Is a Transfer Bonus Worthwhile if I Don’t Have Travel Plans?

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TPG reader Adam emailed me to ask about transfer bonuses:

“I saw that Amex was offering a bonus for transfers to Virgin America. Should I take advantage of these bonuses even if I don’t already have plans to travel?”

Amex Membership Rewards used to routinely offer transfer bonuses as high as 50% to British Airways, Delta and other airline partners. Those opportunities were lucrative enough that it often made sense to transfer points even if you had no immediate plans to use them. Unfortunately, Amex transfer bonuses have become less frequent over the last year or so, and the ones we’ve seen have been uninspiring (like the recent 25% bonus for transfers to Hawaiian Airlines).

The 50% transfer bonus to Virgin America that prompted Adam’s question is no exception. Membership Rewards points normally transfer to the Elevate program at a ratio of 2:1, so with the 50% bonus you would instead get a ratio of 4:3 (that is, 150 Elevate points for every 200 Membership Rewards points transferred). Elevate points can be worth around 2.3 cents depending on how you redeem them, while I list Membership Rewards points at 1.9 cents in my latest monthly valuations. Using those numbers, you’d be coming out slightly behind on the transaction.

That means transferring with the bonus isn’t a terrible idea, but it’s also not a clear win. I wouldn’t transfer points speculatively in this case, which brings me back to Adam’s original question: Are there circumstances where you should transfer speculatively? The answer is yes — at least in theory. If you feel you’re gaining significant value by transferring and you have a reasonable expectation that you’ll put those transferred points to use somewhere down the line, then go for it. However, there are a few other factors to consider.

First, think about the opportunity cost of transferring. Sending your Membership Rewards points to Virgin America means they won’t be available if you need to book with another airline later on. One of the reasons I value transferable points so highly is that they give you more opportunities to maximize value. Once you transfer, those opportunities are narrowed down dramatically. It would be a shame to miss out on a great premium award (like Lufthansa first class to Europe) because you already committed your points elsewhere.

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Transferring speculatively could prevent you from taking advantage of more valuable awards later.

Second, points and miles make a bad long-term investment because they tend to devalue over time. Transferable points can actually insulate you from the threat of devaluation, but you lose that protection once you send them to an individual program. Furthermore, transferable points generally have favorable expiration policies — for example, Membership Rewards points never expire so long as your card account remains open and in good standing. Expiration policies tend to be less friendly for airline and hotel programs, so transferring prematurely means you have to make sure your rewards stay active.

Finally, pay attention to the transfer ratio and not just the transfer bonus. Last fall, Amex offered a 50% transfer bonus to SPG, which sounds fantastic until you realize that the normal transfer ratio is just 3:1. You can use the TPG Travel Resources page to keep track of current transfer partners and ratios, and to check whether a bonus is as good as it sounds.

For more on transfers, discounted points, and Amex Membership Rewards, check out these posts:

If you have any other questions, please tweet me @thepointsguy, message me on Facebook or send me an email at info@thepointsguy.com.

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