I hope that I have helped give you a better understanding of the strategies you can employ to maximize earning points. Obviously, the more points you can build up with the least amount of spend and effort, the better. It's then important to have a general idea what your points are worth. Armed with this information, now comes the fun part. Redeeming points for cash back or travel. Seeing the fruits of your labor realized. In this post I will look at the variety of ways to use your points and hope to again get you thinking about how you can do that in the most efficient fashion.
In this post
Cash back/Erasing purchases
The variety of cash back type cards out there function in a similar way. You accumulate points, or cash back, and then are able to redeem those points for "cash." This may come in the form of a check, statement credit, or gift cards. This is typically done at or near a rate of 1 cent/point. Other programs, like Capital One, allow you to “erase” certain purchases, such as travel expenses. So if you earn Capital One miles and then say, pay for an AirBNB with your card, you can get a credit for that expense using your miles, again at 1 cent/point. These are easy and straightforward redemptions and may be perfect for your travel or spending habits, but often don't produce the best value.
Online Travel Portals
Another option is to book cash flights, hotels, car rentals and more right through a credit card travel portal using points. These portals function just like any other online travel agent (OTA) such as Expedia or Orbitz.
Pros
Easy one stop shop
Often can get more value than cash back- Chase Sapphire products 1.25-1.5 cents/point
They are treated as a cash transaction, so you can earn points on your flight.
Cons
Prices can be higher than directly through the airline or hotel.
Use of a third party OTA can cause issues when needing to change/cancel travel.
Like anything, you need to compare across a couple options to make sure you are getting the best value through a certain portal.
Redeeming directly with airline/hotels
Whether using points earned in a specific airline or hotel loyalty program, or using transferrable, flexible points such as Chase Ultimate Rewards or Amex membership Rewards, redeeming your points this way often times yields the best value. Lets look at some examples.
Hyatt example
This one night stay at the Grand Hyatt Kauai costs $1167 but only 25000 points per night, yielding a tremendous value of ($1167/25000) 4.6 cents/point on this redemption.
United business flight example
In this example, transferring your points to United for this business class lie flat one way seat from Indianapolis to Rome yields a value of (2328/66000) 3.5 cents/point. Remember to subtract any cash fees you would pay when using points to get the true amount of money you are saving.
ANA economy flight example
In this example, a round trip flight from Chicago to Tokyo on All Nippon Airways (ANA) costs $1980 or 50000 miles +$481. When you subtract the cash you still have to pay on the award fare you get a value of (1499/50000) 3 cents/point.
Learning the value of transferrable points
In the points world, it's often encouraged, especially when starting out, to focus on earning points that are flexible. You can see from the examples above that there can be great value to be had when you avoid taking cash back and use your points directly with airlines and hotels. But by being able to transfer to multiple partners, instead of being locked into one partner, you can discern the value in apples-to-apples comparisons.
My Orlando example
When I first began earning points and was looking to use them, I wanted to take my family to Orlando to visit Universal Studios. I had earned 100k points through Chase and wanted to transfer them to Marriott for a hotel stay while we visited the parks. Here were my options in the Marriott family of brands, ranging from 40k-60k points/night for a $100-150/night room.
I didn't really know any better, but I thought that seemed high, and (you now know having read my post on valuation) it really wasn't a very good use of points anyway versus just paying cash.
All hope was not lost though, as I knew that Hyatt was also a transfer partner of Chase so I looked at their options.
As you can see, it was only 6500-12000 points for similar hotels in the area. Using fewer points means much better value and my points go a lot further. It's apparent there are fewer hotel options through Hyatt. I will get into Hyatt hotels in another post, but one of their limitations is that they have less (1150 worldwide) properties than Marriott (7640) and Hilton (6200). In this circumstance, though, there was a good Hyatt option at a fraction of the points of the alternative.
I had learned my first lesson in the power of flexible points. My number of Chase points were the same, but they could go a LOT farther by using them with Hyatt than Marriott in this example.
Conclusion
In order to get a better understanding of this as it pertains to using points for your travel goals, it would benefit you to familiarize yourself with hotel and airline award charts to have a general idea which brands charge what points. And the more you research the options, you will start to see trends where certain airlines or hotels excel in value. If you consider committing a part of your points strategy toward earning flexible point currencies, you can then unlock even more opportunities for valuable redemptions. Regardless, it pays to know the options you have for redeeming your points so you can make informed decisions.
Comments