Don’t agree with me

Yesterday morning I was thinking that it may be time for me to work on increasing my Ultimate Rewards point balance.  Thanks to the upcoming United and Hyatt devaluations, I spent a large percentage of my Ultimate Rewards points on a big summer vacation with pre-devaluation point prices.  In July, my family of three will fly Lufthansa first class to Paris (via Munich) and we’ll return from Zurich two weeks later.  For the first 5 nights, we’ll stay at the Park Hyatt Vendome in Paris… in a suite.  And, the last 3 nights will be at the Park Hyatt Zurich.  Again, in a suite.  In between, we’ll spend Club Carlson points and maybe even some cash.

Despite booking with pre-devaluation charts, this is far from a frugal trip.  I spent 135,000 United miles per person round-trip.  And, I spent 264,000 Hyatt points for 8 Park Hyatt suite nights.  A large portion of the United miles and Hyatt points were transferred from my Ultimate Rewards accounts.  I could have booked a nearly as good trip in business class, and in other hotels (or B&Bs, or apartments) for far fewer points & miles.  But, I’ve been point-rich lately and feel good about splurging here. 

So, now I’m looking at my point balances (thanks in large part to Award Wallet), and I see the following balances across my wife and I (limited to major airline and transferable points programs):

  • Chase Ultimate Rewards: 300,000 (bigger than I expected)
  • American Express Membership Rewards: 250,000
  • Starwood Preferred Guest (SPG): 95,000
  • American Airlines + US Airways: 463,000
  • United: 71,000
  • Delta: 655,000
  • British Airways: 210,000
  • Alaska Airlines: 0

When collecting points & miles, I usually do so opportunistically.  If there’s a great signup bonus or a great portal promotion, I’ll often take advantage of it regardless of whether I think I need those particular points and miles.  Recently, though, I’ve increasingly chosen to earn cash rather than points & miles.  Partly, that is due to devaluations in many programs.  And, partly it is due to the fact that I already have enough points and miles to cover nearly any travel I’m interested in.

I’ve mentioned in many prior posts, that when earning points or miles from a credit card or portal, you are implicitly buying those points by forgoing a cash back credit card or portal.  For example, if you earn 1 mile per dollar from your credit card, but could have used a 2% cash back card instead, you are essentially buying those miles for 2 cents each (see “Buying points, unwittingly“).  Is it worth it?

Depending upon your situation, buying points may or may not be a good idea.  Take my point totals above, for consideration.  With 655,000 Delta miles socked away, I’d be crazy to buy more Delta miles except at extremely low prices.  On the other hand, I have relatively few SPG points and no Alaska Airlines miles.  Both programs offer opportunities for flight awards that are not realistically possible with other programs.  It would make sense for me to “buy” into either or both of those programs.

Given my unique circumstances, here is my estimate of how much I’d be willing to spend if I could easily “buy” points or miles in each program:

  • Chase Ultimate Rewards: 1.2 cents each.  Worst case, I could use points to book airfare at a value of 1.25 cents each, and would therefore save a bit.  Best case, I would transfer to airline or hotel programs for outsized value.
  • American Express Membership Rewards: 1.5 cents each.  Membership Rewards has many more airline transfer partners than Chase.  My favorite use of points to-date was to transfer Membership Rewards to Singapore Airlines to fly Singapore Suites class.
  • American Airlines + US Airways:  1 cent each.  I have enough miles right now to cover near-term needs so I have no need to invest in more.  Plus, an award chart devaluation in the near future seems inevitable.   
  • United: 1 cent each.  By supplementing with Ultimate Rewards, I have enough United miles for now.
  • Delta: .8 cents each.  Since Delta allows paying with miles at a value of 1 cent per mile I should be willing to pay up to 1 cent each, but I simply have too many of these miles right now to be a serious buyer.
  • British Airways: 1 cent each.  BA Avios are often the most valuable currency I own thanks to their 4500 point one-way short-hop awards.  But, because Avios stretch so far, I don’t have a need to get more of them anytime soon.  Plus, I can always add more from my stash of Ultimate Rewards or Membership Rewards points.
  • Alaska Airlines: 1.3 cents each.  Alaska has some very tempting partner awards that I’d like to take advantage of!
  • Starwood Preferred Guest (SPG): 1.7 cents each.  SPG has a huge list of transfer partners, most of whom transfer at better than 1 to 1 when you transfer 20,000 points at a time (usually 20,000 SPG points becomes 25,000 airline miles).

With the above estimates, I don’t literally mean that I’m looking to buy points or miles at those prices.  Rather, if given the choice between earning Alaska miles (1.3 cents each) or United miles (1 cent each), I would pick Alaska miles because I don’t already have enough of them.  And, if given the choice between earning Delta miles (.8 cents each) or pennies, I would choose pennies (AKA cash).

Here’s an example: suppose I’m about to buy a Sno Wovel from Sears and I find that I can earn 5 Delta Skymiles per dollar by shopping through the Skymiles Shopping portal, or I can earn 5% cash back by shopping through a cash back portal.  I would choose the cash back portal because I currently value pennies more highly than new Delta miles. 

To be honest, I don’t run calculations every time I have to make a choice to earn miles, points, or cash.  Instead, I try to keep in mind the types of points & miles I want to earn more than others, and make decisions accordingly.  With all else being equal, my current preferences are: SPG > Membership Rewards > Alaska > Ultimate Rewards > BA/AA/United > Delta

Don’t agree with me

The “buy” prices I listed above are based entirely on my own situation.  If I had fewer miles and was working my way towards a big trip, I might be willing to pay much more for the right kind of miles.  Or, if I rarely traveled I might not want to buy miles at all.  Your situation is different than mine, so your buy prices should be different than mine.

Also note that the “buy” prices listed above are not estimates of value.  I’ve argued before that estimating the value of points and miles before spending them is nearly impossible (see “Impossible point valuations and the joy of free“).  I often get much more than 1 cent per point value when redeeming Delta miles, so I roughly value the miles I have at around 1 cent or more each, but I don’t see the need for more of them right now.

What are your buy prices?  What points & miles do you value most?  Comment below.

Frequent Miler is on vacation

Posts have been scheduled in advance. See you in September!

Pingbacks

  1. […] Not a bad start for the year, picking up mail from the Christmas holidays I noticed that Amex had 3 separate credit card offers for my wife, including a 100k signup bonus for the Amex platinum for 3k spend, and a 50k signup bonus for the gold card with a 1k spend.  From a quick look there seem to be the best deals around.  Sorry, I don’t have any affiliate links for them.  However you could see if Amex will match this offer.  If only I knew what Membership Reward points were worth… […]

  2. […] Not a bad start for the year, picking up mail from the Christmas holidays I noticed that Amex had 3 separate credit card offers for my wife, including a 100k signup bonus for the Amex platinum for 3k spend, and a 50k signup bonus for the gold card with a 1k spend.  From a quick look there seem to be the best deals around.  Sorry, I don’t have any affiliate links for them.  However you could see if Amex will match this offer.  If only I knew what Membership Reward points were worth… […]

Comments

  1. I prefer to look at this game more in terms of a business. What is my cost of acquisition of the points and what do I get when I redeem them. (What am I selling for?). Ultimate reward points for me are easy and cheap to acquire (around 2.5-3 per dollar spent during the calendar year) and I can usually get at least two cents each when redeeming. Starpoint are usually sold for more but they have a much higher cost to acquire them. Usually 1 point per dollar spent. That’s my 2 cents. Lol.

  2. FM – welcome back and happy new year. Excellent post and very much in line with my current thoughts of shifting my mix from all points to more of a points/ cash mix. Cash provides the ultimate flexibility and there is nothing better than “free” generated pennies

  3. Good morning Greg, hopefully you are staying warm today/tomorrow. I have found that the Alaska Airlines shopping portal has about the same earning potential as the Chase UR Mall. Given the choice, I’m stalking up on Alaska miles.

  4. I guess my #1 spend is UR points. I like SPG points, but they go in my account at a snail’s pace. With UR, there are bonuses for dining out, gas this quarter, office supplies and using the portal.

  5. If you actually have a “Wovel” I’d love to read a review! I’m a fellow Ann Arborite, and unable to get out of my driveway this morning!

  6. I expected more points in your account. I’m trying to spend them as fast as I can, I’m sitting on 5.3 mil total. Nepal? Tibet? Russia? Need to burn 400K UR points today.

  7. How did you book a Lufty ticket for July now in FC. Or did you just book it for the available dates and then use the date change option?

    – naroowal

  8. Can you explain in a little more detail how you arrived at Amex MR’s at 1.5 vs Chase UR’s at 1.2. Seems that most Amex transfer partners charge huge SQ’s and other fees/taxes.Are these costs included in your calculations? Or is there some way to avoid paying them say on Singapore Air?

    • Here’s my thinking about that: I still love Ultimate Rewards points, but I find them much easier to earn than MR points. I’m willing to pay more for MR points because they are harder to get and they unlock awards that are not otherwise available (except via SPG), like Singapore Suites. Yes, many of the airline partners charge fuel surcharges, but not always, and not always at very high prices.

      Take a look at this post for more: http://travelisfree.com/hidden-gem-airline-redemptions/

  9. love the blog! great post. my husband and i have similar point totals to the two of you-after reading your blog, we just got business class on air emeirates to africa using memebrship rewards for AE with the bonus, so feeling great about that-THANK YOU!
    any advice on how to get 4 seats together in business or first class? this seems to be the challenge for us as a family of 4. abd our next big trip will be austarlia/new zealand. what program has the best redemption for that area? THANK YOU!

    • Thanks! One of the best options for going to Australia is to use Delta miles to fly Virgin Australia from LAX. With the one award you can include a stopover in Australia and then go on to New Zealand. I’ve easily found 3 business class seats together at saver level in the past, so hopefully you can find 4 together too. With other airlines you might have better luck flying 4 in business or first class via Asia.

      • l

        what about australia from new york? love the idea of the stopover in australia and then going to new zealand. do you offer a booking service?

        ove the blog! great post. my husband and i have similar point totals to the two of you-after reading your blog, we just got business class on air emeirates to africa using memebrship rewards for AE with the bonus, so feeling great about that-THANK YOU! any advice on how to get 4 seats together in […]

        Thanks! One of the best options for going to Australia is to use Delta miles to fly Virgin Australia from LAX. With the one award you can include a stopover in Australia and then go on to New Zealand. I’ve easily found 3 business class seats together at saver level in the past, so hopefully you can find 4 together too. With other airlines you might have better luck flying 4 in business or first class via Asia.

        • Technically you could use the same Delta award to fly from New York to LAX to Australia, but finding 4 saver level awards between NY and LAX on the dates you need them might be nearly impossible.
          .
          I do highly recommend that you use an award booking service, but I do not do that.

  10. I think you are valuing DL, UA, and AA too low on the buy side. The 650K DL you are holding isn’t really that much and there is minimal deval exposure IMHO with DL. I can’t think of a situation where I would take 1 cent over an airline mile, even for DL. I would floor at 1.0 and cap at 1.3 on the buy side (for airline miles), maybe go 20% higher for SPG.

    • That’s good, I did ask everyone not to agree with me, after all. For me, remember that these numbers are not intended to be valuations, but how much I would pay if these miles were for sale right now. Its like buying coffee beans at a store. If I already have 12 bags of beans at home, there would have to be a heck of a sale for me to want to buy more right now. Now, if I were buying and selling miles (or beans) that would be a different story

      • Ah, but how many bags of cash do you have? :) Doesn’t that factor in to the equation? I would agree it doesn’t make sense to invest in miles if view them as illiquid (I don’t) or you don’t have adequate bags of cash. But at 1 cent, I would opt for the bag of miles, particularly if I can exchange them for a 20% larger bag of cash.

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