Miles and Points for Newbies
The miles and points hobby is NOT for dummies. Its complexity can seem staggering, in part because the most rewarding opportunities are often most complicated. This guide aims to bring an intelligent and diligent newbie up to speed, able to comprehend and benefit fully from discussion forums and blog posts.
This summary was written by Cpi-Web member nsx for US residents, who have access to generous bonuses for opening new credit card accounts. It was also written for people who do not fly extensively, or who if they do are already familiar with their airline's extra benefits for elite (ultra-frequent) fliers. Non-elite members can get a lot of value out of loyalty programs. This article is for them.
- 1 What can you do with miles and points?
- 2 Credit Card basics
- 3 Bank points
- 4 Airline points
- 5 Diversification
- 6 Keeping current on hot news
- 7 Advanced topics
What can you do with miles and points?
Miles and points are not an exact replacement for paying cash for travel. For one thing, flights and hotels are less than half the total cost of a typical trip. For another, the best feature of miles and points is that you can get some things you couldn't afford at the cash price, such as (1) ability to cancel (and redeposit points) at relatively low cost and (2) business and first class travel at 2x to 3x the points price of coach rather than 5x to 20x the cash price of coach.
Credit Card basics
For US residents, the cheapest way to earn miles and points is through credit card signup bonuses. As a general rule, you should only apply for a credit card when the signup bonus is worth at least $500. Most miles and points are currently worth 1.2 to 1.6 cents each, so a 0,000 point signup bonus meets that criterion. A 60,000 to 100,000 point bonus is better.
Example: Chase Sapphire Reserve, a Visa Unlimited card.
Chase made a splash introducing this card with a 100,000 point bonus earned by spending $4000 in the first 3 months. The card rebates $300 per year in travel expenditures, mostly offsetting its $450 annual fee. It also rebates up to $100 every 5 years spent on Precheck or Global Entry.
It offers a free Priority Pass lounge membership and National Rent a Car Emerald Club Executive membership. Cardholders can use their points to buy travel at 1.5 cents per dollar, providing good value without the search for award seats. Don't let the $450 annual fee frighten you. The 100k signup bonus is worth $1500, and the other benefits roughly break even on the $450 annual fee. The next time the 100k bonus appears, this is a card to get and keep.
What if you don't have $4000 of charges to make in 3 months? The
signup bonus makes it worthwhile to pay a fee (about 2%) to use your
card for non-traditional expenses like income or property tax
payments. You can prepay many utility bills for the next year or more.
Medical and dental bills can often be paid with the new card rather
than the default auto-payment you may have set up. You can buy gift
cards you are sure to use, such as for Amazon. In a pinch, you can buy
a refundable airline ticket or tickets for travel in the distant
future. Then, when your other spending has caught up, you can refund
the tickets in lieu of paying off your new spending. Do NOT buy
business class or first class tickets for this purpose. Airlines hate
having that inventory tied up by people who plan not to fly. They
might even confiscate all your miles.
Most credit card offers are best utilized by earning the signup bonus
and canceling near the end of the first year.
However some cards, like the Chase Sapphire Reserve, are worth keeping.
For example, United currently offers a 70k bonus to many members
(login at united.com to see your offer, currently 50k or 70k).
The United Explorer card offers a free checked bag if you use the card
to buy your ticket, and it offers improved Saver award seat
availability, which is kind of a big deal. In short, if you fly the
airline the card pays for its $95 annual fee.
Bank restrictions: Don't get too greedy
For many years people applied for credit cards without any constraint
other than their credit rating. Some people collected hundreds or even
thousands of canceled credit cards. Those days are over. The banks got
smarter. Note the "er".
Each issuing bank has its own rules, but I will focus on Chase. Chase
issues most of the so-called affiliate cards which earn points or
miles. Chase is the big dog. You do NOT want to get on Chase's fecal
Chase has done us the favor of spelling out its criteria for approval, known as 5/24 for short. If you have opened 5 or more bank credit cards in the last 24 months, you will be denied. Four or fewer and you will be approved if everything else is OK. Store cards don't count, but authorized user (secondary) cards on someone else's bank card account DO count. So being added as an authorized user can cost you a $500 opportunity. Don't do it! Business cards (i.e. applications in the name of your small business) don't count unless they are Chase cards.
I recommend focusing on Chase cards, leaving room for the occasional
great deal from Citibank or American Express. Keep a spreadsheet of
your application dates. When you pass the 24 month mark, wait until a
few days into the next month before applying for your 5th card.
If you are applying for a card you have had before, another Chase rule
says that if your application date is not at least 2 years after you
received a bonus on the same kind of card, you will earn no bonus on
the new card. Chase will approve you but there will be no soup for
you. So in addition to card opening dates you need to track bonus paid
out dates in your spreadsheet. As a practical matter, you can't earn
the same bonus (e.g., United Explorer) more often than every 26
My advice is stay well clear of the bright lines that Chase has drawn.
You never know when they will choose to tighten the lines for all your
new applications. Chase has also been known to blacklist customers
that it suspects of creating risk for the bank. If you engage in
manufactured spending, which means buying reloadable gift cards or
other financial instruments which can be converted into money to pay
your credit card bill, you are in dangerous territory far outside any
bounds I recommend. Many, many people who thought they were within the
rules doing manufactured spending have been totally banned by Chase
when the rules tightened. Don't follow that example.
Citibank has a stricter rule than Chase for repeat bonuses. You need
to wait 2 years after CLOSING your account to apply again and be
eligible for the same bonus.
Which miles and points should you collect? Strong and weak points of each program
Chase Ultimate Rewards
Chase's points, called Ultimate Rewards (UR), are the best. Transfer
where you need them when you need them. You need a Chase Sapphire or
Ink (which is a business card) card of some sort to be able to
transfer UR points to airline and hotel programs. Just a Freedom card
will not do it.
UR points don't expire unless you close a Chase credit card before
transferring the points to another Chase card.
Chase's Freedom Unlimited card (not the same as the Freedom card) has
no fee earns 1.5 points per dollar on everything. The ideal
combination is Freedom Unlimited and Chase Sapphire Reserve (the $450
card). You spend on the FU card, transfer the points to the Reserve
card, then spend them at 1.5 cents each for travel or transfer them to
an airline program. This way you get 1.5x1.5 = 2.25 cents of value
back per dollar of spending.
Cit ThankYou points
Many transfer partners to maximize value; generally viewed as slightly less valuable than Chase UR.
American Express Membership Rewards points
The list of airline partners is relatively short and they are airlines with less valuable miles. For example, British Airways is notorious for charging large fees on award tickets, almost equal to deeply discounted coach ticket prices. Delta redemption pricing is opaque and almost never favorable.
Other bank points
I don't recommend collecting other bank points. They cannot be
transferred to airlines. They are just a rebate, which Chase Freedom
Unlimited or Citi Double Cash cards will beat without the hassle and
Almost all airline points expire. You absolutely MUST keep a
spreadsheet showing your balances in the various programs, last
activity dates, and when they expire. Excel's date functions can
calculate the expiration date from the last activity date. Conditional
formatting can turn the cell yellow or red depending on how close the
expiration is to the current date.
Alaska Airlines is a great choice for actually buying tickets and
crediting flight miles. As of 2017 most other airlines award points
based on dollars spent, not miles flown.
Alaska has a good set of partner airlines for Fiji and Australia
You can't transfer Ultimate Rewards points to Alaska. One of the best
current options for transfers to Alaska is the Marriott Travel Package (Google it).
United miles give you the best availability between US and Europe with
no non-government fees charged. There is a $75 fee for booking less than 3 weeks in advance and a $125 fee for canceling and redepositing. Expiration is 18 months.
Transfers from Chase Ultimate Rewards are instantaneous, so you don't
need to maintain a United miles balance to be able to redeem United
British Airways Executive Club
BA calls their points Avios. Points prices are distance-based, with pricing fixed within each mileage band. Award flights are priced separately for each flight, such that a trip from A to C with a change a B will cost the same whether or not you extend your stopover at B.
BA charges absurd fees on their "free" tickets, often totaling nearly
the price of a deeply discounted coach ticket. However you can still get a reasonably good deal on some flights on other airlines using Avios. Currently there are no extra fees on American Airlines flights within North America, for instance. Flights within Africa are also a good deal. All these options require Saver award level availability, which is scarce on American Airlines these days. AA award seats do tend to open up within a week or so before the travel date.
BA currently charges no late booking fee, so Avios are a good choice for obtaining a saver seat on American Airlines less than 3 weeks ahead. BA gives you access only to the cheapest saver seats on AA, and those are becoming rarer.
If you cancel your Avios booking of an AA flight within the US more than 24 hours before the flight you can have your Avios redeposited at the cost of only the $5.60 security fee. This nearly free cancellation option can be quite valuable.
I recommend having a British Airways account with a small amount (30k to 50k) of points for use on last-minute short AA flights without plane changes.
Delta has no published award ticket prices, so it's hard to find any great deals using Delta miles. The one bright spot is that Delta does not charge any late booking fee. Unfortunately they rarely open their cheapest award flights less than 3 weeks ahead, creating something functionally equivalent to a late booking fee. Cancellation of an award ticket less than 72 hours before departure forfeits all the miles with no redeposit possible even for the normal $150 fee.
AAdvantage miles are generally good for Asia, sometimes for US domestic flights and the Caribbean and South America AA has British Airways as a partner, and almost all award flights to Europe are on BA. These carry huge fees. If you are very lucky you may find award space on an AA flight to Europe. Then the fees are very low. Fees are also low via Madrid on Iberia.
Southwest Rapid Rewards
Redemption prices are tied to cash ticket prices. Because most taxes are not charged on award tickets, points have the highest value when the cash fare is lowest. Never redeem for Anytime or Business Select due to confiscatory points per dollar rate.
Points tickets are fully refundable to your points account. In effect they make a nonrefundable fare refundable and not locked to one passenger. Cash tickets are locked to one passenger and travel must be completed within one year of the original purchase date.
Points redemption is especially valuable when the passenger might not take this trip or any other trip on Southwest in the next several months.
If you have the Southwest credit card you are allowed to redeem your points for Amazon gift cards at 1 cent per point. Not a great deal, but better than a kick in the head.
You can transfer points to Southwest from several hotel programs, notably Choice, Hyatt, and Best Western. However those transfers don't count toward Companion Pass qualification after March 31, 2017 so there's no compelling reason to make such a transfer.
Ultimate Rewards point provide virtual diversification, allowing you
to pick your airline when planning a particular trip.
Aside from that, some Alaska and AA miles (not UR partners) are valuable
Southwest points are useful, but you can always transfer to Southwest from UR.
Keeping current on hot news
Monitor DansDeals or One Mile at a Time or View from the Wing once or twice a day for opportunities to earn and redeem miles and points, and for warnings or notification of adverse changes to programs. Be aware that these sites earn $100 or more for their owners every time someone uses their links to open a new credit card account. Therefore they tend toward excessive enthusiasm about applying for credit cards.
Monitoring blogs and reading the details on Cpi-Web allowed me to avoid most of the damage when British Airways changed its program in 2011 in without revealing the new program to members in advance. Blogs also altered me to short-lived opportunities to obtain summer business class saver seats to Europe, which are normally quite scarce.
I use ighome.com to integrate RSS feeds from a few travel blogs and other blogs, presenting all the headlines on one page.
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