Sunday Reader Question: Best Use of American Express Membership Rewards Points

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TPG reader Alison writes on my Facebook wall:

In your opinion, what is the best use of Membership Rewards points *aside* from airline point conversion? We’ve established in prior posts that airline points are the value, that gift cards are a no-no, but what about all the “stuff” in between?

Now that United/CO is no longer linked to Amex MR, I’ve lost my primary source of MR corporate card value, and I’m having a hard time figuring the best way to replace it. Since what I really need is SPG points and stays, I’m trying to figure out a way to finesse this situation to my advantage – does the “Pay With Points” function for branded hotels where you have status make more sense than the paltry 3:1 MR to Starpoints conversion? Are their other options that I’m overlooking? Membership Rewards have always confused me and seemed like a “too many options” option (aside from the aforementioned OnePass miles), and I’m terrible at the math to monetize the value of the various points. Please be gentle, other road warriors who respond to this post…I hope to learn from your insights on this MR currency.”

You are correct in that the potential the get the biggest bang for your point with Membership Rewards points comes from airline transfers. For those unaware, this is because many airline awards are not pegged to the price of the ticket.  So for example you can get a $4,000 business class ticket from JFK to London on Virgin Atlantic by transferring 63,000 Amex points (and paying ~$500 in fees) to All Nippon Airways. In that case, 63,000 points would get you $3,500 in value, or 5.6 cents in value per point. That is much better than using Amex points for gift cards/shopping where generally you will get 1 cent per point at the very most.

Also remember, now that Continental is no longer a transfer partner, you can still book Star Alliance (including Continental/United) awards by transferring your Amex points to Aeroplan, ANA and Singapore.

So are there other good redemption values out there besides airline transfers? Not particularly, but some are better than others at least. Let’s take a look:

These allow you to use your Membership Rewards points to buy travel directly from travel providers as if you were paying with cash, so you earn miles and elite status airline tickets purchased this way. Each point equals 1 cent towards travel (so a $300 flight would cost 30,000 points), unless you have the Platinum and Centurion cards, which give a 20% rebate on all points used, essentially making each point worth 1.25 cents. (That $300 flight would only cost 24,000 points.)
-Positives: Maximum flexibility – you aren’t at the airlines’ mercy of releasing award seats. You earn miles/points including elite miles. You can pay for all or part of your trip
-Negatives: Since the value is capped for each points, this option makes it very expensive to buy business and first class tickets. That $4,000 JFK- London flight which only costs 63,000 Amex Points when transferred to ANA would cost up to 400,000 points if using Pay With Points.
-Verdict: The maximum value you can reap per point is 1- 1.25 cents.
$326 flight for 32,600 points
2) Car and Rail Awards
You can use points for gift certificates on Enterprise, Avis and National which come out to 1 cent per point. Gas cards are 6,500 points per $50, so 8/10th of a cent per point. You can also redeem for Mercedes-Benz lease payments at 1 cent per point.
-Verdict: These gift certificates usually come with restrictions and expiration dates, so I’d rather opt for Pay With Points, since they don’t expire.
$50 Enterprise gift certificate for 5,000 Amex points
Available on Cathay, Qantas, Swiss, South African
-Positives: These are not tied to the price of the ticket, so it’s possible to get good value if you redeem for expensive tickets. They also are not tied to award inventory so they should be easier to book than regular awards.
-Negative: Not available for business class, some require expensive fare classes.
-Verdict: It’s hard to assess the value of these awards, but it is possible to get much more than 1 cent because the awards are not pegged to the revenue cost of a ticket.

$495 companion ticket for 60,000 points
4) Everyday Purchases.
Amex allows you to use points to pay off your bill directly. When I went to do this with my cable bill of $132.10, Amex was willing to wipe out that charge for a whopping 22,017 points, which would value each point at 6/10 of a cent per point. No thank you.
5) As for your Starwood transfer option of 3 Amex to 1 Starwood point, you’d want to make sure you were getting more than 4 cents per Starwood point, which is possible- especially with their Cash & Points option. However, in general, if you are spending 3 dollars to get 1 Starwood point, you’d be much better off getting the Starwood American Express, which gives you 1 SPG point per dollar spent (though I understand some people don’t have a choice when choosing an Amex, especially with corporate cards).
Positives: Award stays count towards elite status
Negatives: Cash & Points availability is capacity controlled
Verdict: Amex points aren’t great for getting huge value out of hotel transfers, especially with Starwood. I’d really like to see them bring the transfer ratio to a more compeititve 2:1 (or even 1:1 like Chase Ultimate Rewards has with Hyatt Gold Passport!).
The bottom line is that, while there are a lot of different options for using your Amex Membership Rewards points besides transferring to airline partners, none of them offer the same value, and some offer a mere fraction of the value your points can potentially be worth, so think long and hard before using your points these ways.

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