A. Not Banking Points:
You get a reward immediately, of a point level at or below the point value of the chosen BOD. So, a 500 point BOD (small or large) could be used for any reward for that skill of 500 points or less value. You lose ALL leftover points, if you choose a lower reward. You get the fame and gold reward for the point level chosen (3x point value for gold rewards for smalls, and fame is (Point value/50, round down)^2.)
B. Banking Points.
You only get a FRACTION of the point value. This is 2% for a small BOD, 20% for a large BOD. This gets added to the Banked points, which are kept separately from the points from a non-banked BOD (so, not banking will not affect banked points).
If you use Banked points for a reward, you do not lose the remaining points.
A 500 point small BOD is only worth 10 points into the bank; a 500 point LBOD will put 100 points in the bank.
You only get gold and fame for claiming rewards, not banking points.
The benefit of banking points is that you can use a LOT of lesser BODs to build up to getting to a larger reward.
For example, you could bank 12 500-point LBODs (say, a bunch of Exceptional Weapons LBODs, which use only iron to fill) to get 1200 points in the bank (100 per large), to get a Valorite Runic Hammer.
....Or, you could do the same with 120 colored "famer" small BODs (ones that have no large) to get the 1200 points.
....Or any other combination reaching 1200 points. Theoretically, you could turn in 6000 normal iron smalls to get to 1200 points, but I don't see anyone going that route.
And, with some skills, banking can be preferable to trying to fill the ONE top-end BOD that gives the best reward. It's MUCH easier to bank a lot of smaller Cooking LBODs to get the top-end Cooking BOD reward, than to fill a 20 Ex Sushi LBOD (where items have only a tiny chance, if any, of being exceptional, if you don't already have a high-end Master Chef Apron BOD reward and a high-end Exceptional cooking talisman)
In EITHER case, turning in a BOD (for instant reward or banking) will allow you to get a new reward, though if you don't bank the points, you can't turn in a reward until you collect the unclaimed reward. This makes banking points something that is done by people turning in filled junk BODs worth 10-50 points (0.2 to 1.0 points banked) in order to try for better BODs, if you don't need a bunch of hammers, sewing kits, etc. It will take a while, but the points WILL eventually add up.
