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This topic may be a bit of a beginner’s post, but it still comes up quite a lot whenever I am talking to people about miles and points, whether that’s friends and family, or on the Points With a Crew miles and points Facebook group (free to join if you haven’t already!).
I think the hardest thing for many people who are new to miles and points to understand is this difference between points that act as cash, and miles and points that are their own types of currencies. Let’s take a look at both types of points
The easiest one for most people to understand is points that act like cash. That’s how most people start out using their points.
Some examples of this are the Barclay Arrival card, Capital One Venture Card, or using your Chase Ultimate Rewards through the Chase Ultimate Rewards portal. They give You can find some links to those in the cashback cards of our top credit card offers page
“Cash” points are almost always not tied to any specific airline or hotel. For specific airlines or hotels, the only points that are cash points are programs like Southwest Airlines, JetBlue or Virgin America, where the value of a point is directly correlated to the cash cost of a ticket. Even then it’s not quite the same because it’s tied to a specific airline.
While this can be great, it also means that you won’t get any type of outsized value from these “cash” points. They typically are worth what they’re worth; no more and no less.
These types of cash also needs to be weighted against a 2% cash back card like the Citi Double Cash card, which would be my baseline for most day to day purchases. 2% cash back cards are similar to “cash” points but they’re different because they actually ARE cash, which can either be good or bad, depending on how you look at it.
The other type of miles and points act as their own type of currency.
Slightly different are some of the bank points, such as American Express Membership Rewards. While you CAN use these as cash (typically for 1 cent per point) for things like statement credits, you will get much more value by using them to transfer to their transfer partners, such as the current 30% bonus transferring American Express Membership Rewards to Virgin Atlantic.
The key takeaway is that “points” points operate on their own award chart, and (usually) have no relationship to the cash cost of a ticket. One big example of this is getting hotel rooms during big events like the Super Bowl. I wrote a post about scoring Super Bowl hotel deals and here is one example
That Residence Inn is a Category 3 award, which means it costs 15,000 points / night on the Marriott award chart (this stay was for 2 nights) no matter what time of year it is. During Super Bowl weekend, the hotel raises the cash price but the Marriott points rate stays the same. It doesn’t matter that the cash cost is $899 / night (!). The cash price is irrelevant – because Marriott points are spent on the MARRIOTT award chart, which says it’s always 15,000 points / night
Why the difference matters
With “cash” points, you are usually going to get the same amount of value for your points, no matter where you spend them. If you have a stockpile of CapitalOne Venture points, or Barclay Arrival points or whatever, the trick is to just find the cheapest cash tickets / hotels you can, and then use your “cash” points to pay for it.
That is a fine way to do your travel, and sometimes it’s smart to do that, but it’s difficult to get outsized value from your points this way, since every point gives you the same amount of value
Here are 2 examples
Chase Ultimate Rewards transfer to Hyatt
If you have a premium Chase card, Chase points transfer 1:1 to Hyatt. Once you transfer your Chase points to Hyatt, then they become HYATT points, and are subject to the HYATT award chart. A Category 1 Hyatt hotel costs 5000 points, so you can always book a Category 1 Hyatt for 5000 Chase points by transferring them to Hyatt. You can also book a Hyatt hotel through the Chase Ultimate Rewards portal. If you have a Sapphire Preferred, your points are worth 1.25 cents / points (1 cpp for Freedom or 1.5 cpp if you have a Sapphire Reserve). So your 5000 Chase points can buy you $62.50 of hotel. If the hotel costs more than $62.50 / night, you’re better off transferring to Hyatt. If it’s less than that, book through the portal (setting aside the fact that you don’t earn points on award stays). For Category 1 Hyatt hotels, it’s usually better to transfer
Chase Ultimate Rewards for a domestic flight
Same thing holds if you’re booking a domestic flight. Option 1 would be that you can transfer your Chase Ultimate Rewards points 1:1 to United, and a domestic roundtrip flight costs 25,000 United miles (in most cases). If you book a flight through the Chase UR portal with a Chase Sapphire Preferred, your 25,000 Chase points could instead be worth 1.25 cents each, or $312.50. So again, if your flight costs more than $312.50, it would be best to transfer your Chase points to United, and if it’s less than that, you can book it through the Chase UR portal (as “cash” points).
Similarly with the Chase Sapphire Reserve, except now your points are worth 1.5 cents per point, making your breakeven cost $375
The takeaway is that there are 2 different types of miles and points and they’re good for very different things, and you can’t really compare the two types of points. Learning and understanding the difference between the two is an important step in learning the secrets of free travel.