Sunday Reader Question: What is the best way to unload Membership Rewards points?

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This week TPG reader Dawn asked for advice on how she should unload her Membership Rewards points before her account is closed:

“I have been a member of Amex since 1991 and almost as long with Membership Rewards.  I am in jeopardy of losing my current balance of 685K Membership Rewards points and am trying to figure out the best way to unload them before my account is closed.  I have been saving for the “dream trip”, but do not see that happening in the near future. “

I’m not exactly sure what Dawn’s specific situation is or why she’s going to lose all her points, but I would like to remind you Amex cardholders that if you cancel your cards that earn Membership Rewards points, you will lose your points, so always transfer them to a partner program before canceling all your Membership Rewards-earning card like the Premier Rewards Gold card or the Platinum.

If you’re just looking to get out of paying an annual fee, you can always just downgrade to an Amex Everyday card. That way your points will remain.

If you have a corporate card, but are leaving your job and have give up your card, before you do, sign up for a personal Amex and link your corporate Membership Rewards account to your personal one and then even when the corporate account is closed, you maintain your points.

For the question at hand, if you have to transfer those 685,000 Membership Rewards points, I have a few points of advice.

1. Don’t transfer to hotel programs since the transfer ratios aren’t a great value. I would love to see Starwood at a 1:1 or 2:1 ratio, but unfortunately it’s 3 Amex points to 1 Starwood, and I don’t see a great opportunity there. Same for Hilton, which is 1 Amex point to 1.5 Hilton HHonors points.

2. There are a lot of airline transfer partners where you can find some good values, but I would personally split up the points and send them to British Airways Avios and Air Canada Aeroplan, so you have coverage in both Oneworld and Star Alliance for redemptions down the road. Delta is the third option I’d consider, but lately I’ve noted some recent negative changes to the program and there are rumors that it will change drastically – plus, they haven’t run any good transfer bonuses lately and at just a 1:1 ratio, I just don’t see a tremendous value.

Just picking some numbers out of my hat, I would probably transfer 400,000 Amex points to British Airways because there’s currently a 40% transfer bonus until September 27, 2012, meaning I’d end up with 560,000 Avios. Plus, you can redeem those Avios on partner airlines like American, and short-haul awards start at 4,500 Avios each way since Avios is a distance-based program. I fly New York to Miami all the time and that’s just 15,000 Avios roundtrip, while tickets go for $300-$500 in coach, so you can get great value out of these points. Plus, there are no last-minute redemption fees, and there aren’t huge fuel surcharges on North America and South America fares usually (unfortunately there often are large surcharges, taxes and fees on flights to Europe) so it’s a good thing to have some extra Avios in your back pocket.

That would leave me with 285,000 more to transfer to Air Canada’s Aeroplan mileage program, which is a Star Alliance program, and which you can redeem on all 27 carriers. They’re flexible with their routing rules and you can build in stopovers. However, they do have fuel surcharges on a lot of Star Alliance carriers including Air Canada flights, as well as Star Alliance partner Lufthansa, ANA, Adria, Asiana Airlines, Austrian Airlines, LOT Polish Airlines, TAP and THAI; and they don’t price one-way awards at half the price of roundtrips (you still have to redeem the full amount of miles).

So this isn’t a perfect solution, but between these two transfer partners, you should be covered whether you need some last-minute domestic trips, short- and mid-haul trips, as well as some great opportunities to redeem for premium international travel, so that’s what I’d do.

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