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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?”
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.
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?