher FICO score. However, a few cards offer 1 or 1.5 percent cash back rewards for people with fair credit.
You can often check to see if you’re prequalified for a rewards card before you apply. That way, you won’t get dinged with a hard inquiry for a card you may not be able to get yet.
And if you’re ready to up your credit score, check out these ways to build credit fast.
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