If you buy things and don’t carry consumer debt (think Credit card or payday loans) you should be earning points and miles. But that’s an anodyne. Not all points and miles are made equal. So how does one decide which points and miles are the best? That depends on your specific situation.
First, some basics:
- Points (or miles) are a proprietary currency issued by banks or travel providers – airlines and hotel companies – as a reward for your loyalty to them
- While everyone calls them points (usually banks and hotel companies) or miles (usually airlines), they aren’t the same. Some offer better values than others
- The best currency is the one that let’s you go where you want, when you want. Having a target or a travel goal in mind is the best way to get started
- Points and miles have an acquisition cost and a use cost. More on that later
How does one acquire points and miles?
This one is easy. There are basically up to 4 ways to earn points and miles:
- Travel – Travel providers like airlines and hotels award miles for every travel completed with them
- Financial Relationships – Using credit cards and other financial instruments, and/or maintaining accounts with affiliate banks and institutions
- Referral Click-throughs – Using travel company affiliated shopping portals (see this, or this), Dining portals (see this)
- Others – American airlines offers miles for using an affiliated real estate agent to buy or sell a house
Not all currencies offer all for ways to earn, but those that do fit in to the above buckets.
Do points/miles cost anything?
People refer to the use of points and miles as “free travel.” Here at Read Many Pages, we prefer to account accurately for what these cost. For every point or mile you acquire using any of the above four ways, you are likely forgoing something else. For the sake of simplicity, I will restrict this to the two main ways of earning miles – travel and financial relationships.
When you choose a specific travel provider over another for paid travel, you consider a number of factors:
- Ease of use – Are the flights nonstop or require you to connect? Is the hotel the most convenient to where you plan to go?
- Comfort – Does one provider offer you a better experience over another?
The incremental cost of using a sub-optimal provider to accrue miles or points in your preferred currency is the cost of each mile acquired. This is usually quite hard to put a value on when time is not of the essence. However, if you chose to fly to a destination via a layover with your 2-year old instead of non-stop just to get the miles in your preferred currency, you have incurred a cost. Quantifying that cost is important.
Most of this blog’s core readership will earn miles and points from credit cards. This is also the most important place to account for the cost of points/miles acquired.
Several cards (See Citi Double Cash, Fidelity Rewards Visa) offer unlimited 2% cash back. As such, at Read Many Pages, we hold the minimum cost of acquiring points and miles at 2c per dollar charged. If you card offers you 1pt/$, you just “paid” 2c for that point. As you educate yourself more on this topic, you will see that seldom is a point consistently worth 2c.
A key takeaway from this discussion is never earn 1pt/$. At that point, you are far better off earning 2% cash back on your credit card spend.
So what points should I accumulate?
There are many different answers to this question based on your unique situation. However, the closest thing to a one-size-fits-all answer is to earn “transferable points.” These points are transferable to a variety of travel providers and provide the flexibility to consider multiple options that individual airline miles/hotel points do not provide.
There are 4 transferable currencies that are most useful for points and miles enthusiasts:
- American Express Membership Rewards (MR)
- Chase Ultimate Rewards (UR)
- SPG Starpoints
- Citi ThankYou Points (TYP)
I will blog about each individual currency in separate blog posts.
Earn and Burn
Points and miles are proprietary currencies. They are issued and can be used with one and only one company who essentially sets its worth. This means that your points are uniquely susceptible to devaluation. This devaluation can be both arbitrary, and severe.
The best points and miles strategy is to accumulate points and immediately liquidate them to meet your travel goals. Hoarding points is almost always a losing proposition.
One should always maximize the value received from their spending, and points and miles are an excellent avenue to doing this. The most important advice that anyone can offer is that you earn transferable currencies when doing so, especially when first starting out in this hobby.