Why I Sometimes Redeem My Points For Less Than I Value Them

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.

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.

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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?