The No. 1 way to get the most value out of your credit card points

A woman taking a very expensive nap in first class.

Deciding how to use your credit card rewards can be a challenge. Typically there are various redemption options to choose from: You can turn your points into cash or gift cards, for example, or use them to make specific purchases or donations.

Experts tend to agree, however, about which option offers the most bang for your buck: transferring your points to one of your issuer's travel partners and then finding a great deal on a flight or hotel stay.

"The most lucrative redemption is transferring your credit card points to an airline or hotel partner," CreditCards.com industry analyst Ted Rossman tells CNBC Make It. "If you're willing to put in some legwork to identify sweet spots in the value charts, this is how you can maximize value."

And to really get the most out of your points, sometimes it helps to think big. Co-branded rewards programs entice consumers by making luxury travel less expensive. In many cases, says Daniel Gillaspia, founder of the credit card blog UponArriving, "the maximum value will be with premium redemption, like business class and first class."

Why this is the most valuable option

Every card has so-called "earn rates" and "burn rates." The earn rates represent how you collect points as you spend with the card. The burn rates determine what those rewards are worth, depending on how they are used.

The Chase Sapphire Reserve Card, for instance, rewards every dollar users spend on dining and travel with 3 points, plus 1 point on all other purchases. And you can redeem 1 point for 1 cent in cash, or 1 point for 1.5 cents in travel.

In other words, points are worth 50 percent more when you use them to book a trip through the Chase travel portal.

The American Express Gold Card, meanwhile, rewards every dollar you spend on dining and groceries with 4 points, travel with 3 points, and all other purchases with 1 point. American Express Gold cardholders can redeem points for cash at half a cent per point, or on travel-related purchases for 1 cent per point.

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Your most valuable option with both of these cards is to transfer points to one of their many partner rewards programs. Then points can be worth much more than 1 cent apiece.

Rossman offers an example: "Chase partners with Singapore Airlines and 1 Chase Ultimate Rewards point is worth 1 KrisFlyer mile. So you could exchange 118,000 Chase points for 118,000 KrisFlyer miles and book a first-class flight from San Francisco to Singapore that retails for $8,210. That's a great redemption value (about 7 cents per mile)."

However, it's important to note that even if you find a great deal on a first-class ticket or ritzy hotel room, that doesn't necessarily mean booking either is in your best interest. That's because a high-end booking is usually still more expensive than going with a basic alternative.

You might be able to make it all the way to Singapore and back to San Francisco with 118,000 points if you fly coach — or, at the very least, you'll be able to fund most of the round-trip.

Plus, sometimes the best deal you can find through a transfer partner is a seat in coach. "You can get something like 7 cents per point/mile on an economy flight, particularly if you're booking on short notice," says Rossman.

In any case, no matter how you redeem your points, don't forget to pay off your credit card bills in full and on time to avoid having to pay interest. You should also consider the cost of an annual fee when thinking about the value of your card and its rewards, since most of the top travel cards require one.

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