How Credit Card Rewards Are Funded

This week, we’re exploring how to travel for less, and in this episode we discuss how to smartly augment a travel budget with credit card points. 

Brian Kelly—founder of The Points Guy and author of How to Win at Travel–pulls back the curtain on exactly how these programs work, the crucial pitfalls to avoid, and the little-known strategies for scoring the best deals on flights and hotel rooms. 

For more affordable travel advice, don’t miss our earlier episode with Elaine Glusac (aka the Frugal Traveler). And find our recommended travel gear below. 

This episode covers:

• Why you should pay down debt first: The points game only works if you’re debt-free. Any interest you pay on a carried balance cancels out the value of the points you earn.
• How rewards programs are funded: Credit card companies primarily make money through an "interchange" fee (usually around 2%) paid by vendors on every purchase. The credit card company then gives a portion of this money back to you as rewards.
• How to maximize everyday purchases: Audit your monthly expenses (groceries, eating out, gas, etc) and get a card that offers the highest rewards on those purchases.
• Why you may want to prioritize “transferable” points: Cards that offer transferable points (from major banks) can be converted to many different airline and hotel partners, giving you maximum flexibility for travel.
• When it’s worth using awards tickets: Flights booked with an airline's rewards program are often fully refundable and changeable up until departure at no extra cost, unlike standard cash-fare tickets.

ALSO: If you have a question about gifts, we want to hear from you for upcoming mini series! Send your question as a voice memo to thewirecuttershow@wirecutter.com. 

Additional reading:

• Secrets to Cheap Travel from NYT’s Frugal Traveler
• The 6 Best Carry-On Luggage of 2025
• The 6 Best Carry-On Travel Backpacks for 2025
• The Best Suitcases for Checking
• The Best Gear for Travel in 2025

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