Times are Changing - Running with Miles
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Times are Changing

Written by Dustin

There was a change in the game when the Chase Sapphire Reserve was released and has made cash equivalent redemptions increasingly relevant.

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I have said this time and time again, this game is about adapting. If you don’t adapt, you will miss out. It seems that the times are changing again as I have seen more articles advocating for using points differently than transferring the points out to partners airlines. The times are changing and you should re-evaluate your earnings/redeeming to reach you goals.

Times are Changing

The value of transferring points seems to be slowly eroding. Even programs like Southwest, which are revenue based, are at a tipping point were they could be worth less than valuable than your flexible currency.

That doesn’t mean you can’t find value, but it is becoming harder. Sometimes it is worth the extra effort and other times it isn’t.

I’m a person who travels coach and I believe most people want a ticket to see a new place in the world. For travelers like us, the value to transferring to airlines in many cases is worse than using them as a cash equivalent.

For you premium cabin travelers, we see it becoming harder to use your points for those beautiful hotel size seats. Devaluations are inevitable and award availability is becoming harder to find.

Not to mention we are seeing premium economy becoming the new business class and the actual business class shrinking.

When it Started:

I believe the turning point for points to be used as a cash equivalent once the Chase Sapphire Reserve was released.

When the Chase Sapphire Reserve was launched, there was chatter about using the increased redemption through the Chase Portal at 1.5 cents per point. It was a “great” option because you didn’t need to worry about availability and you could even earn status. Although there is the possibility that Ultimate Rewards could potentially be changing, let’s hope it doesn’t!

A few months later American Express Business Platinum came out with it’s 50% rebate (which is now 35%), then more articles talking about using this avenue to book tickets. This echoed the “great” benefit of redeeming points for 2 cents per point.

There were more blogs and people talking about use their points as a cash equivalent vs transferring their points to programs.

The Changes Continue:

Airline tickets across the world have been pleasantly cheap. Trips to Europe for as low as $200, Asia (including Southeast Asia) for $400- $500.

We can thank the low cost carriers for driving down the cost of flights. Even if you don’t use them, they have helped since it brings increased competition.

Transferring your points to book these would be ludicrous. Not only would it cost you more points, you’d need to pay the taxes and you wouldn’t earn any miles (or elite qualifying dollars) for future trips.

My Take:

I have been earning cash back as my main currency for a while now. It being a great option for daily earnings, for my travel goals. I still open plenty of credit cards for the points, because I am a sucker for a good bonus. Who isn’t?

And we all know cash back credit cards have poor sign up bonuses, but the return on daily spend can usually out perform point earning credit cards. If you have a travel card for the benefits, I can’t blame you, I have those as well 🙂

For the cards I open with a big sign up bonus, I typically use these points in a way that I pay very little for my ticket. I personally have stopped looking at the “cent per point” value, since I believe it is a skewed way of looking at value. Although I still put it in my articles since many people still use this for value calculations.

This doesn’t mean I’ll blow 100k in miles for a coach ticket. I’m not that stupid 🙂

I find it quite interesting that the view point to using points for cash equivalent has been increasing in momentum. Yet the same people don’t want a cash back credit card.

I would expect this is due to the bonuses not being as high, or it not being as sexy to say you redeemed $350 in cash back rewards. It sounds better to say you spent $5.60 to fly somewhere. Sometimes it is good to look beyond the initial bonus and look at long term earnings. Especially as things continue to tighten up.

US Bank “Improvements”

A couple of months ago, US Bank added “Real Time Rewards” for the Flexperk points. While on the surface this sounds great; you pay for your purchase and redeem via a text message. It is great for simplicity, but in reality there have been “real time rewards” all along.

It has been called cash back.

The US Bank Altitude earns 3 points per dollar on travel and mobile payments. Which equates to 4.5% in travel rewards, this is solid if you can use it enough to offset the $450 fee. This took a small hit, in my opinion, when Chase offered 5x on the Freedom in Quarter 1. I think we will see bonus categories for mobile payments in the future as well.

Which if that happens, will reduce the shine of 3x on all mobile payments.

The Flexperk earns 2 points per dollar on grocery, gas, or airlines (on which ever category you spend the most on, the others earn 1 point per dollar), 2 points per dollar on cell phone services and 2 points per dollar on charity. At most you earn 3% back for rewards (since they are worth 1.5 cents per point).

While I think it is nice you can use your points on any travel site and use your points at 1.5 cents per point, but don’t lose site that this isn’t something you couldn’t have already done.

The earning rates for these cards are ok, but not great. You can earn 3% back on your travel expenses with a card like the AAA credit card. Not to mention you can earn 3%+ on grocery and gas with quite a few cards.

Oasis Homes

Not too long ago, Hyatt rolled out the ability to use points at Oasis, part of their Unbound Collection.

Then the information came out, from many of the larger bloggers, this was a nice option for your Hyatt points. I can’t wrap my mind around this as redeeming 15,000 Hyatt points for a $200 credit is a value of 1.33 cents per point. That’s a lot of spend for a $200 credit and I don’t see many people moving their points over from Ultimate Rewards for this option.

I think Hyatt trying to compete with Airbnb in this realm isn’t a great idea. I don’t think they’ll win that battles, but I could very well be wrong. Airbnb has a large network compared to the rental homes ran by hotels.

There are better options for your points than to use them at the Oasis Homes at a terrible value. If your goal is to use your Hyatt points here, they are your points, but you can earn that “free stay,” sooner by using other cards.

Revenue Based Tickets:

We are seeing more programs entering into revenue based ticket pricing vs a standard award chart. I would be a betting person this keeps on expanding (bad for us, good for them).

This stops points from being dynamic in value to a more consistent value.

As these changes continue and these award currencies are (relatively) fixed, this continues to make redeeming your points/miles as a cash equivalent. The redemptions through your flexible currency, could be the better option for you vs transferring these points.

The same goes for hotels, with the exception of Hyatt. Once SPG rolls into Marriott come August, the great value from your SPG points will definitely take a hit. I would expect Hyatt to join in the fun and make their program revenue based.

Conclusion:

The value for redeeming your flexible currency as a cash equivalent for travel is starting to become more convenient and offer equivalent, if not more value. This isn’t to say transferring your points isn’t worth it, but the value is definitely shrinking.

If you are someone who has been using your points this way, have you considered building a cash back rotation?

Do you find yourself transferring your points less and less?

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About the author

Dustin

After completing 6 years of pharmacy school, I finally had the time to travel. I started investigating ways to travel for less and when I redeemed my first award flight for my honeymoon, I knew I was hooked! Fast forward a couple of years and places I had never dreamed of visiting like Budapest, Honolulu, Bermuda and many other places where all within my reach, and for little to no money out of my pocket. Now, I have collected well over a million points and miles, and try to help people travel for less on their wallet.

7 Comments

  • I agree, and believe that “value” is relative. I’d value getting 1.5 cpp and visiting multiple countries, than getting one flight in first class.

  • Dustin,

    We are in complete agreement. The bulk of our spending is on an AMEX Blue Cash 5% card, Citibank Double Cash, and the Citibank Costco card. We also spend on Chase Sapphire Reserve and the AMEX Starwood Preferred Guest personal card which will likely be closed after August 1, 2018. Un-bonused spend on my AMEX Hilton card makes no sense with the current earning rate and the devalued Hilton point redemption value. General spend on the AMEX SPG will not make sense with point valuations less than a cent and the earning rate after 1 August. We only use SPG points for hotel stays and will miss Starwood. Southwest point devaluations result in no spend on my Southwest card either which will likely be closed this year also although the flexibility of changing flights with Southwest points is very attractive. I am surprised you have not attracted more comments with this article.

    • Hey JimT,

      For some reason my initial comment the other day didn’t post.

      That is a pretty solid rotation you have. Once August 1st comes the SPG will be a sock drawer card and American Express will see a large decline in spending on those cards.

      With Southwest recent devaluation, outside of the bonus, the flexible currencies look more appealing. Remember you can rebook on paid tickets as well and be credited back the price difference.

      Comments are always hit or miss. Some articles get more comments than others and I have no way to know which ones are more popular or not.

      Thanks for reading! I appreciate it!
      Dustin

      • Dustin,

        Thanks for the response. It is unfortunate that bloggers do not perform rudimentary financial analysis of credit card returns considering point earning rates, point redemptions rates, annual fees, and total annual spend. Have a nice day.

  • As airline redemptions have gotten more difficult over the years I have “valued” other more flexible currencies a lot more. Cash or cash equivalent programs is always king in my book as it is always the most flexible. I hope more programs move to a revenue-based redemption system as traditionally that has come with better availability and more predictable programs. I want to know I can use my points when and how I want to use them and not be surprised.

    I don’t see predictability as a bad thing personally. It does remove the bragging part of the hobby as you will no longer be able to brag about that first class redemption where you got 11 CPP I guess.

    • Hey Shadrach,

      I agree about the inflated CPP values, I actually have something in my upcoming article about that.

      Thanks for reading! I appreciate it!
      Dustin

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