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In my opinion you should almost never transfer Chase Ultimate Rewards points to Southwest Airlines Rapid Rewards. The only exception is to top off your account with a few points to claim a specific award.
You usually don’t want to transfer all the points you’d need for a Southwest ticket, even though Southwest redemption tickets are fully cancellable with points redeposit for no fee.
One exception that that Southwest redemptions can be great hedges — book an award ticket with another airline out of a city besides the one you live in, and book a Southwest ticket to get to the start of that award, then if space opens up on your original redemption you can include it in your award ticket and cancel the Southwest award.
That’s great for through-checking baggage and also a net savings especially if you have elite status with the airline whose miles you’re using for the international redemption and can make award ticket changes for no or a reduced fee.
Points from a Chase Sapphire Preferred Card are great to transfer to airline miles or hotel points, programs like United, Singapore, Korean, and Hyatt. You can also use them at 1.25 cents per point towards paid travel through the Chase portal.
Points from a Chase Sapphire Reserve Card have the same transfer partners and can be used at 1.5 cents per point towards paid travel through the Chase portal.
Southwest points on the other hand are worth about 1.4 cents apiece towards fare plus taxes (a redemption pays only the TSA security tax). So you’re usually better off booking paid travel through the Chase portal rather than transferring points. You’ll earn points on the ticket based on the value of your fare.
This underscores the relatively low value per-point of Southwest Rapid Rewards. To my mind the only reason to proactively accumulate them is for a companion pass, which lets you take someone with you for free on paid or award tickets when you travel.
And Chase points transferred directly to Southwest don’t actually count towards Companion Pass (though Chase points transferred to a hotel program and then to Southwest do count, Marriott’s travel packages can be especially good for this.
Given the low value of Southwest points, what should you do with them? Obviously if you have a companion pass that doubles the value of your points (compared to buying tickets without one, not compared to cash, since the value of your cash towards tickets is doubled also). But if you don’t… consider gift cards.
Earlier this month One Mile at a Time redeemed 150,000 Southwest points for gift cards. There are extra options for Southwest co-brand cardholders and Southwest points are worth a penny apiece towards gift cards.
In the comments I offered a formula or framework for thinking about when to use accumulated Rapid Rewards points for gift cards rather than Southwest Airlines tickets.
- There’s some probability of having an opportunity/need for tickets at a higher value per point in the future, but you have to discount that based on risk.
- There’s some probability that Southwest will devalue points between now and then.
- And since that redemption will happen in the future, you should discount that future risk-adjusted value further.
What you want is to compare the risk-adjusted net present value of your redemption opportunities. This is all highly sensitive to your assumptions, however:
- say you have an 80% likelihood of having an opportunity to redeem at 1.4 cents 3 years from now
- there’s a 90% likelihood that’s even still an option. (I’ve simplified the devaluation risk to say 90% likelihood you can redeem at a high value per point on airfare in the future when really there’s a very high likelihood of some additional devaluation within 3 years but odds on that devaluation will be quite small.)
- The current risk-adjusted value of that future option is $0.0095 per point. ($0.014 x 80% x 90% and then discounted to present value using a 2% rate)
And that would suggest a gift card redemption today that’s equivalent to cash (and an Amazon gift card is just about a cash equivalent) at 1 cent apiece, would be the better or at least equal option. In fact, an Amazon gift card isn’t quite cash, so let’s just call them of equal value.
It’s worth noting then that since the Southwest Airlines Rapid Rewards® Premier Credit Card lets you earn a signup bonus of 50,000 points after $2000 in spending on purchases within 3 months of account opening, it effectively means you can earn $500 in Amazon gift cards as a signup bonus.