Not All Points are Equal

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When setting out to start a hobby of collecting points, whether your goal is to hop a short flight on the cheap or to travel across continents in ultimate luxury, there’s much to be learned about the different types of points out there, and the different ways to earn them.

Because not all points are the same.

There are points and there are miles, there are credit card points and airline points and hotel points, there are fixed value points and non-fixed value points. You could spend a ton of time and energy earning the least valuable points if you’re not focussed.

So, in order to avoid that, read on and take notes.

Types of Points

There are three main types of points out there. Their value is determined by a combination of the flexibility of using them as well as the cost of purchasing awards.

Think of each point as a different type of currency. A Hyatt point is, say, a Euro, and an American Airlines AAdvantage point a Yen. Some points can be converted into others, while some points are stuck in the program of their origin. Some points can be used to purchase awards in other programs, while some points can only be used on the brand in which they originate.

Transferable Credit Card Points

The most valuable, lucrative points out there are points that can be transferred into multiple travel award programs, with ease, at a 1-1 (or better) ratio. Almost every major bank has at least one credit card that offers these types of points, including Chase, Citi and American Express.

Because awards programs are always changing their award charts, and because availability of awards grows and shrinks on moments’ notice, a valuable award wallet is one that has the flexibility to utilize multiple award programs simultaneously. Like a good investment portfolio, the key to award wealth is diversification.

Sure, it would be nice to have a couple million Delta SkyMiles, but what if you can’t get the flight you want through Delta? Then those many million points are effectively worthless. Having points in multiple programs is key to opening travel doors, and points that can be easily transferred into multiple programs is the fastest way to accomplish this.

Chase Ultimate Rewards are, in my opinion, the most valuable transferable credit card points. UR points can be earned with many different Chase products, including the Sapphire Preferred (which comes with a nice 50,000 point sign-up bonus). UR Points can be transferred, almost instantly, to a long list of travel partners, including Hyatt, Southwest, United, Singapore Airlines, Korean Air and more.

American Express earns runner-up status for their points currency, which can be transferred to programs including British Airways, Air France, KLM, ANA, Delta, Emirates, Etihad and Virgin Atlantic. Additionally, holders of the American Express Business Platinum card can now redeem points directly to purchase airfare for a fixed rate of $.02 per point. Because these tickets earn redeemable and status miles, this option can sometimes be the most valuable route to go.

Zone-Based Airline Points

Traditionally, all airline points were redeemed using on a zone-based award chart to determine costs. For example, American airlines used to charge a flat 25,000 points for a roundtrip coach domestic ticket, no matter the origin and destination, or the cost of the actual flight. The cost for business class was double.

Airlines with zone-based award charts are generally the most valuable airline points because fluctuations in ticket prices and oddities of zoning create specific itineraries of extraordinary value in each program.

For example, my ticket from New York to the Maldives was purchased using Alaska Airlines points. Alaska Airlines is a partner of Emirates, meaning you can use Alaska Airlines points to purchase Emirates tickets. When I ticketed by itinerary, an award flight on Emirates between North America and the Middle East cost only 90,000 points one-way in first class (that price has since doubled). 90,000 points for an award that retails for $18,172 means a redemption value of $.20 per point. That’s HUGE!

Emirates First Class

Most airlines still rely on zone-based award charts, but, as time progresses, more and more are leaving this scheme (for obvious reasons).

There are, also, two different types of zone-based award charts. Some classify zones based solely on broad regions of the globe (North America, Europe, Middle East, Africa, North Asia, South Asia and Oceania). These are the most valuable programs. Others (like British Air, in particular) define zones based on the distance flown for a flight, so the price of the award ticket grows directly proportional to the distance of a flight.

Most hotel award programs work on the equivalent of a zone-based award chart, however instead of dividing up hotels by their location, they divide properties into separate categories depending on how expensive or extravagant they are. While this system may seem more like a fixed-value point (explained below), generally, hotel award charts offer the flexibility and opportunity intrinsic to zone-based award charts, so long as points are redeemed intelligently.

Fixed-Value Points

The glory days of airline points are long gone, and the last decade has seen the dramatic growth of fixed-value airline points. In these programs, a single point is pegged to a certain value (normally somewhere between one and two cents), and the cost of an award ticket is a direct function of its dollar price.

Programs with fixed value points offer the security of knowing a set value for points, and normally are more generous in releasing award space, but do not offer the opportunity for specific awards of extraordinary value. Airline programs  with fixed-value points include Southwest, JetBlue, and others. Virgin America was fixed-value, but since it was purchased by Alaska (zone based) no longer is.

Additionally, many credit cards advertised as “miles earning” actually earn points that are redeemed for a fixed-value reimbursement against travel purchases or air tickets. These include cards such as the Barclay Arrival Plus.

Earning Points

There are two main ways to earn points: through credit cards and through travel.

As I’ve explained here and here, the most lucrative way to earn points in large quantities quickly is through credit card sign up bonuses. Hundreds of thousands of points per year can be earned by signing up for the right credit cards at the right time, without negatively impacting your credit score.

The second best way is through credit card spending, however this is entirely dependent upon your spending habits. Do not spend money on credit cards to earn points if you’ll need to carry the charges month to month on the card and accrue interest – interest charges will quickly wipe away any potential benefit earned through the redemption. Running small business expenses through a credit card that earns you points is a fantastic way to increase points-earning spending; it’s how I paid for my honeymoon.

Historically, when airline award programs were first invented, the best way to earn points and miles was by actually (gasp!) sitting on an airplane and flying. Gone are the days that you earn a mile for every mile flown. Every major American airline except Alaska Airlines has done away with this type of program, and you now earn miles based on how much money you spend on the ticket. So you’ll still earn miles for every trip you take (referred to as butt-in-seat miles), but the speed with which you’ll earn them has, for most spenders, slowed down dramatically. A roundtrip cross-country flight used to earn you, on most legacy carriers, around 5,000 miles. Today, if you purchase a cheap ticket and don’t have special airline status, you’ll earn as few as 2,000 or less. There are still opportunities for earning dramatic quantities of miles from actual travel (as was the recent Qatar Airways sale), but that usually necessitates traveling a foreign carrier and crediting the miles to an American legacy carrier.

Take Away

There’s more to a point than a point. Each type of point is unique, and its value can be determined accordingly. Don’t make the mistake of assuming that all points are created equal. By doing your research, diversifying your points portfolio, and focussing on earning the most valuable of points, you can grow extraordinary award wealth.

Next up in my Beginner’s Guide, a deep dive into each award program.