Depending on your purchase patterns, the new Amex Everyday Preferred card may be a better Membership Rewards points-earning card than the Premier Rewards Gold (since it has bonus categories but also a 50% bonus on all points earned with 30 swipes in a month).
The one really valuable use for Membership Rewards points is transfers to airline miles. For instance,
- they partner with Singapore Airlines and Singapore offers outstanding premium cabin award availability to their own Krisflyer members (albeit with fuel surcharges).
- they partner with ANA whose distance-based award chart can be extremely valuable, including business class JFK – London roundtrip for just 63,000 points (again, with fuel surcharges).
There are millions of things you can do with Membership Rewards points. Most of those things are bad.
With the Everyday card, they’ve found much greater marketing resonance among their target consumer market by not focusing on high value travel redemptions, but on achievable, concrete, practical items to help cover the costs of everyday life.
Here’s What Miles Are Good For.. And Why
Airline miles for good for air travel. Hotel points are good for hotel awards, except that Starwood Preferred Guest Starpoints are great for airline mileage transfers.
Flexible points currencies that transfer at a good (generally, one-to-one or better) rate to airline miles are best for transfers to airline miles.Hotel points transfers are never as good a deal.
Here’s why: the economic model of airline saver awards is that the airline effectively sells distressed inventory at a discount to the frequent flyer program, and in mass quantities. That means the frequent flyer program can get a whole lot more value for its rebate investment than using the same rebate/expense in another way.
Hotel programs charge more per point, because their costs are higher, generally speaking a hotel program will give you any available standard room for their points and that can be a costly redemption.
In contrast an airline saver award is going to be for space the airline expects not to be able to sell.
If an airline buys you a $300 appliance, it is going to cost the airline close to $300. Sure, there may be a discount arrangement based on quantities purchased, but the discount isn’t going to materially change the economics of the arrangement.
In contrast, a saver economy seat on a plane might cost the program less than $30. There’s not just a rebate in the form of an airline seat, there’s also leverage.
I almost feel badly for Capital One, they actually invest more than most credit card programs in rewarding their customers — and yet without the leverage afforded by an airline co-brand relationship that investment isn’t leveraged, and as a result in general provides less value since they aren’t pairing their rebate with the ability to buy distressed inventory in bulk.
Don’t Ever Spend Miles for Merchandise
Never use miles for merchandise.
The frequent flyer program programs have to buy the merchandise and without nearly the sort of discount they get on their own products.
Aeroplan used to offer LCD toasters for 10,000 miles each, and towels for 24,000 miles. Blenders might run 25,000 miles.
A domestic coach saver award ticket might cost a frequent flyer program less than $30. But if you’re going to redeem the same 25,000 miles for merchandise they’re going to have to buy that merchandise.
The program is actually stretching, in some sense being generous, if you get an item that retails for $89 — even though it doesn’t seem like a very good deal to you since the same 25,000 miles could buy you a cross country ticket that would have been priced at $500 or you could have saved your miles and spend 100,000 to go business class to Europe (perhaps $8000).
I don’t often suggest using 25,000 miles for a domestic coach award because it isn’t a very good value. But it’s even worse when using the points for merchandise. 25,000 Aeroplan points will buy you a KitchenAid 5-speed Diamond Blender.
Overstock has it for $63. And you can earn points or cash rebates on your Overstock purchases.
That’s about 1/4th of one cent per mile in value.
Ok, I Give You This Limited Excuse
If you have a small number of miles in an account — and I usually suggest earning more rather than cashing out — it can make sense to redeem if you believe you won’t earn more.
I had about 4500 Etihad Guest miles and no particular expectation that I would build that balance. And I needed a new wallet. Etihad has some of the most extensive miles for merchandise redemption options.
Still, a new wallet is hardly a reason to remain loyal. Miles have been able to give me the sort of travel and experiences that I would never be able to afford in my entirely life. I travel more, and well beyond my means, because I’ve had access to these programs. I’d never trade them for merchandise, not even a lawn gargoyle.
The Only Other Great Value Redemption
Miles for experiences can be a good deal, something for which there’s not a ready market price.
When you’re leveraging the connections, the sponsorship, or other clout that a multibillion-dollar business has to open doors you can’t open on your own there tends to be much greater value.
Chase Ultimate Rewards offers this, there’s Citi PrivatePass and American Express has long offered cardholder events.
Starwood has some great auctions, there are real deals to be had because it seems like not enough people know about them, there’s not a critical mass of bidders so these auctions don’t suffer from the “winner’s curse” (where anyone winning necessarily overpays because all other bidders don’t go that high for a reason).
These redemptions aren’t always cheap, but they can be for things you couldn’t buy yourself.. opening the door to experiences.
But What If You Don’t WANT Air Travel or Experience Rewards?
First, get a cash back credit card not a mileage one. Probably the Fidelity Investment Rewards American Express which gives 2% back into a Fidelity account (and now comes with a signup bonus).
Second, for your other points, you should still redeem those for travel not LCD toasters. Just maybe redeem them for other folks’ travel, friends and family who would otherwise be buying tickets or as gifts for the holidays they might be treated to business class instead of economy.
I get that someone with an unlimited flight pass purchased for a song in the 1980’s has no reason to redeem for their own travel but earns miles, the more they fly, and to the extent these can be used for gift cards they’re effectively paying themselves to fly. I suppose that can make sense. But it’s this sort of extreme limit before it does make sense that illustrates that the rest of us aren’t in that situation – and just shouldn’t do it.
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I’m using AmEx MR for 2 segments on EK Shower Suite. SYD – DXB – JFK
@Bill n DC,
I transferred mine to Avios. It’s been a year and I have yet to be able to use them.
Nice, another cc advertisement. You really are not paying any attention to your readers at this point anymore huh.
How about since you’ve smugly said that ‘worse changes to AA are coming’, why don’t you skip one CC ad and tell us those changes, and where we should move our activity to?
Sadly, I think you won’t, because like others have said you are so close with your corporate sponsors that you are an LLC, not a traveler’s advocate.
This is actually a great post. I’m sending it to all my friends who brag about the televisions they got with points.
Interesting post. It makes sense that our miles are letting us buy distressed inventory at a cheap rate.
I have a question. Why are airlines like Delta trying to give out less miles now as if they are even MORE valuable then ever. Which they are actually worth less because of award chart devaluations.
Its funny as Delta recently had a $1700 sale to Europe. Exact dates I wanted this summer – but out of Seattle and I live closer to Vancouver. Also its flying Delta and I would earn Delta miles – and probably not that many Delta miles. I almost bought, then thought about redeeming my miles to fly Lufthansa business as it cost me less for the miles as I purchased Avianca miles for $1500 and could fly out of my desired airport.
Second question I have. Why did United change their award chart. If they are buying this distressed inventory at such as discount, does it really warrant charging 140,000 miles to fly to Europe in business?
Final question – isn’t money better then no money. I used to be a big advocate for Avios. Now instead of releasing award seats on BA from the west coast, they let the plane fly with many empty seats. So now if I want to go to Europe I find it a challenge to use my oneworld points, and need to redeem to fly on Star or SkyTeam.
@Tyler – I’m genuinely at a loss, there are no credit card links in this post.
Gary, it’s an advertisment for the new Amex Cards that you obviously have a relationship with.
Can you please answer our question as to what AA changes are coming and where we should move our business to in order to best be prepared…?
@Greg
You could’ve flown Delta and credited the miles to Alaska. You would’ve earned roughly 15k Alaska miles including class of service bonus depending on where in Europe you were going. Even at a fairly conservative valuation of 1.5c each, that’s a ~$225 rebate right there.
Yes, it’s basically break even, but you’re also saving miles for a trip you can’t book @ ~$1500 in business class later on. That allows you to take 2 trips at that price, and eventually you do max out the number of miles you can buy at a bonus from Avianca…
Everyone’s situation is different and everyone values different things, but if you can afford to take 2 trips at ~$1500, you probably come out ahead by purchasing the ticket IMO.
There are at least two CC links in this post.
I have been in the game 25 years or so –some people have millions an millions of miles , that can not be used for air travel– I choose not to use my
A.A. miles for JFK -ATH as this is my route , almost imposable to find a seat in business or first without an overnight in London or an arrival at 3:00 a.m.
plus a hi YQ —( LH is/was a better deal even at 140k r/t — no YQ easy to find seats — now I see no LH biz on UA over the Atlantic????)
I decided to use those A.A. miles for hotel stays — not a great value ( about a little more than penny is the value I get) —
if do not use this way– they will only depreciate or sit in my account for years -plus now with A.A. 100k credit card offer AND U.S. air weekly / monthly fire sales — I know I am right — BURN THEM ASAP
FYI — I have not paid for an airline ticket in about 20 years –travel in past only first class now not many offer with miles ,so use business now — why warehouse miles
Very insightful. Thanks.
Tyler-
Give Gary credit when he deserves it. He mentioned the Fidelity cash card even though, as he said, it is not a card he gets a commission from. You won’t see this card mentioned often in a lot of blogs, and no one flies to join 600 other people to learn about how it works.
Sam,
My point is he’s ignoring very valid questions by readers to peddle corporate relationships (comissions on links is only of the many ways to benefit from promoting credit cards…).
@Tyler – Actually I have zero relationship with Amex everyday.
As for the changes that are coming I’ve written about those in the past:
* We’re going to get a combined award chart, we can expect Asia awards to get more expensive and in general we can expect first class awards to get more expensive. I do not see huge increases to Europe because American’s chart is already effectively quite expensive due to the fuel surcharges on their primary transatlantic partner.
* Not for 2015 necessarily but I don’t expect 8 confirmed international upgrades from any fare to last for top tier elite flyers
* I expect the airline to go with unlimited complimentary upgrades for elites, no more stickers
* While US Airways is beginning to match American service standards for now, I expect that a year from now there will be fewer meals in the forward cabin domestically (closer to what US Airways service stanaards were than American’s standards), I also can’t imagine they’ll keep the mints 🙂
* They will almost certainly move to 4 elite tiers. American Platinum members will see 50% bonuses on miles flown rather than 100% most likely.
These are just a few of my educated guesses about the future.
@Are you blind? – have you tried clicking on the supposed credit card links in this post? There are not links to any credit card applications here. There are references to specific credit cards, and in two cases links where you might learn more about those cards — I link to a previous post for instance about the Fidelity Investment Rewards Amex adding a signup bonus (and this is not, and has never been, a card which offered any referral credit to me).
@Tyler I am not ignoring anything, I write 4-7 posts each day but even there I cannot cover everything at every moment of the day, I eat and sleep and have a job and a wife and a dog….
If there is some way that I can benefit from this post though that I have missed, I’d love the business advice. Thanks!
Gary – Like you, I use my miles primarily for overseas first or business. However, on two occasions I was able to use 25000 sky pesos for domestic trips that would have cost over $600.
Tyler – no one is forcing you to read these posts. Gary provides a valuable service. I have returned the favor by using one of his cc links.
@Allen that works, you got far more value than merchandise for sure!
If you use the 63K ANA miles from EWR-LHR there is NO fuel charge if redeemed for UAL. I have done both J and F awards and only pay the taxes and UK fees which are exactly the same as if using UA miles.
I’m going to enter a qualified disagreement with your opinion that miles are the only sufficiently valuable redemption for MR points. As a general rule, you’re correct, but I think redmption at anything over 1cpp is justifiable. Amex runs occasional specials offering $100 gift cards from useful retailers for 8,000 points. That’s a cash value of 1.25cpp. Not nearly the maximum obtainable, but not bad, either. I probably wouldn’t buy Skymiles at 1.25cpp.
@Allen: You are so wrong! Tyler is being forced (forced!) to read these posts because Gary’s writing is JUST THAT GOOD. other than those eeevil referral links.
@Andyandy hah, put a smile on my face this Friday afternoon!
Thanks for providing your predictions on the changes to AA. Regarding Amex, it’s probably best to just drop it- there’s many non-financial ways you can benefit from advertising a cc for Amex, and we’ll agree to disagree. But thanks for providing the predictions.
@Tyler due respect but you’ve thrown down an accusation and never backed it up, when I’ve offered a refutation you simply want to “agree to disagree.” Is there anything of substance in this post that you disagree with, or after 7 snarky comments in a row across multiple posts did you just want to impugn my character?
Gary, I can’t back anything up because only you know your relationships with credit card companies, although given your constant pushing of the Chase cards and your invitation to this card’s launch party, one can pretty much be assured you will benefit indirectly from promoting it. Snarky comments? Impugn your character? Do you not see the many other comments across your posts yesterday and Lucky’s posts today that are saying the same thing? You are an LLC, and as such will get feedback, both positive and negative. I’ve never insulted you with slander or put downs. I’ve merely said your comments yesterday were smug, which they were, and that instead of telling us all that they changed things ‘we dont use anyway’ to give us advice on next steps, since you are the expert.
@Tyler what in this post do you disagree with? What is your substantive complaint?
Why bring your unhappiness with the way I’ve described American’s changes — and I’ve lambasted them more than anyone else I’ve seen quoted in mainstream media for making these changes without notice — into a totally unrelated thread?
As for your theory that I’m somehow posting about how it’s far better to redeem points for travel than merchandise because of my relationship with a credit card issuer and in order to benefit that relationship I’m genuinely at a loss. I’ve told you it isn’t true, that I can’t even fathom how it would benefit me, but you remain sure. So I simply ask you how exactly that works. Given the certainty you seem to have about it all, then surely you know how it works right?
Let me ask this clarifying question: have you ever posted a positive comment on this blog? I’ve only looked back at your last 8 so I’m wondering.
Gary, I disagree with the constant cc pushes in general, which have seemed to significantly increase on your blog. That’s all. I thanked you for your predictions. Again, we’ll agree to disagree about Amex. And yes, I’ve posted positive comments as well. You (up until this week) and Lucky are my favorite bloggers. I’m sorry this feedback upset you as much as it did. It was meant to be constructive. I’ll stop reading and posting both positive and negative if that will make you happy.
Tyler you are welcome here always if you wish, I love all of my readers. And your comments didn’t upset me at all, I just was struggling really hard to understand where you were coming from because I genuinely couldn’t understand how you concluded that this post had something to do with an otherwise-undisclosed financial interest. It seemed so obvious to you and made no sense at all to me, so I kept asking for the explanation that I still haven’t gotten.
So be it. You’re more than welcome here, positive or repetitively negative, my comments section remains an open forum as it’s always been. Readers are more than welcome to say what they wish provided they aren’t extremely profane or revealing personal, non-public information about others.
Best,
Gary
Your math is right but I quibble with the last paragraph a little. If people don’t travel, they are probably not reading this thread. But if some nontraveler has actually stumbled by here, I can’t agree they should redeem to pay for other people’s travel. I also agree with @andyandy that Amex gift cards can be a great deal when they make those offers. I’ve taken advantage of them myself from time to time. Maybe $1.25 cents per is not the ideal use, but it’s a far better use of the points than buying a plane ticket for one aunt and then having all the rest 1) hate you forever for picking favorites or 2)expecting a gift of similar value on their birthdays. You’d be better off blowing the points on the stupid blender!
I have some other cards like US Bank and Travelocity. Basically I can use them for a flight value of 400.00 (using about 20,000 points. Sometimes on the US Bank program I will get a little less maybe 1.7-1.8 cpm. I have many cards including Fidelity as well. For business purposes I cannot put all charges on one single product or even 5. I use Starwood a lot as well. At least with US Bank and Travelocity, you get the miles as well fromt he airlines. US Bank will give you 25.00 for credit toward onboard meals or baggage fees. Another nice perk. I agree that using 25K miles in an airline account for a coach ticket may not be the best value. It might be on a last min ticket or a 400-500 fare. Right now I think it makes sense to spend airline miles year to year as much as possible. I have been getting decent value from my Delta miles booking some trips. Also Priceline Barclays card-ZERO Annual fee and 2% Cash back on all purchases.
Tyler, you seem like a really well-adjusted individual. Thanks for keeping the rest of us safe from non-affiliate links and subconscious advertising messages disguised as sound advice.
Gary, I’m a big fan of these analyses of the value of points and what they mean from the program’s perspective.
My one exception to this rule:
Redeeming 2-3k miles for a 1-Year print subscriptions to the Economist. It’s hard to find a better deal anywhere else.