About four years ago I made the transition from being a casual earner of frequent flier miles to becoming a serious mileage junkie. How serious am I? I attend conferences devoted to the subject and make a nice living writing about loyalty travel programs and credit cards. But having earned millions of points and miles through some ingenious methods, I reached an inescapable conclusion that will sound very familiar to personal finance enthusiasts: Spending points and miles wisely is at least as important as finding ways to earn them.
A case study
Consider this scenario: A traveler wishes to fly from Atlanta to Chicago and has plenty of Ultimate Rewards points earned from his Sapphire Preferred card from Chase. First, he goes to the Ultimate Rewards site, searches for a flight, and finds plenty of seats for $400. He is then given the option of spending 32,000 points to book the flight as Sapphire Preferred cardholders can directly book travel at a rate of 1.25 cents per mile/point(CPM). Then, he realizes that United flies that route, and is an Ultimate Rewards transfer partner. So he can transfer 25,000 points to United miles and book the same trip, realizing 1.6 CPM and saving 7,000 points for later use. But wait, Southwest Airlines is another transfer partner, (whose flights you can’t book directly from Chase’s web site) and its points convert to their airfares at a rate of about 1.8 CPM. So that $400 flight becomes only 22,220 points. But wait, British Airways is yet another Ultimate Rewards transfer option. And while BA certainly does not fly between Atlanta and Chicago, its partner American Airlines does. And better yet, the award costs a mere 9,000 BA points round trip since it is shorter than 650 miles. So by considering all of his options, the traveler can fly nearly four round trips on American for the points he would have used for a single ticket purchased directly from Chase.
Note from Eric – Be sure to check out my up to date favorite credit cards page.
Achieving this value was only possible because the traveler earned flexible rewards points such as Chase Ultimate Rewards, American Express Membership Rewards. Earning flexible points is the easiest way to maximize your award travel possibilities. Here are some more rules to consider to travel more with less:
- Look for high value awards. In the example above, the traveler used 9,000 BA miles/points for a $400 flight. That equates to an outstanding 4.44 cents per mile (CPM). As a rule of thumb, anything below 1 CPM stinks, 1-2 CPM is marginal, 2-4 CPM is pretty good, and > 4 CPM is awesome. I find that redeeming miles for international business class flights always returns greater than 4 CPM, as well as some luxury hotels booked with Hyatt points. Hyatt’s top of the line hotels require 22,000 points and can sell for over $1,000 in some cities. On the other end of the spectrum, I do very well redeeming 3,000-4,000 Starwood points per night at their budget minded Aloft hotels and Sheraton Four Points properties that can sell for $100-$200 per night or more.
- Think partners. Also in the example, the best use of points was only possible because the traveler considered the fact that AA is a partner of BA. In fact, most major airlines have a dozen or more partners. And often, you have to do your own research as their web sites or representatives won’t volunteer that information when you search for an award flight.
- Set a value on your points and miles. The CPM rating is a great place to start, but don’t get carried away. Just because an airline will sell you a business class seat for $8,000 doesn’t mean that it is actually worth that to you or that you are “saving” $8,000.
- Forget merchandise. I have yet to find a credit card, hotel, or airline program where it makes sense to redeem your points or miles for goods. Due to the low marginal cost of services such as lodging and transportation, there is always more value in travel awards.
- Remember hotels and rental cars. Don’t focus just on airfare, think about your other travel costs as well. Again, I love the Hyatt and Starwood hotel programs, and I am starting to use my Ultimate Rewards points for car rentals just to further reduce my out of pocket travel expenses.
- Pay for it sometimes. If you are only getting 1 CPM for a flight, consider just paying for it with dollars. Save your points and miles for awards with higher CPM value.
- Never redeem for “Medium” and “High” tier awards. The major airlines offer several different prices for awards, but you should only bother with the “low” or “saver” tier. This becomes clear when you calculate CPMs. The trick is to learn all the ways to find those elusive low mileage awards, which is another subject.
- Go far. Americans have most of the points and miles in the world. We get them from our credit cards and all sorts of other promotions. As such, we consume nearly all the available domestic award seats and those on flights to other continents. But once you escape North America, award space opens up dramatically. On a trip to Africa this year, my greatest challenge was finding an available award seat from my home in Denver to my international gateway. Once I got to Europe, there was plenty of availability to Africa and beyond. Besides, if you are traveling for free, why not explore the world?
The only thing better than taking a dream vacation is doing so entirely by using points and miles. By carefully considering how to stretch those points and miles, you can go further than you ever thought possible.
Jason Steele is a freelance writer based in Denver who will sell his soul for enough Starpoints. He is a long time contributor to Smart Balance Transfers and many other top personal finance sites.
Image from oatsy40 / flickr
6 thoughts on “How You Spend Points and Miles Is Just As Important As Earning Them”
I feel a lot of people earn the cash rewards or miles and then just waste them. This is a great wake up call for those people. I normally get cash back and put the money toward my current goals as I don’t fly often.
Wasting rewards makes me cringe! It is like throwing away money. People don’t often realize the value.
Yeah, to me airline rewards just aren’t worth the bother. I seldom fly and points seem complicated to redeem – subject to so many blackouts, etc.
I travel quite a lot, and my most recent trips have all been 100% free. Even for a non-frequent traveler, it is worth a few minutes to save a few hundred dollars.
Just seems like a lot of work to me. Dont know if I would even bother looking after the first savings would feel like a dog chasing his tail.
After doing it a couple of times, it is not too much work. I have found ways to get the best deals fairly quickly lately.
Comments are closed.