If you’re new here, welcome! Before you read this, be sure to check out Getting Started. If you’ve been following along, thanks for the support so far! I know I’ve thrown lots of information your way and as I add more content I’m going to do my best to categorize and organize posts so you can easily find the ones that pertain to your individual needs and interests. I am constantly trying to make this site as user-friendly as possible so bear with me!
In my examples, I know I keep using Chase Ultimate Rewards and Southwest, but I promise more information about other programs such as American Express Membership Rewards and the Starwood Preferred Guest program is coming soon. I want everyone to learn the basics before we start talking about all the different reward programs!
If you read my Napa trip post, you saw that we were able to get flights and hotels in Napa for $11.20 (taxes and fees for the plane tickets). As I was writing that post, I realized I need to talk about how to make sure you’re getting a good value when using points.
I’m kind of a math nerd so I’ll “show my work”…
To figure out the value of a point, simply divide the plane ticket or hotel room value by the amount of points you’re spending, then multiply by 100.
Since I’ve been daydreaming about the Maldives lately, I’ll use the Park Hyatt Maldives for this example.
The Park Hyatt Maldives is a category 6 hotel which means 25,000 points per night for a free night or 12,500 points plus $150 per night if using cash and points.
It’s no secret that the Maldives ain’t cheap. Check this out:
That exact same room is available for 25,000 points per night.
- 0.033 x 100= 3.3
So you are getting 3.3 cents per mile. I consider this a great value. In general, I consider redeeming for 2 cents or more per point a good value, but of course there are exceptions and situations where it may be worth it to use points even if the value is under 2 cents.
For example, since Ultimate Rewards are so easy to earn if you utilize category bonuses and shopping portals, I will still use them for some redemptions even if the value is under 2 cents per point. I have also booked hotel rooms through the Chase Ultimate Rewards travel booking site. If you have the Chase Sapphire Reserve you can redeem at a rate of 1.5 cents per point for travel booked through their portal (or 1.25 cents per point if you have Sapphire Preferred). As stated above, since earning more than 1 point per dollar is so easy with Ultimate Rewards, it sometimes makes sense to book travel through them even at a rate of 1.5 cents per point.
This is just a quick easy calculation that I use to help guide me. Of course the more cents you get out of a point for a redemption, the better.
Booking with Cash and Points
Now getting back to this Maldives example, although you can get this stay entirely on points, let’s talk about cash and points. Some people love the idea of using all points because you’re getting a free vacation and since Hyatt doesn’t charge resort fees on stays booked entirely on points, you would not pay any fees either. But in cases like this, it may be worth it to pay the cash copay for a cash and points stay and save some points. For a category 6 Hyatt hotel such as the Park Hyatt Maldives, you will pay $150 and 12,500 points per night. Let’s do the math:
- $825-$150 (the copay for a Hyatt category 6 point and cash stay)=$675. So you’re paying 12,500 points for $675
- 0.054 x 100=5.4
So with cash and points, you’re getting an even better value because you’re getting 5.4 cents per point. Yes, you’re paying some cash with the cash and points copay, but you’re also getting a ridiculously good rate at an otherwise very expensive hotel.
- 5 nights on points is 125,000 points plus 0$
- 5 nights on points and cash is 62,500 points plus $750
- Thats $4125 worth of a hotel stay for 62,500 points and $750
- or $4125 worth of a hotel stay for 125,000 points
In this case, I would definitely save some points and go with the cash and points if it’s an option. The Park Hyatt Maldives is notorious for having scarce availability on cash and points even though the all-points availability tends to be good. Even if cash and points isn’t available, 3.3 cents per point is a great value.
Now I’m going to give you an example of a not-so-good value.
The Park Hyatt Istanbul is a category 5 hotel. So a room would cost 20,000 points per night or 10,000 points + $125 if using cash and points
So let’s check out the rates
Here’s the math:
- 0.010 x 100=1
If you use points on this room, you’re getting 1 cent per point. Not a good value. If you use points and cash, it’s even worse
- $209 (room rate)-$127 (cash and points copay. Note that it’s $127 instead of $125 due to exchange rate)=82$
- 0.008 x 100= 0.8
So the value is 0.8 cents per dollar if you use cash and points. Definitely not a wise use of points.
As you can see, doing a little simple math when redeeming points can help you determine whether or not you’re getting good value out of your points. So now you’re asking, “why not just get one of those 2% cash back cards?”
Depending on your travel needs, you may find some value in using a cash back card. But for the most part, you will always get more out of a points earning card if you learn how to earn and redeem efficiently. Yes, you’re earning 2% cash back, but when it comes to redeeming, you redeem at a 1% rate. Here’s an analysis:
With the Capital One Venture card:
- you spend $20,000 a year on your 2% cash back card.
- this gets you 40,000 points to redeem
- which gets you 400$ in travel
With American Express SPG
- you spend $20,000 a year
- this gets you 20,000 starpoints
- 20,000 starpoints can most likely get you more than 400$ worth of hotel stays at Starwood properties or
- 20,000 starpoints get you 25,000 airline miles since you can transfer starpoints to many airlines at a 1:1 ratio, and for every 20k transferred, you get a 5k bonus.
- 25,000 airline miles is more than enough for a round trip to Mexico. Or a roundtrip to Canada. Or many other places, but you get the idea. A plane ticket to Canada or Mexico is most likely going to cost more than 400$
With Chase Sapphire:
- All you have to do is look at the example of the Andaz Napa rates during our Napa trip … 20,000 points can get you a $659 hotel room
- 20,000 points can also get you a trip to Mexico or Canada if you redeem with the right partners, so once again, more than $400 in value
- this is assuming that your $20,000 spend was without any bonus categories or shopping portals. If you utilize those, you will earn even more points. So most likely if you spend $20,000 a year on your Chase Sapphire Preferred or Chase Sapphire Reserve, you’re going to have even more than 20,000 points. Most cash back cards don’t really give opportunities to earn more than the 2% cash back.
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