Maximise Reward Points

Reward points and air miles can feel like a foreign currency when you’re starting out – there are so many different schemes with their own rules, value and transfer rates. The difference between the best, and worst, value redemptions on some points can be significant – in fact, the best redemptions can often be worth about twice as much as the worst. Here are some quick tips for making sure you head towards the best value:

1. Collect transferable points.

If you’re primarily collecting points on every data spending, rather than through frequent use/loyalty, then opting for a transferable scheme will give you the most flexibility and potential for value. Particularly if you’re new to collecting points, this will give you more options and a better chance of maximising their value.

The most flexible points are American Express Membership Rewards points – these can be transferred to wide range of travel and shopping schemes. Some of the schemes they transfer to offer a decent amount of options themselves, for example Nectar and Avios points can be used with multiple brands, however unless you’re getting a significantly better offer (for example because you’ve already had the Preferred Rewards Gold Card bonus and can get better value with a bonus on the BA or Nectar Amex), then you’ll likely be better off starting with Amex points. The main reason for this is that, with most schemes other than Amex it’s either impossible to transfer back out, or impossible to do it without a serious reduction in value.

2. Don’t transfer your points until you’re ready to use them

This is one of the golden rules for transferable points. No matter how likely you think you are to use your points with a specific partner scheme in the future, unless there’s a bonus transfer offer available (which would be unusual), you are far better off leaving your points where they are.

The main reason for this is the potential for devaluations in a points scheme – this is typically where the points prices for a specific scheme are re-aligned so that you need more points to get the same room, flight, etc. If you’re holding thousands and thousands of points with one partner scheme and this happens, then your points could suddenly be worth significantly less.

In addition to this, there’s also the matter of flexibility. Let’s say you hold all of your points with one of Hilton or Marriott, and then when you come to book a trip they have no rooms available, or so few that the points price is ridiculously high – there’s little you can do with those points, unless you’re willing to change the location you’re staying in. However, if your points are still held with American Express, then you have the option of checking points redemption options for a whole host of other hotel schemes with properties in the same area.

The only time you’ll be at a disadvantage doing this, is if you suddenly want to use your points for an offer immediately and risk missing out whilst waiting for them to transfer. Points transfers can take 1-2 days (longer if the accounts aren’t already linked) and the scenario where it’s most likely to cause difficulties is where a special experience offer suddenly becomes available. For example recently Marriott suddenly reduced the points price for VIP tickets to see Counting Crows at O2 to 15,000 points. To me this seemed like a great deal, and I have a healthy balance of Amex points – however, by the time I’d looked at transferring, they’d sold out! The problem with holding points for things like this though, is you don’t necessarily know that the offer is coming, or which scheme will have the offer.

3. Do the Maths to check your redemption value.

Before transferring and redeeming points, it’s always worth checking the maths on your plan. In simple terms, you want divide the cash price by the points price – this will give you the value you’re getting per point. You can then check this against information about a) the value of the transferable points and b) the value of the points in that scheme.

So, for example, if I am considering moving American Express Membership Reward points to Hilton Honors points for a hotel booking:

Let’s say the redemption for the room I want is 30,000 Hilton points.

The transfer rate from Amex is 1:2, so I need to use 15,000 Amex points.

The lowest cash price is £120

I would divide the £120.00 by 30,000. This would give me a Hilton Honors point value of 0.4p per point and in turn an Amex Membership Rewards point value of 0.8p.

One Hilton Honors point is normally worth around 0.33p and whilst it’s possible to get 1 p per Amex point, 0.8p isn’t dreadful, so this would be a relatively decent value redemption – especially for an Amex to Hilton Honors transfer.

See this useful post from Head for Points about expected point values: Head for Points

4. If you have a plan for your points, consider whether there’s a better value way to achieve it.

It’s a great to be able to make a plan to treat yourself using points you’ve acquired from every day spending. I often think that planning a trip is half the fun and find myself testing how realistic a points target, for a flight or hotel I couldn’t otherwise afford, is!

In particular I think this helps me to be more disciplined about organising spending and getting the maximum rewards back – i.e. applying for and spending on the best cards available. However, sometimes it’s worth considering whether there’s more than one way to achieve your plan and this might mean that you get better value using the points for something you would be paying for anyway, and using the cash for your trip.

Normally, especially with Amex points, you’ll get a better redemption for most travel options than for a shopping, statement credit, etc. This means the main decision might be whether to use points against the flights or the hotel for example. However there are some exceptions, for example no matter how much you want to use your points for a specific trip, if you do the maths and are getting less than 0.45p per Amex point, you’re better off just paying for the trip on your card and then taking the statement credit. I also recently touched on the fact (see here) that if you use Nectar points to book via Expedia, then if you can see a better price elsewhere you might just want to use the points for fuel/groceries, and the cash you save for travel.

If you’d like a referral for any American Express card use my link for additional bonus points (click here) (scroll down to see all cards)

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N.B.. Disclaimer: This is an amateur, personal blog. Nothing here should be construed as financial advice, and it is your own responsibility to ensure that any product is right for your circumstances.

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