4 ways points and miles can provide a financial safety net
This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.
The coronavirus pandemic has put travel plans on hold for many. And while we’re not traveling, our points and miles balances may be large and continuing to grow due to continued spend on our credit cards.
Instead of letting those balances sit and risking the chance that programs may devalue before we have the opportunity to travel again, it may be a good idea to consider using those points to help improve your financial footing.
Some rewards currencies can be cashed out or redeemed against your statement balance to cover purchases. This is one benefit of flexible points programs like Chase Ultimate Rewards, American Express Membership Rewards and Citi ThankYou Points. Here are four scenarios in which it may be useful to redeem points and miles to cover expenses or boost your savings account.
For more TPG news delivered each morning to your inbox, sign up for our daily newsletter!
Recently, I had to shell out more than $1,000 on unplanned expenses. My dog was sick and needed a trip to the vet (she’s fine now, thankfully). Then, a week later, my car broke down while I was on a road trip about three hours from home.
I’m fortunate to have a rainy-day fund set up to pay off the bill when things like that occur, but there was a time when unplanned expenses like these would have sent me into a financial spiral. Back then, I frequently felt like there was too much month left at the end of the money. And I’m not alone in having felt that way.
According to a 2019 report from the Federal Reserve Board, almost 40% of Americans would have trouble covering a $400 emergency expense. Unexpected expenses happen and sometimes we don’t have enough in savings to pay for them. With a little planning, you can sign up for a cash-back credit card or two and set aside that welcome bonus for your emergency fund. That way, you’ll be prepared for future emergency expenses.
Cards you should consider include the Chase Freedom Unlimited with its current offer of a $200 welcome bonus after spending $500 in the first three months from account opening. The Bank of America® Customized Cash Rewards credit card is another excellent choice, with its $200 cash bonus after spending $1,000 in purchases within 90 days of account opening.
It’s a good idea to sign up for a new card when you know you’ve got large, planned expenses on the horizon, or you can shift your current spending to a new card to meet the minimum spending requirement.
But in the meantime, should an emergency expense pop up before you’ve had a chance to establish an emergency fund, cashing out points or redeeming them for statement credits can ease that difficulty and help you avoid carrying a balance and paying a high-interest rate.
Maybe the pandemic has wreaked havoc on your income. As we know, the bills will keep coming in, even though your income may have been paused or reduced. Cashing out points for everyday expenses can be a way to get through a difficult economic period when your expenses may be higher than your income.
Chase’s Pay Yourself Back feature makes it really easy to do this. Current categories are grocery stores, restaurants, home improvement stores and charitable organizations. If you have the Chase Sapphire Reserve, you can redeem points at 1.5 cents. The rate is 1.25 cents for the Chase Sapphire Preferred Card.
The Citi ThankYou points portal offers multiple paths toward using points for everyday expenses. There’s the cash reward or statement credit option that allows you to convert ThankYou points to a check or statement credit. It would be best if you avoid both of these, as the points are only valued at 0.5 cents each. So a $50 check or statement credit will cost 10,000 points.
Pay With Points is a slightly better option is that allows you to convert ThankYou points into statement credits against purchases in specific categories, including dining, groceries, gas, clothing and department stores, utilities, entertainment and drug stores.
The rate of conversion for Pay With Points is 0.8 cents per point. While better than the cash reward or statement credit, it is still not a great deal. But if you have expiring points you may not otherwise use, this could be useful.
The final and best option would be to use Citi ThankYou points to help pay your mortgage or student loans at 1 cent per point by requesting a check with your lender as the payee. Under the “More Ways to Redeem” tab on the portal, there are selections listed to make a payment toward a mortgage or student loan. Both say you need to call 1-800-THANKYOU to redeem.
Saving for the future
Let’s say you’ve already got a rainy-day fund established and your everyday expenses are handled with no problems. But it could be that there’s just not enough left in the budget to set aside for the future. You know that things like saving up for a down payment on a house, for your children’s college fund or for your retirement are important, but you haven’t been able to find the money to do so.
In that case, it may be smart to consider cashing out excess points and putting that money toward savings and investments. If you have the American Express Platinum Card® for Schwab, you can cash out your Membership Rewards points directly into an investment account at 1.25 cents per point.
The information for the Amex Platinum Schwab card has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.
Family emergencies and bereavement
This final section doesn’t involve cashing out points, but it’s another way your miles and points can be financially beneficial. While I am a fan of the earn-and-burn strategy, keeping some points and miles on hand for emergency travel allows you to take expensive flights on short notice (like in family emergency/bereavement situations), which can save you hundreds or even thousands (for a family) of dollars. I think of it like insurance: you know you have it, but you hope you don’t need it.
Unfortunately, there have been times when I did need to use my points and miles in that way. When my grandmother was ailing, I was able to take a last-minute flight to visit with her for a day. I was so thankful that I had the miles to book that last-minute trip to see her and spend precious moments together. She wound up passing away just a few days later, and miles enabled me to fly back the following week to attend her funeral.
Ideally, we’d all use our points and miles for exciting vacations and high-value business– or first-class travel redemptions. But there are scenarios in which cashing out points or using miles for last-minute redemptions due to family emergencies can work for your personal situation. Points and miles can really provide a financial safety net in those situations.
Featured photo by JGI/Jamie Grill/Getty Images
Welcome to The Points Guy!
WELCOME OFFER: Up to 100,000 bonus miles
TPG'S BONUS VALUATION*: $1,040
CARD HIGHLIGHTS: 3X miles on United® purchases
*Bonus value is an estimated value calculated by TPG and not the card issuer. View our latest valuations here.
- Earn 80K bonus miles after you spend $5,000 on purchases in the first 3 months your account is open. Plus, an additional 20K bonus miles after you spend $10,000 in the first 6 months
- $250 Annual Fee
- Earn 3X miles on United® purchases, 2X miles at restaurants, on select streaming services & all other travel, 1X on all other purchases
- Earn 3X miles on United Airlines purchases
- Earn 2X miles at restaurants and on select streaming services
- Earn 2X miles on all other travel
- Earn 1X mile on all other purchases
- Each year, receive a $125 credit on United® purchases and two 5k-mile anniversary award flight credits. Terms apply.