Reader Question: “Should I Cash Out My Points For Cold, Hard Cash?”

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Let’s talk about the elephant in the room. The travel industry is bleeding hard, no one knows when or how it’s going to stop, many analysts say the “financial bailout” isn’t enough, and that ultimately makes travelers, particularly those involved in the points and miles hobby, uneasy.

I received a message the other day that I thought would be a great topic to discuss. The message read:

I’m curious of your thoughts. I have been in the points and miles circle for a few years. I still consider myself a newbie because you have opened my eyes to so many things that I never knew and you say this is only the introduction. But given the current situation, do you think it’s wise to collect my chips? In other words, should I cash out my points for cold, hard cash?”

MY RESPONSE

The great part about rewards programs from banks such as American Express and Chase is their points can be redeemed for statement credits or gift cards, or as the reader described “cold, hard cash” – essentially saving us some money (more on this below).

However, we generally get more bang for our bucks points when redeeming them for travel.

Let’s take a look at the options…at least, for two main players; Amex and Chase.

AMEX MEMBERSHIP REWARDS POINTS

Membership Rewards (MR) points are very valuable…for travel.

Even at a very very very conservative estimate, MR are worth one cent each for travel.

Outside of that, Membership Rewards points are very disappointing.

Let’s check out a couple of examples. The first is from a simple grocery purchase.

In other words, I can redeem 2,790 MR points (which we value at $27.90 in travel) for $16.74 in statement credit. NO WAY!

Gross. In the words of Biz Markie: Don’t gimme that! Don’t even gimme that!

What about getting some Amex gift cards with our Membership Rewards points?

5000 points for a $25 gift card? 10,000 points for a $50 gift card? etc. etc. PLEASE DO NOT DO THIS!! This is a straight rip off!!

PRO-TIP: For those of you that are more advanced, one option that could make sense is is using the Schwab Amex Platinum card which allows you to cash out MRs at 1.25 cents each to a Schwab account.

It hurts me to say this because I love Amex. But I’m more than happy to put more spend on my Chase cards right now.

Chase Ultimate Rewards Points

Similar to Membership Rewards, transferring points to an Ultimate Rewards travel partner for an award booking is generally the preferred way to go.

Or if you have a Chase Sapphire Reserve card, you can book travel through the Ultimate Rewards site and receive 1.5 cents value per point. (Chase Sapphire Preferred and Chase Ink Preferred cardholders enjoy 1.25 cents per point.)

But if you need to redeem points for statement credit (transfer cash to your bank account) Chase will give you a cent each. Far better than what Amex offers.

This is a reason why no annual fee Ultimate Rewards cards such as the Chase Freedom and Chase Ink Cash — which offer category bonuses in some way, shape, or form — can be rather valuable.

Credit or Cash?

Statement credit is fast and easy. If you simply must eliminate some credit card charges, it’s a good way to go.

Bank deposits can take a couple of days. But if you have some patience and don’t desperately need the money, cash gives you more flexibility and options like saving it, investing it, paying other bills, etc.

FINAL STAMP

Tough economic times and reports that 10+ million people filed for unemployment in a matter of 2 weeks is jarring and it sure looks like things can only get worse before they improve.

While travel generally represents the best use of points, it depends on your situation as there may come a time when you/I/we need to redeem them for money. AND THAT’S OKAY!

As long as you’re earning something for your credit card purchases, that’s what counts.

Many of us can (and will have the ability to) replenish our points balances when travel returns to “normal.” Until that point, using points to pay bills might become more and more practical.

Tell me, have you redeemed points for statement credit or cash? Are you thinking of redeeming your points for statement credit or another cash alternative?

6 comments

  1. Thanks for this! While I had just signed up for the IHG card in March I believe, I’m pondering on what to do with the bonus points. While travel is up in the air I’m thinking do I blow them on amazon gifts card $350 or just wait to redeem on reward nights. I do know the reward nights are worth more but my question is will we get to travel again 😦

    Liked by 1 person

  2. We will get to travel again and although this is just speculation, I think hotels/airlines will probably run some sales to get ppl back so the points could be worth more. But again, everyone has to determine what’s best for their situation.

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  3. I was literally just pondering this last night. 🤣🤣🤣. Like should I just cash these points for this Dunkin’ Donuts gift card since that’s my only escape/treat these days. I’ll probably just pull the trigger on it. Points will build back up eventually.

    Liked by 1 person

  4. It just depends on your preferences. You’re essentially selling your points back to the bank for free. This is an oversimplified example but you could exchange 100,000 points for 2-4 nights at a 5-star hotel where rates are $750+/nt (or 10 nts at a basic hotel, think Aloft) or you can get $100 worth of doughnuts. Personally, I’d go after the cash back before I’d go after gift cards but hotels are waaayy better but to each their own.

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  5. We’re talking 2,500 points. I don’t spend that much on my cards to get up that high. And it’s my Chase Preferred so i already took my trip to Europe on those initial bonus points a few years ago. But it’s the only card Ani uses when he’s gone for work so they replenish quickly when we do use. The upside is that we already get travel bonuses for hotels Bc he can claim all his nights and status even tho company paying. Racked up 75 nights with Marriott while he as at training.

    Liked by 1 person

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