“I think a valuation of 2 cents per point seems appropriate”
This is a direct quote from a prominent points blogger/website. Most newbies don’t understand how valuations work, given by the keyword “seems” there, it’s clearly far from an exact science. Point values vary based on individual transactions. I understand the desire to assign a relative value to all points in a program. Not all points are equal. As we’ve discussed in previous episodes, some points offer more flexibility and redemption opportunities. It’s just impossible to have an accurate valuation that works for all point holders.
Take, for instance, the recent news that Korean Air will no longer be a Chase Ultimate Rewards partner. Historically, point transfers from UR to Korean Air offered some tremendous value. Could this bring down the overall value of Chase UR points? It would make sense. However, all that really matters is your travel habits. Don’t have any Asia trips planned soon? Then this wouldn’t change anything about your rewards wallet. As always, everything about the points and miles world, point valuations most notably, are based entirely on how you navigate it.
How do I calculate the value of my points?
Cash value/points = value in cents per point
Say the flight we want to take costs, less fees, $150. If I were to use United Airlines points, it would cost 15,000. Divide the $150 by 15,000, and you get .01, so 1 cent per point value. If decimals give you anxiety, simply multiply the final number by 100. I was able to use 40,000 points recently for two tickets which, out of pocket, would have cost about $720. This provided a 1.82 cent per point value.
1 cent per point is a good anchor, as you’ll earn and redeem a minimum 1 cent per point with all rewards credit cards.
Why am I not getting those insanely high values I see in forums or from travel blogs?
Crazy high point valuations are had on “sweet spot” redemptions, which are typically for first or business class international fares. Though, flash sales and great deals can occasionally be found for domestic tickets as well. Full-time travel bloggers seem to find and redeem these fares with frequency because, well, it’s their job to do so. Most people have limited travel windows and opportunities, which limits redemption options. You may never walk into one of those “sweet spot” deals. That’s ok. You’re still saving money, which is all that matters.
When should I use the Chase portal?
Simply put, if the loyalty program is going to charge you more than you can redeem in the portal, then redeem in the portal. Take this sample fare for a trip I planning in October. It will cost me about 12,900 points to book through Chase. If I booked through United directly, it would cost 15,000 points. Accordingly, I’ll book with my Ultimate Rewards points.
Advantages to booking with UR points is that, in essence, this counts as a cash fare with United, so I’ll earn miles from United for the flight. This doesn’t happen when you use their native points for award bookings. Another nice feature is that with Chase you can pay in any combination of points and cash. So say you have limited points at your disposal, you can still get a significant discount.
It’s important to note for the comparison that when you book an award ticket with an airline they will not put you into basic economy, at least none that I know of. Basic economy fares limit your opportunity to pick a seat and usually charge for a carry-on bag. You do have the option of booking basic economy through the UR portal.
If the fare is better with airline transfer partner, moving points there is very simple. Your first step is to get an account with the program if you do not have one. Then, log in to your UR account where you’ll find a “transfer to travel partner” tab. Pick the partner of your choice, confirm your member ID, then enter the points you want to transfer. Travel partner transfers only unlock if you have the Sapphire Preferred or Reserve cards. Both of those cards offer point advantages when booking through the portal as well, at 1.25 and 1.5 cents per point respectively. Though, any UR point earning card can be used to book travel through the portal at a flat 1 cent per point.
Is buying points worth it?
Buying points is rarely, if ever, a good deal. I only left the “rarely” in there in case some miraculous deal comes along. The whole point of this is to get something for nothing. Buying points is a complete about face and a pricey endeavor. Need to top off your account for a redemption? Reach out to the airline or hotel and ask if they’ll do it for you. You’d be surprised as to how many are receptive.
As I’ve said before, the valuations you see floated around is based solely on redemption opportunities. There is also the factor of acquisition. Some points are awarded easier and more quickly than others, depending on your loyalty to different brands and credit card strategies. No two currencies, if we want to call them that, are exactly the same. But there is one common factor among all of them, they won’t increase in value. So use them.
There’s no such thing as a bad deal, no matter what any blogger says. Redeeming points for travel plans you would have otherwise used hard earned cash for is why you started this education in the first place. Could you find more efficient uses for your miles? Perhaps. But if you feel comfortable with the transaction, that’s all that matters.
If you get something for nothing, you’ve done your job.