What's the Best Way to Redeem Points for Merchandise?

TPG reader Bertie sent me a message on Facebook to ask about redeeming points for merchandise:

"I have a sizable stash of Membership Rewards and Ultimate Rewards, which I'd like to redeem for TVs and iPads for my new store. What's the best way to do this?"

One piece of advice I find myself repeating often is that you generally shouldn't redeem points and miles for merchandise, gift cards or cash back. You get way more value by using your rewards for travel, either by booking flights and hotels directly, or by taking advantage of airline and hotel partners (in the case of transferable points like Chase Ultimate Rewards and American Express Membership Rewards.

On the other hand, I also often say that the best way to use points is the one that makes you happy, and some of my favorite award redemptions have been for events and experiences, rather than award flights. While I think the first piece of advice takes precedence, there are times when you may want to spend your points even though you're not getting a good return. It's best to at least know what your options are in order to keep a low value from getting lower.

Membership Rewards allows you to redeem points directly for merchandise, but you'll get a dismal return of just 0.5 cents per point. Only slightly better is the option to redeem points for statement credits, which gives you 0.6 cents per point. You can also link your account to Amazon and shop with points, but you'll still only get 0.7 cents per point that way. In terms of value, these are the worst ways to use Amex points.

You can also redeem Membership Rewards for retail gift cards, generally at a rate of 1 cent per point, though sometimes gift cards go on sale and you'll do slightly better. The problem is that Amex has a pretty uninspiring roster of gift cards available. Your one option for electronics is Staples, and that's only available as a physical gift card, so you'll have to wait (sometimes several weeks) for delivery before you can complete your purchase. That makes it hard to take advantage of sales or other discounts on the products you want.

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Your prospects are a bit better with Ultimate Rewards. For starters, Chase offers a better variety of retail gift cards, including Amazon, Target, Best Buy and Staples. You'll generally get 1 cent per point, though again you can find the occasional sale that boosts your redemption value slightly. Ultimate Rewards also lets you use points to make purchases directly from Amazon at a rate of 1 cent per point. That's convenient because you can make the purchase immediately without having to wait for a gift card to arrive.

Best of all, Ultimate Rewards lets you redeem points for statement credits on your credit card. The redemption rate is still just 1 cent per point, but you gain the flexibility to buy when the price is good and then use points to cover the cost later on. Paying with your card means you'll also earn rewards for your purchase, which again boosts your total return to slightly above 1 cent per point.

To reiterate, I don't recommend any of these options. In my December monthly valuations, I list Chase and Amex points at 2.1 cents and 1.9 cents apiece, respectively. That means you're squandering about 50% of the value by redeeming for merchandise. My advice is to use your rewards for travel and pay cash for retail goods, but if that doesn't work for you, then at least don't settle for less than 1 cent per point.

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