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TPG reader Janelle emailed me to ask about choosing between different travel rewards:
There’s a lot to like about cash back and other cash-like rewards. For starters, each point or mile has a fixed redemption value, so you know exactly what you’re getting in return for every dollar you spend. They’re also easy to use, since you can redeem for the travel you want and you don’t have to worry about award charts or availability. Thanks to their flexibility and simplicity, fixed-value rewards definitely have a place on the award travel menu, but they probably shouldn’t be the main course.
Janelle’s travel plans offer a good example of why transferable points are so useful. Hawaiian Airlines charges around $500-$800 round-trip for a nonstop economy ticket from Honolulu to Vegas — let’s be generous and say the average is about $600. At a fixed redemption rate of one cent per mile, you’ll need 60,000 miles to buy that ticket using Venture Rewards. The Capital One Venture Rewards Credit Card earns 2 miles per dollar, so you’ll have to spend $30,000 on the card to earn that flight (excluding any sign-up bonus).
By comparison, you can book an economy award on that same flight for 30,000 miles and $11.20 round-trip through the Korean Air SkyPass program, which is a transfer partner of both Chase Ultimate Rewards and Starwood Preferred Guest. Thanks to the SPG transfer bonus and various opportunities to earn bonus points, you can acquire those rewards by spending much less than $30,000 on your card. For example, if you were to maximize the 5x bonus categories on the Chase Freedom card in tandem with the Chase Sapphire Preferred Card, you could earn 30,000 points from as little as $6,000 of spending.
In fairness, this isn’t an apples-to-apples comparison. Booking through SkyPass or another frequent flyer program usually means you have to find award space, and you won’t earn miles for your flight like you will with Venture Rewards. Still, this example illustrates that transferable points have much greater potential than fixed-value rewards, and the difference between them is even more stark for more costly premium awards.
Ultimately, I don’t think you have to choose between the different types of rewards. It’s good to diversify your points and miles, so just use whichever card offers the best return for a given purchase, and then you’ll have more options when you’re ready to redeem. I like to use fixed-value rewards for travel expenses that aren’t covered by other loyalty programs (like tours or incidentals), but they’re also great for flights and hotels when cash prices are low. Using those rewards efficiently helps me save more valuable points for when prices are high.
For more on cash back rewards and choosing loyalty programs in general, check out these posts:
If you have any other questions, please tweet me @thepointsguy, message me on Facebook or send me an email at info@thepointsguy.com.
Source: thepointsguy.com