Not all points and miles are equal
There are two sides to award travel: earning points and redeeming points. Just like with money, the goal is to earn more and spend (redeem) less. But it’s not quite as simple as it sounds, because not all points and miles have the same value.
It helps to think of miles and points like actual currency. If you’re selling a car for $20,000 and someone offers you 20,000 Mexican pesos, you wouldn’t accept that offer, right? Well, just like Mexican pesos are less valuable than US dollars, some miles and points are less valuable than others. For example, 1 Chase Ultimate Rewards point does not have equal value to 1 Hilton point; Ultimate Rewards are more valuable. So this can really cause confusion if you’re trying to decide which miles and points are best for your goals.
Just like the value of foreign currencies differ from one another, credit card rewards also have different values.
There are 4 types of credit cards that earn points/miles that you can redeem for travel
- Airline co-branded cards which earn miles for the co-branded airline
- Hotel co-branded cards which earn points for the co-branded hotel
- Cards that earn transferable bank points that can be transferred at a 1:1 ratio to airline or hotel loyalty programs. The Chase Sapphire Preferred card is an example; it earns Chase Ultimate Rewards points.
- Cash-back cards which either earn cash back or ‘miles’ that can be redeemed for cash back, usually at a 1 cent per ‘mile’ rate
If you’re new here, you may not know that I am a Registered Nurse. As a nurse, I am trained to set goals and outcomes that are measurable. I am also a math nerd, so I am happy to do the math required to get the most out of this hobby!
The value of a mile or point is both objective and subjective. While you can calculate a cents per point value when redeeming miles or points to put a number on it, there are other factors to consider.
For me, redeeming for an appropriate cents per point value is very important, but having options is also important. For that reason, I prefer transferable points such as Chase Ultimate Rewards. Some of the value of points such as Chase Ultimate Rewards is in the flexibility. Rather than being limited to one airline or hotel program, I can transfer those points to a variety of programs when I am ready to redeem.
Don’t be fooled by large sign up bonuses
The fastest way to earn a large amount of miles and points is sign up bonuses. Open a card, meet the minimum spend, earn the bonus, close the card before the anniversary to avoid paying an annual fee, and repeat with new cards. Or keep the card open if the benefits outweigh the annual fee.
Sign up bonuses can be deceiving. Here are two current offers:
- The American Express Hilton Ascend card is a sign up bonus of up to 100,000 Hilton points
- The sign up bonus for the Chase Sapphire Preferred card is 50,000 Ultimate Rewards points
It’s easy to understand why earning 100,000 points instead 50,000 points is tempting, but you have to consider the potential redemption value of each of these currencies.
Hilton does not have an award chart; instead, there are ranges for each property. To get an idea, you can use their tool to calculate the maximum price of a standard room. Redemption prices in the Hilton Honors program are pretty high. The most costly redemptions are 95,000 points per night for a standard room. These are going to be the higher end properties such as the Conrad Maldives Rangali Island and the Grand Wailea in Maui. To compare, Hyatt’s highest category is only 30,000 Hyatt points per night for a standard room. This includes properties such as the Park Hyatt Paris Vendome. That means that Hilton’s highest end properties are over three times more than Hyatt’s highest end properties.
To be fair, the earning side of the Hilton Honors program is inflated. In other words, Hilton points are easy to earn. So it makes sense that the program would need to charge more points for redemptions than programs like Hyatt. For example:
- The Amex Hilton Ascend credit card earns 3 Hilton points per dollar on all non-category bonus spend.
- The Hyatt credit card from Chase earns 1 Hyatt point per dollar on all non-category bonus spend.
So if you look at the whole earning and redeeming equation, this makes sense. Even though Hilton’s highest redemptions are more than 3 times Hyatt’s highest redemptions, you earn 3 times as many points with Hilton for the same credit card spend.
So now that we’ve established that 100,000 Hilton Honors points can get you 1 night at the most expensive Hilton properties, let’s look at what else 100,000 Hilton Honors points will get:
1. 2 nights in Siena at LA BAGNAIA GOLF & SPA RESORT SIENA, CURIO COLLECTION BY HILTON
- Cost: 100,000 points for 2 nights (50,000 Hilton Honors points per night)
- Value for dates in September 2018: 249 Euros which is ~$300 USD per night
- Total value: ~$600
2. One night in Rome at ROME CAVALIERI, WALDORF ASTORIA HOTELS & RESORTS
- Cost: 80,000 Hilton Honors points per night
- Value for dates in September 2018: 288 Euros per night (~$350 USD)
- Total value: ~$350 plus there would be points leftover
3. 2 nights in Rome at HILTON GARDEN INN ROME AIRPORT
- Cost: 100,000 points for 2 nights (50,000 Hilton Honors points per night)
- Value for dates in September 2018: 127 Euros per night (~$150 USD)
- Total value:~$300 total
What redemptions are possible with 50,000 Chase Ultimate Rewards points?
Chase Ultimate Rewards partners with several airlines and hotels to which you can transfer points, and then you can use the airline or hotel program to redeem the points. This is usually my preferred way of redeeming, but you can also use points as cash to redeem for travel booked through the Ultimate Rewards portal.
It’s tough to put a value on flexibility, but the nurse in me still wants to calculate what we can measure, and we can somewhat put a value on what 50,000 Ultimate Rewards can be used to redeem!
- 2 roundtrip tickets to Hawaii (transfer 50,000 Ultimate Rewards to Korean Air then use Korean Air miles to book Delta flights).
- 2 nights at the Andaz Napa (transfer 40,000 Ultimate Rewards to Hyatt to redeem two free nights).
- 3 Plane tickets from DFW to Mexico (transfer 45,000 Ultimate Rewards to British Airways then use BA Avios to book AA flights).
The value of each of the above depends on dates and/or your departure city, but each of these redemptions is likely at least $1000 in value. In some cases 100,000 Hilton Honors points may be worth $1,000, but it’s not very likely.
And remember, that is not taking into account the subjective value of the flexibility of the Ultimate Rewards points.
With Hilton, you must redeem those points at Hilton. You cannot transfer them to another hotel chain. You can transfer them to airlines but the transfer ratio is so bad that it is not even worth discussing.
On the other hand, you can use your Ultimate Rewards points for hotels, plane tickets, or both. Ultimate Rewards points transfer to 4 hotel programs and 9 airline programs at a 1:1 ratio. 9 airlines may not sound like a lot but there is a partner in each of the 3 major alliances in the world, which means lots of indirect partners. For example, Delta is not a partner, but Korean Air is. Both are in the Skyteam alliance so you can transfer Ultimate Rewards to Korean Air, then use Korean Air miles to book the Delta flight. Southwest is also an Ultimate Rewards partner.
Do not be deceived by everyday spending earn rates on credit cards
Some credit cards are worth keeping open even after you earn a sign up bonus. There are some credit cards that we keep open because the benefits outweigh the annual fee. For example, I never use my AAdvantage card but I keep it open for the free checked bag benefit. On the other hand, there are cards worth keeping open so that you can earn miles and points on your everyday spending. For everyday spending, I usually use credit cards that earn flexible points such as Chase Ultimate Rewards.
Just like I said with sign up bonuses, don’t get fooled by bigger numbers when deciding which card is best for everyday spending. When it comes to everyday spending, you should use the card that earns the currency that is most valuable for your specific redemption goals. If you’re unsure and do not have specific redemption goals, flexible points such as Chase UR and Amex MR are probably the best currency to collect.
As I mentioned above, the Hilton Ascend credit card earns 3 points per dollar on any purchase that does not have a category bonus. The Chase Sapphire Preferred earns 1 point per dollar on non-category purchases.
So again, it’s easy to think that 3 points per dollar is better than 1 point per dollar. But you have to think of the end goal here, which is to redeem for maximum value. At 3 points per dollar, Hilton points will certainly add up quickly. But when you look at the redemption potential, the high earn rate matches the inflated redemption values. In my opinion, 1 Ultimate Rewards point is more valuable that 3 Hilton points. Therefore, I would use the Chase Sapphire card.
I’m not trying to throw shade at Hilton
This is not to convince you that Hilton is worthless. In fact, that is a card that I would probably recommend for the sign up bonus eventually. But for most beginners, there are other cards that should probably take priority due to higher value.
The bottom line: don’t get lured by large numbers
When you see a credit card with a large sign up bonus, look at what redemptions the bonus will get you. It may or may not be worth it.
When deciding which card is best for everyday spending, consider both the earn rate and the potential redemption value. The earn rate may be 2 or 3 points per dollar, but if it is a currency such as Hilton that has high redemption rates, those 3 points are probably not as valuable as 1 point that has the potential for lower cost redemptions. The SPG credit card changes are a great example of why it is important to look at both the earning and redemption side of things. I’ll cover that next week!