Some of the longest held advice about using points could soon be out of fashion. As airlines and hotel programs have dwindled the value in their points, credit card companies have fought hard to increase the value of theirs. “Cents per mile”, the basis of all intelligent points decisions matters more than ever, but how to maximize it is not quite as straight forward as it used to be…
The Backstory…
Traditionally, you always received better value transferring your credit card points to an airline or hotel rather than using the points directly through the credit card company. For many years credit card companies assigned a fix value to their points, often less than 1 cent per point, or 1 cent per point at best. Basically a $1000 ticket would require 100,000 points, whereas airlines and hotels allowed for arbitrage opportunities because their points were based on a chart for each region and NOT on current cash price. Therefore you could often use less points for more value, sometimes 62,500 credit card points converted to airline points could get over $3,000 in value.
Then Airlines Started Making Points Difficult To Use…
Less seats where you could actually use your points, raise the “fixed” rate charts, add variable rates depending on demand. Converting credit card points into airline miles went from finding the magic number of miles needed from city X to city Y, calling and asking if there was space available to use miles and pressing book, to a world of chaos only understood by a studious few. It’s harder to use airline miles in strategically brilliant ways than it ever was before, and more often than not you now do well to achieve value far better than 1 cent per point.
So Amex, Chase and Citi Upped The Value Of Their Points…
An important detail to remember is that credit card companies purchase their points from their airline and hotel partners. It’s an expensive customer acquisition cost. Credit card companies figured out that their customers were frustrated with the experience of trying to find a seat using miles, transferring their points and attempting to book these seemingly mythical great deals offered by the airlines they paid so much money to, so they upped the “cents per mile” value of their points, especially on their premium cards. Customers would no longer need to struggle to find seats using miles, they could just book any ticket at a decent “cents per mile” rate (roughly 1.5 cents per point) and even earn miles and elite status from these purchases, something they could not do on the “free flight” by transferring credit card points to airline miles…
The Amex Business Platinum Offers 2 Cents Per Point Redemptions…
Running a household is a business, which means that virtually anyone on earth can (and should) open a business credit card, allowing them to double their sign up bonus potential. On top of a lucrative sign up bonus, the U.S. Amex Business Platinum offers a 50% rebate when you use points for business or first class flights. Essentially a $1000 airfare purchase would require 100,000 points, just like before, but then 50,000 points would be credited back to you. For 50,000 points you’d get $1000 of value and earn airline miles and elite status. That’s brilliant.
1.5 Cents Per Point On All Travel With Chase Sapphire Reserve…
You can book any flight or hotel directly through Chase travel online and receive a value of 1.5 cents per point. Essentially, you could book a $1500 flight or hotel room for 100,000 points. Taking away the headache of finding space available with miles and adding in the potential to earn miles and status from these flights goes a long way in the value proposition. There will always be certain redemptions, like those in international first class or in certain hotel chains, like Hyatt, where it will likely make more sense to transfer your points to an airline or hotel partner, but this is a solid “bird in hand” value not to be laughed off…
There Will Always Be Potential For Arbitrage, So Do The Math…
Let’s take Korean Air First Class from New York to Seoul. It’s a $13,000 plane ticket round trip, but can be booked for less than 200,000 Chase points if you transfer those points to Korean Airlines, giving an incredible cents per mile value. The same goes for Hyatt hotels, where a stay at the Andaz Tokyo goes for $500+ per night year round, yet only requires 25,000 credit card points per night transferred into the Hyatt program, thus offering a 2 cent per point value, better than you can get directly via Chase. You know how to do the math, so approach each travel decision looking for maximum value and ease of booking.
