In our last post we covered how credit cards, if used properly, can bring value to consumers. Credit card companies give points/miles – glorified rebates- to their customers. For the purposes of discussion I will use the words interchangebly, but generally points are specific to a credit card company, like American Express Membership Rewards or Chase Ultimate Rewards, while miles usually come with an airline affiliated card and go directly to said airline’s frequent flyer program.. These points can be valuable little currencies to improve your life and allow you to buy or experience things that you might not otherwise be able to afford. This is great as it improves life at the margin, meaning that it allows you to do something you otherwise wouldn’t and therefore provides a greater return and satisfaction to you. In short, without miles and points you may not take that trip or buy that tablet.
To demonstrate the value of miles and points I will provide two quick examples of how miles work and how you might be able to use them.
Example #1: Shopping:
Below is a sample screen shot from the American Express Membership Rewards Mall. I believe it speaks for itself, but does provide some idea of the kinds of items available.
When one considers that a good credit card sign up bonus is often 50,000 points, and you can apply for multiple cards in a year and link to the same account, these numbers become do-able. Also, American Express offers frequent discounts on the points required for purchasing these items. Moreover, if one pays attention to bonus spending categories (American Express offers 2X points on groceries for its Premier Rewards Gold Card and 3X points on airfare), it can be reasonable to rack up 200k points every few years. As you can see above, that could equate to a fairly high end laptop computer, or at the very least, a Kindle Fire. Not bad at all for signing up for some cards with bonuses and putting spending on the right card. This past year, for example, I received a 50k bonus for upgrading to the Platinum Card, another 50k bonus for the Premier Rewards Card, and a final 50K bonus for the Business Rewards Gold card. As long as you are comfortable with yearly fees and/or cancel the card before the yearly fee comes due, you have some pretty lucrative points to transfer into shopping.
Example #2, Transferring to Airline Miles
Most miles and points experts recommend transferring your points into an airline mileage program, or using a card that directly deposits points in an affiliated airline frequent flier account. AMEX and Chase offer the ability to directly transfer their points into affiliated airline frequent flier accounts, and nearly every airline has some sort of affiliated credit card that gives at least 1 mile per dollar of spending on the card. To see how this can add up, observe the United Airlines chart below:
While perhaps difficult to read, the mileage redemptions should make you take note of the value of your miles. A trip in the US at the Saver level is just 25,000 miles round trip. Therefore, a sign up bonus of 50,000 miles nets two round trip tickets. Again, though many experts recommend shifting to the international first class awards. A Saver level trip in first class between the US and Europe is just 135,000 miles or so, and only 100,000 in business. The retail value of these tickets is in the many thousands of dollars.
Of course, each program is different and each airline may have various availability challenges. Nonetheless, the clear fact remains: you can buy and travel in ways you didn’t think possible all through clever credit card usage.