All Points Aren't Created Equal: Understanding The Different Types Of Rewards Programs -

When you're new to the world of rewards programs, the sheer number of them can make your head spin. Just about all the major airlines, hotel chains, and credit card issuers have their own loyalty programs. Not all programs work the same, and points from one program aren't exactly comparable with points from another. It's easy to get overwhelmed trying to figure out the difference between Chase Ultimate Rewards points, Hilton Honors points, Capital One Venture miles, and all the other rewards points you can earn.

There's no need to give up on the idea of credit card rewards altogether, though. Although rewards programs look perplexing at first glance, they're simpler than you may think. Before we begin, a quick note on the terms "points" and "miles": These two terms are practically interchangeable in the context of rewards programs.

In general, credit card programs and hotel programs use the term "points," while airline frequent flyer programs and some travel reward cards use the term "miles," but this isn't always true. For simplicity's sake, I'll use "points" in this article except when referring to programs that use miles. While there are dozens of rewards programs, there are two ways you can redeem points for travel.

Some rewards programs only allow one method, while others allow both. The first is to book travel in points. For example, you could purchase an economy ticket on a domestic flight for 25,000 points or a hotel stay for 20,000 points. The cash value of said ticket or hotel stay is irrelevant.

Airlines and hotels typically give you the option to search for points bookings on their homepages. American Airlines has a "Redeem Miles" box you can check under its "Book Flights" tool, and Marriott has a similar "Use Rewards points" checkbox available when you enter your desired location and booking dates.

Some companies, such as Hilton Hotels and Resorts, give you the option to toggle between prices in cash and points on their search results pages. The second is to book travel in cash, but pay using your points. With this option, your rewards program will value your points at a certain amount (1 cent per point is the most common valuation), and you can redeem those points toward the cash price of travel purchases. Most rewards programs offer one of the two redemption options above.

American Express Membership Rewards, Chase Ultimate Rewards, and Citi ThankYou Rewards give you both options, making points in those programs especially valuable. Now let's take a closer look at each option. With enough searching and some flexibility regarding when you travel, you can find fantastic redemption opportunities this way, making a flight or hotel much cheaper in points than it is in cash.

Just remember that there can be fees and surcharges tacked on. The key factor in the quality of these rewards program is their transfer partners. The more transfer partners, the more ways you can use your points. That's why American Express, Chase, and Starwood Hotels have the best rewards programs. All three have plenty of airline and hotel transfer partners that allow you to transfer points at a 1:1 ratio. Starwood does you one better: Every time you transfer at least 20,000 Starpoints to a frequent flyer program, you'll get a 5,000-point bonus.

To join one of those programs, you need to get one of their credit cards. Once you've earned points, you can redeem them through the program's travel portal or cash them in as a statement credit toward prior travel purchases. A few programs allow you to choose from both those options.

When you log into a program's travel portal, you can search for flights and hotel stays and then pay for them in cash with your points balance. The value of your points will depend on the reward program and the credit card you have. Even within one program, having certain credit cards can entitle you to a higher redemption rate.