If you are using your Chase Sapphire Preferred and redeeming those points for merchandise, that is a bad deal no matter what. If you are using your United miles to fly domestic economy, that isn't a "bad deal" per se but you're certainly giving up the opportunity to receive an outsized return on your everyday spend.
As I'll explain in a moment, that is why I use my miles and points for international first class and luxury hotels.
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| Watching the sunset |
I'm "buying" a product with miles and points that I wouldn't ordinarily be able to purchase and doing so at a steep discount. Beyond that, there are a limited number of 2% cash back cards on the market. I can massively stretch my point balance by applying for dozens of cards per year and taking advantage of spend bonuses. So even if I could put $250,000 in a spend per year on a card (I can't) I would only earn $5,000 in cash back to use for travel. With just a few thousand dollars in spend per month, I can easily rack up 1,000,000 points and miles per year - worth WAY more than $5,000 for travel.
Part of the calculation of how much points are worth has to do with what you would actually spend on a flight or a hotel. Hold that thoughts - we'll come back to it in a moment.
In terms of hotel points, let's use Starwood's SPG program as an example. We'll forget the fact that Starwood's been purchased by Marriott and that this calculation will change at some point in the future.
Starwood points are amongst the most valuable points in the loyalty world. Part of that is due to the fact that they are hard to accumulate. Other than staying at Starwood properties and putting spend on the SPG Amex, there isn't another (reasonable) way of acquiring SPG points.
So when you decide to use your SPG points, you have two real valuable options:
1) Transfer points at a 1.25 to 1 ratio to a number of airline partners
2) Redeem points for hotel stays either in part (cash and points) or in whole
While option one can be a good deal, and I've used the option to top of my Alaska account for an Emirates First Class award redemption, option two is my preference.
Emily and I have been looking for a Spring weekend away from Denver. While we enjoy Arizona and Mexico, we were looking for something a bit different this year and settled on Palm Springs. Flight times and cost were reasonable but hotels were outrageous. We were going back and forth between La Quinta and The Parker.
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| April rates at The Parker Palm Springs |
La Quinta ended up being sold out but The Parker was available. For 20,000 points per night. Or $645 in cash per night. With tax, that is $793. Obviously we're using points.
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| Cash or points? |
In terms of value, that is 4 cents per SPG point. Would I pay $793 per night for a hotel room? Absolutely not. So it's not a fair argument to say I am getting 4 cents per point. But I would likely pay $400 AI for the same hotel room. That is 2 cents per point. Plus the fact that I'm unlocking something would otherwise be out of reach adds to the value received. This isn't a perfect science and the calculation will actually be different for everyone.
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| 39,000 points = THIS |
Was using 39,000 points per night a "good deal" at Al Maha? Given that cash rates were north of $1,200, that was a redemption of around 3 cents per point. But I would NEVER pay $1,200 a night for a hotel room...so using points unlocked a wonderful experience for Emily and I that would have been out of reach.
You do want to use some guide to help you with the decision on whether to use points or pay cash for a hotel. If The Parker was priced at $200 a night, I would absolutely pay cash. At $300, I'd still pay cash. At $400, I might use points for one night and cash for the second. Above that, I'm either using points or finding another place to stay.
So for me, if I'm not getting at least 2 cents in value from each point, I'll use cash. Above that, I'm using points if I have them.
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