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

by on January 15, 2012 · 16 comments

in American Express

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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.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.

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  • kaiserpeds

    Nice post. Can you comment on the value of using them on AF? With regards to DL, I often read how the AF availability is excellent on the Skymiles website. How about using MR points to book AF directly? I’m in the California, so I’d be most interested in West Coast options.

  • Aaron

    With two caveats: IF you routinely use miles for domestic redemption (which I know is taboo but for some of us necessary) and IF you have the Plat card which gives the 20% rebate on points used, pay with points can be a good deal because you’ll earn miles on the ticket, allowing to get above the 1.25 cents per point you might usually. Especially true for cheaper domestic redemption if you can get a good deal.

  • Anonymous

    Delta has lower fees so it usually makes sense to book AF awards via delta- especially if you can catch a delta transfer bonus

    Booking through AF makes sense for promo awards and premium economy (which can’t be booke using delta and generally has great availability)

  • Carl

    The Flying Blue promotions do make a nice opportunity to transfer to AF. Otherwise, Delta’s award chart for AF routes, e.g. Africa, is better, especially given the frequent transfer bonuses.

  • Anonymous

    Yeah I was just thinking that!

    Round-trips between SFO and JFK on UA p.s. Y (or AA or DL) tend to cost around $320 booked 3 weeks out, and even less further out. That’s 25,600 points (the same as transferring to Continental would have cost you). However, you’re going to earn 5172 EQMs for this trip, and if you have status, be eligible for upgrades and 25-100% bonus miles.

    You could end up earning 5172EQM and 10344RDM, which actually makes this similar to the transfer ratio Amex has to Continental in Canada :P (its 1000:750 up north, still).

    Thus your round trip transcontinental flight in Y ends up costing you between 20428 and 15256 miles, and earning you EQMs. Thus the redemption value goes from 1.25cpp to “up to” 2.1cpp.

  • PJ

    too bad Amex does not allow MR points to be transferred as MR into another account.. Much more flexible with Chase : when I do not have enough UR points in my Sapphire Preferred I can have one or more family memeber(s) to fill my Sapphire Preferred ; this works as well as channel as many UR from all family members into ONE Sapphire Preferred account in order to take advantage of cheap tickets. not to mention all points can go exclusively to one eltite member’s account to avoid quick fees and change fees.

  • PJ

    SPG strategies: hop on promotion to get 25K or 30K plus 5K referral bonus; a top card to use when a purchase gives you only 1% rebate and “AMEX” is welcome..line up another promotion offer when you are finishing up the SPEND on ‘old’ SPG card

    would love to see SPG also give one free anniversary night as Hyatt and Marriott cards to make the decision on annual fees a no brainer. also as Brian said ” 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!).”

  • PJ

    AF is? Air France ?

  • Aarono

    you can still book your flights on united and CO by transfering to aeroplan.

  • PJ

    Can anybody confirm that MR can be converted as Virgin Atlantic Elevate points ( 1:1 conversion ratio) to book flights on Virgian America ? Virgin American flies Nonstop to LAX SFO from BOS JFK MCO ( Orlando) FLL ( Fort Lauderdale) etc with amazing low points requirements.

    I think TPG missed this update: MR to ELEVATE is now 1 to 1 ratio conversion ; NOT the 2:1 ratio reported on his posting dated early October…

  • Anonymous

    Once again, you are confusing Virgin Atlantic Flying Club at 1:1 with Virgin America Elevate which is 2:1.

  • Sean Reeder

    I regularly fly between LAX-JFK and assuming price points are similar, about 1/4 of the year you will be paying a lot more than $320 so it is not nearly the deal it can be during the off season. Summer fares in Y (on UA) are approaching $700…

  • Michael Bogle

    Question – I’m planning a trip to Europe in September, leaving from South Carolina, business class (at least for the leg over the Atlantic) – I have a bunch of Delta and American miles, but they’re pretty much worthless until November/December or later, which doesn’t help me out. United offers plenty of flights out of South Carolina and nearby Charlotte, so they’re usually my best bet for a rewards flight. I barely have enough United miles for the trip, at 100k per ticket.

    I also have 200k AmEx membership rewards points, which I can transfer to Air Canada, which seems to offer many of the same flights for 90k per ticket (business class). As long as I make sure my transatlantic flights are offered by United/US Airways/NAS/Swiss (no fuel surcharges), is there a downside to doing this? My wife and I have kids, so we’re a one big vacation per year type of family and I don’t see myself using the membership rewards points for anything else before years end, when I’ll probably cancel the Green card that keeps them active.

    Am I missing something, or is the membership rewards points –> Air Canada exchange a good idea. That way, I can bank my United miles (which are the best value for my geographic area) for later.

    Thanks for your opinion on this!

  • Lester

    Don’t even bother to try and book a United domestic flight using SQ miles. It may be available in theory, but there just isnt any reasonably available seats for them, even if you can EASILY book using United miles.

  • margo

    Want to use MR points for trip to Chicago in late July. What is best way to do this? Went on AmEx Travel and could not find a flight yest I know they are out there, Please help. Only use these points once a year for this get away with old friends, About 68,000 points.

  • doctorofcredit

    Yup, best option is to transfer to one of the partners in the same alliance.

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