Why Are Transferable Points Worth More Than Other Rewards?
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TPG reader Khant sent me a message on Facebook to ask about point valuations:
“I noticed that you value Ultimate Rewards more than points or miles from any of Chase’s transfer partners. Why is that the case, and how do I get the higher value out of Ultimate Rewards points?”
I tend to put a premium on programs like Chase Ultimate Rewards and Amex Membership Rewards compared to their various airline and hotel transfer partners. For example, I list Ultimate Rewards points at 2.1 cents apiece in my most recent valuations, while the highest transfer partner (Hyatt) is listed at 1.8 cents apiece. I frequently get asked how I account for that difference: The answer is that I value the added flexibility of having more redemption options, but it’s also a result of my methodology.
My valuations are based partly on what I can get by redeeming points, as well as how much I would pay to buy them. They don’t necessarily represent the absolute best redemption value possible — you can certainly get more (or less) than 1.5 cents per AAdvantage mile or 0.5 cents per Hilton HHonors point. Instead, those numbers are meant to help you decide whether an award redemption is worthwhile, and on the earning side, to guide you toward getting the best return for each transaction. With that in mind, it makes sense that transferable points would be worth more than any of their transfer partners.
Imagine you’re booking a trip that involves a flight and hotel stay. When airfare is cheap and hotel rates are high, then you should pay cash for your ticket and use points to cover your room. Conversely, when hotel rates are low and airfare is expensive, then you should pay cash for your room and redeem miles for your flight. Hotel points and airline miles each offer good value in only one of those two scenarios, but transferable points cover you in either case.
Programs like Ultimate Rewards have multiple airline and hotel partners, so the same principal applies when you’re comparing different flight or hotel options. For example, you might transfer to United for an economy award from San Francisco to Europe, but you could transfer to British Airways for a short-haul award from Miami to New York.
The virtue of transferable points is that they allow you to access the sweet spots in each partner program, and ultimately give you more opportunities to redeem points efficiently. You don’t have to do anything special to get that higher value; just try to target awards that give you a good return and stay away from the ones that don’t.
Of course, the other thing to remember about my valuations is that they’re mine, and they don’t necessarily have to be yours. You might value SkyMiles higher if you live in a Delta hub, or you might value ThankYou points less if you’re not interested in Citi’s roster of transfer partners. There’s plenty of room for debate, and I always welcome a healthy discussion about the relative values of all these rewards!
For more on earning and maximizing transferable points, check out these posts:
- Should I Earn Airline Miles or Transferable Points?
- Should I Earn Cash Back Rewards or Transferable Points?
- When Should I Transfer Points to Airline and Hotel Partners?
Featured image courtesy of the Andaz Savannah.