Americans are using credit-card rewards to pay for groceries, gas

A pile of credit-card reward points can take you business class to Bali or cover a few days’ stay in a London boutique hotel. These days, as inflation strains American budgets, more people say they’re using points for daily essentials, from gasoline to cat litter.

In a survey of more than 1,000 people, more than 35% said they redeem reward points for “everyday expenses,” according to USAA Federal Savings Bank. Statement credits also are popular, with 79% of respondents saying they’ve used points that way at least once in the past six months.

The results show how persistent inflation is squeezing household budgets. Grocery costs are up more than 6% since mid-2023 and gas is up about 30 cents a gallon. Inflation-adjusted wages, meanwhile, have risen at an annualized average pace of about 1.4% over the same period.

“As living costs increase, practicality is the priority,” said Michael Moran, president of USAA Federal Savings Bank. “More households are reassessing their finances and prioritizing what’s in front of them.”

Consumers are shifting spending away from “less time-sensitive purchases” like appliances and furniture toward necessities such as food and gas, Moran said. They’re taking the same approach with credit-card rewards, using points to stretch their budgets and help offset higher prices, he said.

Cardholders accumulate reward points through everyday spending. Many cards offer bonus points for purchases in categories such as dining, groceries and travel, while new customers can earn sizable signup bonuses by meeting minimum spending requirements in the first few months after opening an account.

As recently as 2023, Americans were most likely to redeem credit-card rewards for travel, according to Credit Karma. Today, they're prioritizing groceries and gasoline instead.

Natasha Brown, a 33-year-old Miami resident who recently lost her job as a user-experience researcher, said credit-card points and cashback rewards have helped her money go further. Before each purchase, she looks for a way to earn rewards whenever possible. She also combines cashback offers with rewards from her other credit cards, maximizing the savings on everyday spending.

Brown said she uses her Capital One card to get rewards at cosmetics chains Ulta Beauty and Sephora. She’ll also use points from her card to buy pet food and clothing.

“In my head, it works like a coupon,” Brown said. “Yes, I'm spending the money up front, but I'm getting 20% back to spend later somewhere else. It's a nice way of feeling like I'm getting a little bit of something back.”

The Consumer Financial Protection Bureau reported that Americans earned $47.5 billion in credit-card rewards in 2024, almost double the amount in 2020. About half those rewards were earned as points.

Nicole Sackett, a 35-year-old executive vice president at communications firm Edelman Smithfield in New York, said her credit card offers 1.5% cash back on every purchase.

She prefers to redeem those rewards as statement credits because she doesn’t travel much and likes the simplicity of lowering her monthly balance. Statement credits allow cardholders to apply rewards directly to their credit-card balance, reducing the amount they owe.

The strategy has helped Sackett keep expenses down as she paid off her student loans.

“The vast majority of my discretionary spending is done on my credit card,” Sackett said. “There’s a convenience factor of knowing that I get a little bit of cash back.”

At Bank of America Corp., more cardholders are using rewards to offset everyday expenses. Cash back has become one of the most popular features in the company’s rewards program, said Mary Hines Droesch, head of consumer and small business products and analytics. In June alone, client engagement with its cashback feature reached three times greater traction than during the same period last year, she said. Gasoline is now the second-most popular redemption category for purchases, behind retail which includes grocery stores and shopping.

“People are really looking for deals right now,” Droesch said. “They want to make the most of their money. We aren’t seeing consumers significantly pull back, but because they recognize certain things are more expensive, they want to stretch their dollar.”

More than 70% of respondents in the USAA survey said they redeem reward points every month or as soon as they become available. Only 24% said they save rewards for larger purchases or “dream” redemptions such as trips.

Younger consumers are especially quick to cash in. Among Gen Z respondents ages 18 to 24, 72% said they redeem reward points every month or as soon as they're available. They were also more likely than older consumers to use rewards for everyday expenses.

USAA attributes much of the shift toward immediate redemptions to the growing number of “pay-with-points” options at checkout, particularly at grocery stores and gas stations. More card issuers and retailers, including Amazon.com Inc., also now allow customers to redeem rewards at the point of sale, making it easier to use points for routine purchases.

Cindy Flores, a 29-year-old financial analyst from West New York, New Jersey, said she has used her credit-card points on Amazon to buy skin-care products and supplies for her cat.

“If I have, like, $15 in cashback rewards, why not use that to buy cat litter?” she said. “I know I have to buy cat litter.”

Flores usually redeems rewards as a statement credit or deposits the cash back into her savings account. But when she needs an inexpensive household item, she’ll often use the pay-with-points option instead.

The USAA survey suggests consumers are increasingly using pay with points to manage everyday expenses rather than indulge in discretionary purchases. Only 26% of respondents said they redeem rewards for nonessential spending.

“Prices move faster than earnings, so households need time to readjust,” Moran said. “If a tank of gas costs more this week than it did last week, a family may not have budgeted for it. Relieving that cost with rewards in real time means being able to handle new or unexpected expenses and creating a buffer to adjust budgets.”