Selecting your credit card portfolio is the first step in creating a thorough credit card rewards plan.(Photo : by Justin Sullivan/Getty Images)
Selecting your credit card portfolio is the first step in creating a thorough credit card rewards plan. Ideally, you should have a variety of cobranded cards connected to your preferred hotels and airlines, general travel rewards cards with transferable points, and perhaps one or two balance-transfer credit cards with cash back.
You should choose the best way to utilize your points when you've accrued them on different cards. Certain redemptions are better than others, enabling even a modest collection of points to be used toward a luxurious hotel stay or a long-distance ticket.
Credit card rewards come in different types, and their value can vary significantly depending on the program and redemption method. For example, the value of points from programs like Chase Ultimate Rewards®, Marriott Bonvoy®, and Hilton Honors can differ. To determine the value of points or miles for a particular redemption, such as a flight or hotel stay, divide the cash price by the number of points or miles required.
For instance, using 50,000 SkyMiles® to purchase a $500 plane ticket gives a value of one cent per mile. It's important to note that different points and miles offer varying levels of flexibility in their redemption options.
Fixed value rewards are straightforward, offering a set value for points when redeemed for cash back, travel, gift cards, statement credits, or shopping purchases. These values are explicit and unchanging, though they might vary by redemption type.
For example, 10,000 points could equate to a $100 statement credit or $150 towards travel booked through the issuer's portal. In contrast, variable value rewards, commonly used by hotels and airlines, fluctuate based on factors like distance, property category, or travel seasons. This dynamic pricing model requires more effort to find valuable redemptions since many programs no longer use fixed award charts.
Transferable points add another layer of flexibility, allowing cardholders to move points from their general travel rewards card to various hotel or airline loyalty programs. Popular transferable points include American Express Membership Rewards®, Capital One Rewards, Chase Ultimate Rewards®, and Citi ThankYou® Points. These points can be redeemed at a fixed value through the card issuer's travel portal or transferred to a loyalty partner for potentially higher value.
Understanding these partnerships and transfer options is crucial, as transferring points is typically beneficial if the value exceeds the fixed rate offered by the travel portal.
Regardless of the method you select, you may minimize your out-of-pocket expenses by financing a trip using points and miles. You can't put a figure on traveling the world and enjoying your ideal vacation, even if you aren't getting the most out of your points. To find out if you're getting a decent bargain, though, you might want to perform some arithmetic if you're working with restricted points.
Points and miles can be highly subjectively valued, so what could be a fantastic redemption for me might not be for you. Consider your travel preferences and financial objectives when determining whether to use your points or charge a trip to your credit card to earn more points.
The content provided on MoneyTimes.com is for informational purposes only and is not intended as financial advice. Please consult with a professional financial advisor before making any investment decisions.
