Transferable points from banks remain one of the most type of flexible rewards – because you can usually use them in an unlimited number of ways including transferring to airlines and hotels. There are, of course, other ways including redeeming them for cash back or gift cards (something you should never do).
Most banks now also integrate their points with some sort of online travel agency in order to provide the ability to redeem your points directly for flights, hotels, or car rentals right from the bank’s website – with no transfers to airlines required. While most people think *this* is how you book flights with miles/points, it actually isn’t… however, in some cases you’ll come out ahead using your points this way instead of transferring to an airline. Usually when the ticket is cheap.
Cash/Revenue Ticket vs. Award Ticket
A cash or revenue ticket is an airline ticket that is paid for directly using “cash” and not “true” airline miles. Cash tickets come with a bunch of restrictions and high fees for changes or cancellations. Some of the cheapest tickets are non-refundable and/or non-changeable.
An award ticket is an airline ticket paid for by airline miles directly with that airline. This means you must buy this ticket directly with the frequent flyer program of the airline where you have your miles. Award tickets come with taxes and fees and sometimes fuel surcharges (depending on the frequent flyer program and operating airline). The base fare of the award ticket is covered by the miles. Most airlines use a “zone” based award chart – meaning the cost of your itinerary is determined by the departing zone and arriving zone (for example, North America – Europe). Some airline frequent flyer programs use a distance-based award chart, which means you’ll need more miles if you plan to fly further. Then there are the awful programs that are revenue-based which means the cost of the ticket in miles will be tied to the cost of the ticket in cash.
Value of Bank Points
Most of the biggest banks with transferable points value their points at 1 cent each. This means that if you decide to redeem your points directly with the bank, 1 point = 1 cent. This can be applied to cash back, gift cards, merchandise, etc. If you transfer your points to an airline or hotel, then the value will be determined by how you use those points in that program.
Some banks increase the value of your points if you have a premium credit card (usually with a higher annual fee). For example, if you have the Chase Sapphire Reserve, you can redeem your points towards travel directly through Chase at a value of 1 point = 1.5 cents. That means that a ticket costing $150 will cost you 10,000 Chase points. If you have the Chase Sapphire Preferred, the value is 1.25 cents, which means a ticket costing $125 will cost you 10,000 Chase points. This is all if you redeem your points directly through the Chase travel portal.
Redeeming for a Cash Ticket vs. Award Ticket
Let’s use United Airlines as an example, with the following (sample) flight information:
- route: Seattle – San Francisco
- class: Economy Class
- ticket cost: $250 USD one-way if booked last minute
- ticket cost: $99 USD one-way if booked at least 21 days in advance
- ticket cost in miles: 10,000 United Airlines miles + $5.60
- if booking less than 21 days before flying, additional $75 fee for non-elite members
In this case:
- Booking closer to Departure: $250 or 10,000 miles + $80.60
- Booking in Advance: $99 or 10,000 miles + $5.60
Let’s assume you have the Chase Sapphire Reserve and your Chase points are worth 1.5 cents each. If you decide to redeem your points directly for the flight through the Chase portal (redeeming for a cash ticket), it will cost you:
- $250 = 16,667 Chase points
- $99 = 6,600 Chase points
If you are booking the flight in advance and it costs $99 in cash or 10,000 miles + $5.60 if booked using miles, here you come out ahead if you book your flight directly with Chase as you will pay 6,600 Chase points. If you were to transfer to United, you would have to pay 10,000 miles + $5.60… subject to award availability.
If you are booking in advance and the flight costs $250 in cash or 10,000 miles + $80.60 if booked using miles, you will want to consider what to do if you are a non-elite member and will be paying the $75 close-in booking fee. The flight will cost 16,667 Chase points if redeemed directly through the Chase portal or 10,000 miles + $80.60 if booked using United miles. Are the extra 6,667 points worth the $80.60? If you have the Chase Sapphire Reserve, the 6,667 points are worth $100.005 and therefore you are still better off redeeming directly with Chase.
What happens if you don’t have to pay the close-in fee? Then it would be either $250 in cash or 10,000 miles + $5.60 if booked using miles. In this case, you will want to transfer to United and book using miles as you will be paying $5.60 to save 6,667 points, which is a great deal.
You should always check whether the ticket is cheaper and you’d be better off just redeeming bank points for the flight directly instead of transferring to a frequent flyer program and then booking the ticket as an award ticket. Award availability is generally better closer to departure as airlines will open up their unsold seats for award tickets and therefore if you are redeeming a few days before the flight, usually award tickets will make more sense.
If you are booking in advance and the ticket is on the cheaper side you should firstly consider if you want to use any points at all since the ticket is so cheap (you might want to save your points for a bigger trip). If you still decide to use points, you should check both the cash ticket and award ticket options and then see which one is a better use of points.
Remember that cash tickets paid for with points through a bank directly are still cash tickets which can earn miles (depending on the fare class), but also remember they come with a bunch of restrictions and high change and cancel fees!
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