Choosing a Redemption Method

Redeeming points and miles can be almost as daunting as how to earn them. Just like everything else in this trade, how to best redeem your points and miles differs by person. Below are some of the most common ways in which points and miles can be redeemed.

• Statement Credits

• Cash

• Gift Cards

• Cover Travel Expenses

• Transfer Partners

Most credit card companies value points and miles at 1 point per cent (PPC). This means that you can generally redeem 10,000 points/miles for $100.00. Depending on the card issuer, you may be allowed to apply this as a statement credit, or you can have the cash value transferred to a bank account on file.

While this might seem tempting, the true value of points and miles comes when you transfer your points to partners. Each credit card company has its own list of transfer partners. Some transfer partners are unique to specific credit card companies, while others are transfer partners to multiple (or all) of the major credit card companies.

Hyatt, for example, is well known for its strong value for award redemptions. Rooms can range from 7,500 to 45,000 points per night, making this a great option for those looking to book multiple nights for an award stay. Only two card companies currently transfer to Hyatt - Chase and Bilt - making them valuable transfer partners.

Likewise, there are programs that are common transfer partners to the major credit card companies. Capital One, Chase, Citi, Bilt, and American Express all transfer to AirFrance. While this can lead to higher redemption prices for AirFrance, it can also make it easier to combine points across ecosystems to make the award redemption. For example, when I was booking two round-trip business class seats to Italy on AirFrance for my honeymoon, I didn't have enough AMEX MR points alone to book the flights. I was able to transfer an additional 20,000 Capital One points to top off my AirFrance Flying Blue points to complete the redemption.

Choosing the Best Redemption Method for You

There are several factors that go into determining what the best way to redeem your points and miles is. The first thing to consider is your goals. A few questions to consider -

• Are you hoping to redeem your points for an upcoming trip?

• Do you prefer to get a statement credit to help offset the cost of home renovations?

• Do you prefer straightforward redemptions, or are you hoping to maximize the value of your points/miles?

• Does it make more sense to purchase the flight or book the hotel room with cash, as opposed to using your points?

If you value ease of redemption over maximizing value, opting for cash back or statement credits is likely the best approach. Redeeming points/miles for gift cards can also provide good value, especially when credit card companies have special offers that allow you transfer the same amount of points or miles but get a higher value at specific merchants.

For those looking to maximize value, it's important to define what the value actually is.

Calculating Value

One way to help determine if a redemption is a good use of your points or miles is by calculating what's called the Cents Per Point (CPP). The CPP is calculated by taking the cash price of the redemption and diving it by the number of points redeemed.

For example, if the cash value of a flight costs $900 or 50,000 points to redeem, the CPP would be:
$900 / 50,000 =$0.018, or 1.8 CPP

There are a number of different valuations out there for the different credit card points and miles ecosystems. Often considered the standard valuation is The Points Guy, which updates their valuations monthly. If you are deciding whether it's better to purchase the flight outright at the $900 cash value or to use your 50,000 points, you can compare the CPP to the valuation of the points program.

For instance, if you were transferring 50,000 Bilt points, you would see at the time of publishing that the valuation for Bilt is 2.05 CPP. The 1.8 CPP for the flight redemption would be below the points valuation. Typically this indicates that it is better to pay the $900 rather than use the 50,000 Bilt points. On the other hand, transferring 50,000 Wells Fargo points valued at 1.6 CPP would generally be considered a good redemption.

Of course, value is also subjective. While you can calculate the CPP for each redemption, there are other factors to consider like convenience, whether you have the cash on hand (or if you want to use the cash) to make the purchase, and whether you value a certain ecosystem's points more or less than others may.

The general rule of thumb tends to be that a "good" redemption is at or above the CPP valuation, and to also strive to get at least 2 CPP when possible. Again, this is subjective. If you are family of 4 and redeem points at 1.5 CPP but book a vacation you otherwise couldn't afford, then I tend to think that's a good use of points. Being mindful of ways to maximize value doesn't mean you should ever feel less excited or proud for redeeming points or miles in a way that's valuable to you, regardless of the CPP.