OMAAT reader Kbulo asked a great question about a recent points redemption that I shared, and I’d like to talk about that a bit in this post, and provide an explanation.
In this post:
I redeemed credit card points for less than I value them
I publish my valuation of many points currencies, and I personally value the major transferable points currencies at 1.7 cents each, give or take. As I’ve explained in the past, my points valuations aren’t intended to be some hard-and-fast rule, but instead, are supposed to be a general guideline for how I go about thinking of redeeming points.
Let me explain the redemption I shared that prompted this question. I wanted to fly an Emirates itinerary from Ho Chi Minh City (SGN) to Dubai (DXB) to Frankfurt (FRA), in order to review the carrier’s A350 business class and new 777 business class.
Nowadays Emirates Skywards redemption rates for premium cabins are hard to get excited about. If there were saver level award availability for the itinerary, the ticket would’ve cost 120,000 Emirates Skywards miles plus $845 in taxes & carrier imposed surcharges. For a moment, let’s even ignore that Emirates Skywards is no longer a 1:1 transfer partner for most transferable points currency.
Here’s the interesting twist — the cash fare for the ticket was around $1,500. Now, I think it goes without saying that paying $1,500 is better than redeeming 120,000 Skywards miles and paying $845.
While Chase has reduced most redemption values when paying directly for revenue tickets with points, I still have the benefit of redeeming for 1.5 cents each toward the cost of airfare for some amount of time, since I was an existing cardmember.
So I decided to redeem 100,000 Chase Ultimate Rewards points for the ticket. That included taxes & fees, and I’ll even earn miles for my ticket (10,650 Skywards miles, for what it’s worth). But wait a second, if I value Chase points at 1.7 cents each, why would I only redeem them for 1.5 cents each, instead of just paying cash for my ticket?
Why did I redeem points rather than paying cash?
The question of why I redeemed points rather than paying cash for this ticket is a good one, though the answer is a bit nuanced, with several considerations.
I always tell people that they should redeem points for anything that makes them happy, and that points valuations aren’t science, but are more of a general concept to think about when considering how to redeem your points. My points valuation doesn’t have to be your points valuation. Okay, but how does that explain my redemption choice?
For one, I think it’s important to recognize the huge spread between our points acquisition costs and our points redemption values, at least in most situations. It’s one thing if I were acquiring Chase points for 1.5 cents each, in which case I of course wouldn’t want to redeem them for 1.5 cents each.
But just as an example, I racked up a lot of Chase points several years back, when there was a Chase card welcome bonus that offered 3x points on all purchases for an entire year. Even just paying income taxes by card for a 1.8% fee, that meant I was racking up points for around 0.6 cents each. And that says nothing of even lower acquisition costs of points as part of credit card welcome offers.
I absolutely always want to redeem points for more than my acquisition cost, but I do have a bit of flexibility with how much I’m willing to redeem for.
So, why did I choose to redeem in this situation? Well, sometimes you’re just happier parting ways with points rather than with cash, and if the ability to pay with points toward the cash cost of a ticket beats an award redemption, then I’m more than happy to do it. Let me expand on that a little bit.
In this case, I found a really attractive Emirates business class fare:
- I just preferred not spending an extra $1,500 on flights, if I could avoid it, to keep my overall travel costs down (I try to fund my review trips mostly with points I’ve accrued)
- Given that I wanted to redeem points, it was a much better deal to just use 100,000 points and pay nothing in taxes & fees while also earning miles, rather than using 120,000 miles and paying $845 in taxes & fees
I think this also gets at how people love to have inflated redemption values. For example, how many social media posts do you see where people talk about how they booked a $20K first class ticket “for free,” and got 10 cents of value per point, or whatever? That’s simply not a fair valuation, since most of us would never be willing to pay that.
Let’s say that instead of booking a ticket from Ho Chi Minh City to Dubai to Frankfurt, I instead flew to Munich. That fare would’ve been $3,500 instead of $1,500 for the same day, with a connection around the same time (you’ve gotta love airline pricing).
If I had redeemed 120,000 Emirates Skywards miles and $845 in taxes & fees for that itinerary, I would’ve been getting over two cents of value per point, technically. Does that mean it’s a better redemption than just outright redeeming 100,000 points for a $1,500 ticket that’s comparable, even though it “only” gets me 1.5 cents of value?
I’d argue absolutely not, for obvious reasons — I don’t actually value the $3,500 ticket more than the $1,500 ticket, and my goal was to experience two Emirates business class products for as few points as possible… which happened to be a redemption of 1.5 cents per point.
So that kind of gets at the grey area, as I see it, where I’m happy to redeem for less than my stated valuation, while still getting way outsized value compared to my acquisition cost. Fair?
Bottom line
I think it’s good to decide on a valuation of various points currencies that works for you. That’s not because it needs to be some hard-and-fast rule that you can’t break. Instead, it’s so that you have a general framework for deciding when to redeem points and when not to redeem points.
But I also think rules are meant to be broken… a little bit, and in moderation. Sometimes you just don’t want to spend cash on something, and assuming you can get a decent value on points, there’s nothing wrong with choosing to redeem points. Similarly, sometimes airline pricing just isn’t rational, and doesn’t reflect the value a flight has to you. Just because a flight costs twice as much in cash doesn’t mean it’s any more valuable to you.
In my case, I found a reasonably priced Emirates business class ticket, and it was way cheaper to redeem my points as cash toward the cost of a ticket, rather than booking the award through Emirates Skywards. No, that might not get me some blockbuster redemption value based on an inflated flight cost that I can brag about, but in absolute terms, I’d say it was a great deal for what I was trying to accomplish.
Anyone else take a similar strategy to me when it comes to breaking rules on points valuations?
I think what you're getting at is the concept of marginal utility. On an annual basis I value the first 100k Chase points much more than the fifth 100k, I only have a certain appetite for these redemptions so there's a sweet spot for accrual. If you're beyond that then these non optimal redemptions make sense.
I think this goes for a lot of things in life, value is linear up close but varies dynamically at the ends. Finally, a use for those calculus classes.
Confirms that 2% cash back is the best deal in rewards credit cards (by far), and that the points valuations made by credit card shills are wildly inflated to benefit themselves.
Long way of saying you don't actually value UR at 1.7 cpp. You actually value them at 1.5 cpp, or actually less. Nobody would buy UR at 1.5cpp just to turn around and use them on travel for 1.5cpp, a reasonable person would rather just have cash. So seems like you really value them at maybe 1.4cpp.
How much you value anything is what you are willing to buy or sell them for. FM "reasonable...
Long way of saying you don't actually value UR at 1.7 cpp. You actually value them at 1.5 cpp, or actually less. Nobody would buy UR at 1.5cpp just to turn around and use them on travel for 1.5cpp, a reasonable person would rather just have cash. So seems like you really value them at maybe 1.4cpp.
How much you value anything is what you are willing to buy or sell them for. FM "reasonable redemption values" are not values, you would not buy or sell the points at those valuations, they are just a guide for how and when to use points vs cash. I think your so called valuations are similarly not actually valuations.
Appreciate you taking the time to engage in your thoughtful manner to break down your approach.
I would've thought you'd stick more with the consideration of the loss of opportunity costs by purchasing outright vs redeeming at what on paper seems like an inferior redemption. At least historically speaking (and not knowing your aquisition costs).
At the end of the day, it's what makes you happy. If in that moment it makes you content that...
Appreciate you taking the time to engage in your thoughtful manner to break down your approach.
I would've thought you'd stick more with the consideration of the loss of opportunity costs by purchasing outright vs redeeming at what on paper seems like an inferior redemption. At least historically speaking (and not knowing your aquisition costs).
At the end of the day, it's what makes you happy. If in that moment it makes you content that you value a baseline of 100k pts more than $1500, then can't argue with that. Although $1500 cash all-in for such an itinerary seems actually like a more than fair value.
The marginal value of points changes based on your balance.
If you have 1K points, they're worth little because you can't afford many redemptions (just a $10 credit). If you have 100M points, they're worth relatively little because it would take years of flying to redeem them all.
1.7 cpp is a reasonable average value for a "typical" balance of points. I suspect your balance is on the "way too big" side, meaning the marginal value to you is lower.
I agree that your valuations are too high which is why you will redeem for Less. I often see Business Class fares for less than a penny a point if you have some flexibility. For example trans-atlantic for $2000 usd and trans-pacific $2500. However this may require a positioning flight to get to those.
Unfortunately my mileage balance keeps growing which indicates too high a value on my points. On top of that partner...
I agree that your valuations are too high which is why you will redeem for Less. I often see Business Class fares for less than a penny a point if you have some flexibility. For example trans-atlantic for $2000 usd and trans-pacific $2500. However this may require a positioning flight to get to those.
Unfortunately my mileage balance keeps growing which indicates too high a value on my points. On top of that partner blocking or partners not releasing inventory has greatly decreased the value. Some routes and some flights have great availability but there are only so many times I want to fly say Bos-Lis in J especially when I live on the west coast
I’m sorry Ben, but this is just dancing around the issue. The salient question is why you valued UR points at less than 1.34 cents. I suspect it has to do with having a massive UR balance, which makes it perfectly understandable. But this post is just confusing and frankly not very helpful to anyone trying to decide when to redeem UR points.
Ben, with respect, your valuations have not changed and the programs have. Rather than this tortured justification, why not just admit that banks have devalued their programs too, and airline transfers are less valuable due to devaluations, so bank points are simply worth less than they used to be?
Your spending behavior probably indicates that the real valuation is lower than your official valuation. Perhaps it's time to revisit the valuation page and mark them down. 1.7 cpm for chase is too high IMO. It should be 1.5 or 1.6 at best.
@Ben While I get where you are coming from, it is also somewhat a reflection of the fact that if you have more points than you really need, then you can/have to start making suboptimal redemption
For people who have just enough points or need time to accumulate sufficient points, it would be better for them to keep the points for higher value redemption, or the opportunity cost can be high
Your current miles balance is also relevant to what you'll redeem them for. If you have 80k miles, you don't want to redeem them for anything less than the best possible use value. If you have 800k, then you wouldn't be seeking to grow your balance and would instead be actively seeking to redeem them and accept anything greater than the acquisition cost.
Your current miles balance is also relevant to what you'll redeem them for. If you have 80k miles, you don't want to redeem them for anything less than the best possible use value. If you have 800k, then you wouldn't be seeking to grow your balance and would instead be actively seeking to redeem them and accept anything greater than the acquisition cost.
Ben, on the trips that are for blog reviews, When miles don't save you much, do you ever opt for cash just to keep the tax deduction? I’m curious if the math ends up being better that way since it’s a write-off and if you factor that as part of your equation.
I was going to ask this too (I'm an accountant so can't help thinking about taxes!) Since Ben's review flights are for business purposes, given that this blog is his livelihood, they are tax deductable, meaning that he would effectively receive the flight cost x his marginal tax rate back from the IRS.
Is there any way to claim a tax deduction on points flights? If so, I'm not aware of it.
1.7 is generous
I'm happy I withdrew $1000s into my amex schwab brokerage for 1.25c per point. Invested it and probably worth 2c per point Today. And still don't pay cash for any flight.
As you note you also will get 10,650 skywards miles. Your site values those at 1.2c each, so that's $127.80 in value. Add that value on to the $1500 ticket and you're really getting 1.62cpp not 1.5cpp, and that's before the rest of your analysis, which I agree with. There's nothing wrong with hitting singles and doubles - makes the occasional home run that much sweeter.
Also - valuing something at 1.7cpp doesn't mean 1.7cpp...
As you note you also will get 10,650 skywards miles. Your site values those at 1.2c each, so that's $127.80 in value. Add that value on to the $1500 ticket and you're really getting 1.62cpp not 1.5cpp, and that's before the rest of your analysis, which I agree with. There's nothing wrong with hitting singles and doubles - makes the occasional home run that much sweeter.
Also - valuing something at 1.7cpp doesn't mean 1.7cpp and up. It's not necessarily a floor, it's an average. At least that's how I think of it.
I don't think you're looking at the alternatives correctly here. Forget about redeeming Emirates points. That's clearly inferior.
Ben's 2 best choices:
1) Redeem 100k UR points to buy the flight.
2) Pay $1500 cash to buy the flight.
Both options earn the same amount of Skywards miles. Take that out of the decision.
He earns 8x UR points on the $1500 if he pays cash. He earns zero UR points if he...
I don't think you're looking at the alternatives correctly here. Forget about redeeming Emirates points. That's clearly inferior.
Ben's 2 best choices:
1) Redeem 100k UR points to buy the flight.
2) Pay $1500 cash to buy the flight.
Both options earn the same amount of Skywards miles. Take that out of the decision.
He earns 8x UR points on the $1500 if he pays cash. He earns zero UR points if he redeems 100k UR points for the flights.
So, really the 2 options come down to
1) Pay 100k UR points
2) Pay $1500 and earn 12k UR points
He's forfeiting 12000 UR points by paying cash, so he's really 112k points worse off by not paying cash. Ben is really only getting $1500/112000 or 1.34 cents per ultimate rewards point here.
That's bad IMO, but I have 3M points and was redeeming as fast as possible at the 2 cents per point level (really only 1.73 cents by the same math I used above, considering the opportunity cost of earning 8pts/$ on the Chase portal on paid bookings). *Unfortunately redeeming for 2 cents on United/Emirates/theEditHotels with Points Boost has become significantly harder over the last couple months.
But, if Ben has 10M+ ultimate rewards points, and can't spend them as quickly as he accrues them with good value, it's probably the right decision for him. It just means that with his current UR points balance, at the precise moment he redeemed them, he valued those 112000 Ultimate rewards points below 1.34 cents each.
... or one could argue that the good feeling he gets from redeeming points has a monetary value. Specifically, if someone values UR points at 1.7 cents each and effectively redeems 112k of them (112000* $.017 = $1904) for $1500 of airfare, that person is getting more than $404 of happiness or utility from redeeming $1904 worth of points for $1500 of airfare.
Some fair points (ha).
The Emirates points have a value though and I don't see why they shouldn't be considered. I might personally value them at much less than 1.2cpp, but Ben flies Emirates with some frequency. And he placed a public value on them of 1.2cpp. So that has a value of $127.80 (according to Ben).
But you're correct that if you value UR points at 1.7 cents and you pay cash and...
Some fair points (ha).
The Emirates points have a value though and I don't see why they shouldn't be considered. I might personally value them at much less than 1.2cpp, but Ben flies Emirates with some frequency. And he placed a public value on them of 1.2cpp. So that has a value of $127.80 (according to Ben).
But you're correct that if you value UR points at 1.7 cents and you pay cash and use the Chase Travel portal with a CSR you are not receiving $204 in "points value" (12000x0.017). (You're also assuming that Ben would choose to buy an Emirates ticket through the Chase portal and get the 8x. I think it's far more likely he would book direct and get 5x on Amex or 4x on CSR. But I digress...)
Anyway, assuming the 8x UR, net net, it's-
Cash = $1500-$127.80 value of Emirates points-$204 UR points=$1168.20
Points = 100k points less the value of 7553 UR points to account for the earned Emirates points (assuming a 1.41:1.0 UR:Emirates point ratio to account for 1.7cpp:1.2cpp) = 92,447 UR points (which at a 1.7cpp value = $1571).
So I guess, looking at it your way, it's even worse than 1.34cpp (I get to 1.26cpp) and you are "paying" an extra $402.80 by redeeming the points.
But if you're just looking at it based on out of pocket cash saved (which I really don't think is unfair given that the whole point was to get rid of points and not pay cash) then 1.62cpp is "correct" as well. For instance, should we value keeping that $1500 in the S&P 500 as a counter to the $204 value of UR points earned? If Ben invested $1500 in the S&P 500 in 2025 he would have made $268.50 on that investment. Isn't that a consideration as well?
As you alluded to, points are not an asset that increase in value - we don't earn interest on our points and devaluations are common. So there's a cost of not using your points in a timely manner as well, especially if you have a lot of them.
I'm not sure that means that the opportunity cost of foregoing a cash booking necessarily needs to devalue the cpp analysis of using points - I think that opportunity cost analysis can stand on its own when considering which pathway to go down.
Fascinatingly, I actually think you are not wrong that the feeling itself has a monetary value. And I think that feeling would be interesting to factor into a more traditional opportunity cost analysis. You could always say that Path A is theoretically more profitable than Path B, but not if choosing Path A itself might lead to a demoralized work force (or blog writer), etc.
Anyway, this was fun, let's do this again sometime. I obviously need to spend more time engaging with economic theory (and theorists?) when considering these pressing issues!
I would argue that you actually got a little over $1600 dollars in value, for a 1.6 cent valuation, given that you also got more than 10000 Skyward miles that you value at 1.1 cent per mile.
If there's a destination you want to go to and don't have or want to spend the cash on it makes sense. In general, redemption for domestic coach travel isn't worth it (other than maybe to Alaska and Hawaii) using miles/points.
I turned in 450K miles for a First Class LAX/SYD roundtrip last summer. That's a very long flight. In my younger days I could handle coach in that route but no more. And getting...
If there's a destination you want to go to and don't have or want to spend the cash on it makes sense. In general, redemption for domestic coach travel isn't worth it (other than maybe to Alaska and Hawaii) using miles/points.
I turned in 450K miles for a First Class LAX/SYD roundtrip last summer. That's a very long flight. In my younger days I could handle coach in that route but no more. And getting out of South Florida in July to go somewhere with LA type winter weather.
Redeeming points for domestic US travel can absolutely be worth it for last minute travel and is a bit of a sweet spot - Ben has mentioned it before. Is it an exciting way to use points? Hardly, but when I had a family emergency last year I was much happier to spend 9,000 AAdvantage miles to travel the next day than shell out $694. Even factoring in the opportunity cost, it was over 5cpm....
Redeeming points for domestic US travel can absolutely be worth it for last minute travel and is a bit of a sweet spot - Ben has mentioned it before. Is it an exciting way to use points? Hardly, but when I had a family emergency last year I was much happier to spend 9,000 AAdvantage miles to travel the next day than shell out $694. Even factoring in the opportunity cost, it was over 5cpm. If I’m traveling on short notice I have gotten in the habit of checking to redeem miles - those last minute redemptions are widely available on AA and AS with either of their currencies.
I agree on that point @Timtamtrak. While QF almost never has award flights on its own metal when cash fares are high, in the US recently AA was offering a PHX-LAX flight four days out for $AU509 (booking with an AU credit card AA redirects me to their AU site and charges in AUD) but I was able to book it with 9,200 QF points + $US6, not a huge return per point but way...
I agree on that point @Timtamtrak. While QF almost never has award flights on its own metal when cash fares are high, in the US recently AA was offering a PHX-LAX flight four days out for $AU509 (booking with an AU credit card AA redirects me to their AU site and charges in AUD) but I was able to book it with 9,200 QF points + $US6, not a huge return per point but way above either my cost of acquisition, or Ben's (or others') assessed 'fair' value.
[The $509 was the 'standard' Google fare across the market on the day.]
I've paid myself back last year at a measly 1.25 cpp but that refrigerator will bring years of service and made my wife happy. Doesn't hurt that I have a ton of UR points that are just sitting there after the redemption so why not. A little weird you felt compelled to post about it but content I guess. Points should be used in whatever way makes you happy
Another consideration is refundability. By using points, in many cases there is no fee to cancel the flight as taxes/fees are refunded and points/miles are credited back to your account. Paying cash for a fare, unless a full fare will leave you with a loss, perhaps a credit (with an expiration date) at best.
Only the case with some ffp. Eg Avios, Virgin Atlantic, Aeroplan, etc unless you are elite flier with that program.
When it comes to tickets worth four-figure sums, a canx fee in the €50-$100 doesn't really move the needle unless we're talking purely speculative bookings.
*in the €50-$100 range
Ben - roughly what are your total Chase/Amex/Bilt/Citi/Cap One points balances?
IMHO this is a key question; folks with very high points balances likely in practice value each point less than those with fewer.
i have a respectable collection across currencies, but "running out" of any given currency is still a real possibility for me, so i'm hellbent on getting at least 2cpp for most currencies; meanwhile, i suspect those with seven-figure balances in multiple transferrable currencies can afford to be less dogmatic.
@digital_notmad , I fully agree with this but the opposite is also true when it comes to points with hard expiry dates. I value the points I got from the SAS millionaire challenge at a fair bit less than my *A points because I know I have to use them up by the end of '29.
I’ve always found it interesting how those who try to apply a monetary value to points will value transferable points higher than any of the loyalty programs they can transfer to.
While I understand the value of the flexibility and opportunity cost, the pure accounting valuation doesn’t always make sense.
If we assume the values to be true and people to make rational economical decisions, someone should we willing to pay up to .4...
I’ve always found it interesting how those who try to apply a monetary value to points will value transferable points higher than any of the loyalty programs they can transfer to.
While I understand the value of the flexibility and opportunity cost, the pure accounting valuation doesn’t always make sense.
If we assume the values to be true and people to make rational economical decisions, someone should we willing to pay up to .4 cents more to use their Amex card than their United card (assuming no point multiplier).
As some business have started to pass on interchange fee (already common abroad but more so in the US) this isn’t an unrealistic scenario as Amex almost always charges more than Visa.
So really the question is really how much more would you pay for the same good/service to earn the same number of transferable points vs a hotel/airline point?
I feel the exact same way. Sometimes you just don't WANT to spend X in cash and are content to redeem points at a (theoretically) sub-optimal rate just to spare you the wallet hit. Especially if you have the ability to rack up a lot of points
Exactly right. I've gotten a couple of cherry-picked redemptions in the past but there have also been a few times where I was just happy to save on some (not-insignificant) out-of-pocket flight or hotel costs.
James K.: You've described my view better than I can. And Steve K's point on refundability is a good one.
Agreed - the refundability adds extra value
“I always tell people that they should redeem points for anything that makes them happy” - I think this is a very important point. My trip to the Middle East starts tomorrow, and I had booked QSuites LAX-DOH for 140k Avios. Was that the best value for the flight? Nope. But it allows me to leave on a Friday and get to try out a new product (and also get me there with one stop...
“I always tell people that they should redeem points for anything that makes them happy” - I think this is a very important point. My trip to the Middle East starts tomorrow, and I had booked QSuites LAX-DOH for 140k Avios. Was that the best value for the flight? Nope. But it allows me to leave on a Friday and get to try out a new product (and also get me there with one stop from PHX). I already had my return booked, so I didn’t waste much time thinking about it.
In the end, no saver fare ever opened up for this week (other than flying AA), so I’m glad I didn’t hesitate.