Using Your Loyalty Points!
by Jon Mohatt
We have come to the final step in our travel for less beginner series, how to use your loyalty points. Since every person is going to want to get something different from their loyalty points I stick to just one basic rule, get more than what you can get with cash back and call it good. If I can do that then I know that I am doing OK and, as I have said before, I’m in this to make travel for my family and I more affordable, not to spend every waking moment trying to get every last drop out of my points. Many points are essentially free so it’s not hard to beat that value, but what you really want to concentrate on is getting more than 2% which is what the Fidelity Investments Rewards American Express (must have Fidelity acct), currently pays in cash back. The new Capital One Quicksilver card offers 1.5% on all purchases and you don’t have to have a Fidelity account as with the 2% cash back Fidelity card. This makes the cash back range 1.5-2% so if I want to get more than 2% of value from my points I am doing great and if I just beat 1.5% then I’m still doing OK.
At this point, some of you may be saying that with all the recent program devaluations (United MileagePlus and Southwest Rapid Rewards) one should just give up on loyalty program credit cards for earning points all together and just get cash back for your credit card spend (how the majority of points are earned). I don’t think we are anywhere close to that point yet as it is still common to get well over 4% value from one’s points. As long as the banks keep offering those huge 50-100K point signup bonuses I don’t see people given up and heading to strictly cash back.
Please remember that point valuation is far from an exact science and at the end of the day any travel you get for free from points is great travel. Sometimes you just want to use your points to help lower the cost of a trip and get it within your budget. That’s perfectly fine as not everyone is always going to maximize every point and everyone’s schedule may not be flexible enough to accommodate a certain reward. There is a point when you are better off just spending the cash and saving your points but if you don’t have the cash and you do have points then I say go ahead and use the points to travel while you have the time.
A lot of folks spend a ton of time trying to figure out what each point of every program is worth. For instance, I believe the most recent value I saw for a United MileagePlus point was 1.9¢ but who really knows if that is accurate for you as everyone acquires their points differently and values their points differently based on the methodology they use in their calculations. This is why I like to use the opportunity cost of 1.5-2¢ per dollar. If I get more than that, then I know that I am not leaving any cash on the table. But, for the sake of those who want a somewhat objective value of points to know if they are getting a good redemption I offer you the following table with the results of two other travel bloggers.
Point Value Chart
|One Mile at a Time
|Frugal Guy Travel
|The Points Guy
|The Points Guy
|The Points Guy
|Amex Membership Rewards||1.8||1.9||1.7||2.0|
|Chase Ultimate Rewards||1.8||2.2||2.0||2.1|
|Air Canada Aeroplan||1.3||1.9||1.6||1.6|
|Alaska Mileage Plan||1.6||1.8||2.0||2.0|
|BA Executive Club||1.3||1.67||1.6||1.7||1.6|
|Southwest Rapid Rewards||1.4||1.8||1.4||1.3|
|US Airways Dividend Miles||1.5||2.98||1.8||1.9|
|Virgin American Elevate||2.0||1.5-2.3||1.5-2.3||1.5-2.3|
|Virgin Atlantic Flying Club||0.8||1.4||1.5||1.5|
|Hyatt Gold Passport||1.6||2||1.8||1.8|
|IHG Priority Club Rewards||0.5||0.7||0.7||0.7|
|Starwood Preferred Guest||2.2||2.3||2.1||2.4|
As you can see, the blogger’s values don’t match up at all as they used different methods to calculate value. You can click on their web site names to read their full reports. It is nice to know which programs have the more valuable points, so that given the opportunity to choose when performing transfers or purchases via shopping portals and credit cards; you can pick the more valuable points. You can also see that, in general, if you are getting more than 2% in value you are doing great. So if you like to keep things simple like me just remember 1.5-2% when calculating the value you are getting with your point purchases.
Calculating the value you are receiving from a mile/point:
Flight Cost: $436
Points Required: 25K United (Saver Reward)
Value = 436/25,000=.01744 or roughly 1.7¢ per mile
This would be a toss-up as it is below the 2¢, but well above the 1.5¢ minimum I like to get so it’s not a bad value especially if it’s the times and date I want. I would not spend 50K points for this ticket if a saver reward wasn’t available as that would not be enough value (.87¢) and I would just pay the cash. But then again, if you don’t have the cash, then the “value” of that ticket just went up for you and it may be worth the 50K points to make the trip, especially if it’s to see you brother get married or be your best friend’s Best Man. That’s why so much of this is so subjective and you just can’t make any absolute rules. Just have fun and enjoy.