Tips for diversifying your points

I’m incredibly fortunate to more or less advise people on miles and points for a living, and there’s one issue I’m noticing more and more lately — people are either diversifying their points (and I’m using the term “points” generically to refer to both miles and points) too much or too little.

And this is especially becoming a problem lately because we’re seeing more and more programs make huge devaluations, often with very little notice. These devaluations really shouldn’t come as a surprise, as the travel world is almost in better shape than ever before. Hotel occupancy is crazy high, and airlines are actually doing something called turning a profit, which was previously unheard of.

But the problem I find is that some people either put all their points “eggs” in one basket, while others put their points “eggs” in too many baskets. I get emails from people with millions and millions of Membership Rewards points, while they don’t have points in any other programs. No doubt they were feeling pretty bad about that a couple of years back when Continental OnePass was removed as a Membership Rewards partner, Aeroplan hugely jacked up award rates and added fuel surcharges to partner airlines, and British Airways also destroyed their award chart for longhaul redemptions for those in North America.

Then I’ll get emails from people that cumulatively have 300,000 points, but don’t have more than 50,000 points in a single currency, and are wondering why they can’t redeem for an international first class award ticket when they have 300,000 points. As a result, a 50,000 point sign-up bonus on a credit card might not be worthwhile for you if it’s the only points you’d have in that currency.

So I figured I’d provide a few tips for making sure you’re neither under-diversifying nor over-diversifying your points. I’ll provide these in the context of my situation, as an addictive points collector. Obviously the numbers would differ a bit if you run a business where you’re running a million dollars of spend through a credit card each month, for example.

Never have more miles in an account than you could reasonably burn in the next six months

I have a very simple self imposed rule — if an airline program’s points can’t efficiently be transferred to another program, I aim to have no more than enough points for two premium cabin tickets to anywhere in the world. So generally that means I try to keep my points balances below 300,000 or so. That’s because I know that if a devaluation were to be announced, I could reasonably redeem those points before their value is reduced greatly. That’s actually one of the reason I burn so many American miles for Cathay Pacific first class. I fly American a lot, have a BankDirect account, and have earned a ton of miles through the sign-up bonuses on their credit cards.

Focus on programs with many transfer partners

If you’re going to rack up points without a short term use, accrue those points in a program with multiple efficient transfer partners. By efficient transfer partner I mean when you can transfer points to another program and get at least as much value out of them as you did in the original program.

For me that includes Chase Ultimate Rewards, American Express Membership Rewards, and Starwood Preferred Guest. All have multiple airline transfer partners that are actually often the best uses of those points. As a result I have no problem carrying balances of over 300,000 points in any of those programs.

Focus on programs that can be trusted

The most alarming trend I’m noticing lately are the number of program changes that are made without any sort of advance notice. For a loyalty program this sets a horrible precedent. While it might sound cheesy, that’s why I believe that if you can’t accrue points in a program that has multiple efficient transfer partners, at least accrue them in a program you can trust.

For example, I trust Hyatt Gold Passport, because I trust the people that run the program. I think it’s a given that their top tier redemptions will be devalued eventually, because that’s a side effect of no blackout dates and high occupancy at hotels. But I also know they wouldn’t “pull” a Hilton and literally slaughter their program overnight.

Focus on programs that don’t just have one “sweet spot” redemption

This really is the thing that came back to haunt me with Hilton’s recent devaluation. Up until March, you could book four nights at any Hilton or Conrad in the world for just 145,000 points if you had one of their co-branded American Express cards. I went from not caring about Hilton to having 500,000 Hilton points in my account in a matter of months — they were just so easy to rack up, and seemed so valuable.

And why wouldn’t I, when I could burn 145,000 points for four nights at the Conrad in Koh Samui, Hong Kong, or the Maldives? And then they changed their prices for AXON awards, so that of those properties now cost 300,000 points for the same four nights — that’s more than double the previous cost!

But that’s what I was stupidly overlooking with Hilton when I became obsessed with them — there was one “sweet spot,” one thing worth accruing Hilton points over, and when that was gone, so was the value of my points.

Compare that to Starwood points, for example, which can be redeemed for cash & points at hotels, free nights, or converted into miles. The program doesn’t have just one “sweet spot,” and there’s value to that.

Think twice about programs you can’t get an aspirational redemption “out of”

Just because a credit card is offering a good sign-up bonus doesn’t mean it’s a good sign-up bonus for you. When you see a good sign-up bonus on a credit card, objectively think about whether the bonus will actually get you closer to a redemption you’ve been wanting to make, and if it doesn’t get you all the way there, how will you make up the difference in points?

I’ll give two examples. One is the Southwest Rapid Rewards Visa. It often has a big sign-up bonus of two free roundtrips, and to some that’s incredibly valuable. In my case, I prefer doing my domestic flying on American on revenue tickets, since I need those miles to requalify for Executive Platinum status. So that’s not a card I personally apply for when the increased offers come around, though I realize why others find the card valuable.

Another example is the Alaska Airlines Visa. Alaska miles have become incredibly valuable lately due to their partnership with Emirates and that they’re allowing one-way redemptions with stopovers at half the cost of a roundtrip. And their credit card is tempting as well, and has a 25,000-30,000 mile sign-up bonus.

But if you want to redeem for Cathay Pacific or Emirates first class, what will you do to make up the difference in miles for what you need? Transfer from Starwood? Outright buy the miles during a promotion? Or get the business credit card as well? There’s no right or wrong answer, but I think the value of miles varies hugely based on the increments you have. For example, I might value 40,000 Alaska miles at 1.5 cents each, while I’d value 70,000 Alaska miles (enough for a one-way in Cathay Pacific first class from San Francisco to Hong Kong to Johannesburg with a stopover) at two cents each. Or something like that.

In my case it’s easy since I fly Alaska, so the miles I earn from the credit card complement the miles I earn through flying. But if you’re not a frequent Alaska flyer, it could be a different story.

DON’T think of points as a commodity you should save long term

I’ve said this a million times before, and I’ll say it again, because it really is important. I know tons of people that are saving points as a “retirement account” of sorts. If that’s the approach you take, you’re much better off using a cash back credit card, since money actually has a chance of growing in value over time when invested properly. Points can’t be invested and never increase in value long term. If you look at the award charts for just about any loyalty program you’ll see that over the past 5-7 years the cost of redemptions has probably increased an average of 50%. Points are also much, much, much easier to earn than ever before, so that has to be factored in, but still, that doesn’t sound like a wise travel retirement plan.

What do you guys think? How do you diversify your points to maximize their value?

Comments

  1. I think Chase UR points are great here because of the variety of transfer parters, as well as the fact that they can be turned into cash if you want. That way, while they may not end up being as valuable as they are in miles, it’s not like they become worthless. I have about 80k UR points right, and will continue to accrue them as my Chase Freedom and Sapphire are the cards I put 99% of my daily spending on. I have a few trips in mind over the next 5 years I could see myself using them on, but the nice thing is, if I hit a financial bump, they can always be turned into $800 cash instantly.

  2. Sage advice. I am definitely a huge fan of Chase UR points. I see the value of Amex Membership Rewards, but after having accrued a lot of them in short order this year I find that UR’s transfer partners are so much better for me.

  3. @ Gene — I’d say that’s reasonable, assuming you have more than two weeks of vacation per year (in other words, that on a moment’s notice both would be able to plan two trips sometime in the next 11 months).

  4. Lucky,

    How do you churn ultimate rewards points? Don’t they only give out sign up bonuses once, and once you go through CSP, the Bold and Plus, Freedom, what more can you do? I am confused how you can earn hundreds of thousands in credit card points without having to hundreds of thousands on credit cards first?

  5. I do basically what you suggest and hoard UR points. My other major source of points is from United (and partner) flights, so what has happened so far is that I combine UR with UA points for my trips. I’m not a fan of giant corporate hotels (there’s almost always a small boutique hotel or a low-cost vacation rental wherever I want to go), so the value of hotel points is utterly lost on me (although I do accrue them slowly and burn them for occasional overnights on the way to somewhere else).

    The problem with the UR hoarding strategy is that UA is starting to require a minimum spend on UA tickets to achieve status, which I will likely never meet – but it can be waived with some minimum spend on a UA-branded credit card ($25K? I don’t remember). That’s going to severely limit how many UR points I can collect – and force me to pay for two credit card annual fees. Ugh.

  6. @ BG — Well with Chase you can get the Chase Sapphire Preferred, Chase Ink Bold, Chase Ink Plus, and Chase Freedom, which get you 150K+ points.

    But I earn most Chase points through my actual everyday spend and taking advantage of the shopping portals for all my shopping. They have so many bonus categories that points rack up really quickly for everyday spend.

  7. Following up on Gene’s q. Spouse & me have about 225K UR, 65K MR, 80K UA, 200K AA, 50K BA, 120K AS, 75K VA, 70K US. Would you consider acquiring another 122K AA at 1.35cpm worthwhile? I signed up for the AA fast track challenge to EXP for 30K EQM, and am trying to figure out whether I am tipping over into points hoarding by going for it instead of using our MR for the 50% of required travel I need to make anyway (earn & burn!) and the other 50% required through mileage running.

    Excluding the EXP benefits, would the 122K AA at 1.35cpm be worth it to you if you had our stash? We probably try for 1 or 2 aspirational holidays of 5 days each a year.

  8. @ jig — Wow, you’re diversified. šŸ˜‰

    Yes, I’d definitely say picking up American miles at 1.35 cents each is a steal, especially if you get EXP in the process. Absolutely go for it!

  9. @Ben — I’m lucky enough to have 6 weeks of time off each year, but our (first world) problem is that we always have our award travel planned 11 months in advance. If notice of a devaluation is given, we would have to cancel trips and book replacements. Fortunately we both have AA, DL, and UA top status (for now), so we can both make free award changes.

    I think we will be able to use most of our 1.2 million DL miles before the revenue-based devaluation comes, but we will inevitably get screwed by AA with >3 million AA + US miles.

  10. do you have an article written on how to book Alaska Air with free stopover, oneway, roundtrip and all the rules and regulations that go with it. got to burn those miles up before devaluation like you said in this article. Thanks

  11. “DONā€™T think of points as a commodity you should save long term”

    @Lucky:

    Just semantics, but I think points/miles *are* a commodity, which is exactly the reason you should not save them long term.

    A good reminder to post for everyone. I cringe when I hear people say “I am saving my points for my retirement travel.”

  12. earn and burn! But i don’t mind keeping a bit larger balance in UR and SPG because of the variety. I don’t even have an MR account anymore, didn’t find it very useful once they essentially devalued and got tired of the annual fees.

  13. Earn and burn doesn’t fully match my family man, need points for 4 tix once a year lifestyle, so I am always accumulating. I try to keep my cash costs as low as possible so future devaluations don’t hurt too bad.

    I am leaning towards cashing out my quasi-cash like TYP vs hoarding them for a future TY Premier redemption. The pure points are getting to be high enough that there isn’t much point in holding them.

  14. Well lucky, you hit the nail on the head. Accruing points can be addictive and I would submit that those out there aspiring to be like you: go for it. Your sage advice regarding most everyone else is spot on: find the programs that work for you.

    I accumulate miles through my work travel and CC spend to burn miles for my family of 4. We’ve been to South Africa and China on CX F and going to Europe next spring on EK in F. We accumulate/use miles on Alaska because it’s worked well for us for the past decade. So things like UR, which are attractive, won’t work for us because the only partner we can use them on is BA(sorry, I’ll never think of using BA for award travel as “award travel” so long as fuel surcharges exist).

    So, we use SPG instead and complement with the AS Visa Signature. For hotels, we’ve been experimental. Had great success in China with Hilton, but the devaluation is causing us to relook at SPG. Which is why we read your blog: seeking the ‘pieces’ that work into our larger puzzle. Keep up the great work!

  15. Good advice. I went WILD a year ago and have over a million points but no program has more than 300,000. If I were starting over today I would do things differently.

  16. One perspective that always seems missing in these analyses is that it’s actually quite difficult to burn more points that you can earn if you’re a heavy credit card churner. My wife and I have earned more than 7 million miles and points in bonuses alone in the past four years. We’ve gone on 4-6 lengthy international trips in business class each year and yet our balances keep increasing. I’m trying to spend my points, really I am! šŸ™‚

  17. Another option is to trade points with friends [some of which you have probably been introducing to the game]. I go to Belgium every summer and this mid summer was tough to get business tickets for 3. I had 240,000 US Airmiles I was looking to use before US Air exits the Star alliance. A friend had 240,000 United miles. I booked his Australia – New Zealand nonstop Business trip [May 20140 and he booked my one way LAX – ORD – BRU and transferred the balance owed to my United account from UR. He got the sweet spot of 110,000 a person to Australia/New Zealand. I got 220,000 more United miles for two one way trips to Europe [I used another 500,000 United/UR this past year for Asia and Europe]. He got a trip he could not have booked with the number of miles he got. The more buddies playing the game, the more options you will have.
    Just another angle…

  18. By this summer, I meant July/August 2014. It would have been very difficult to book the 3 of us on the Star alliance if I had to wait the 3 weeks for a round trip. I booked at 340 and 338 days out on United…one way [so much for my free one way…]

  19. Some of us have fixed vacation time ( 4 weeks here), and need to request it in advance, so a devaluation without notice is devastating. I have lots of points and am unable to burn as fast as I get them. Maybe cause I do no go for the top end awards like F class or top hotel. To me CX business and a 4* hotel is great.

    I think Hyatt will devalue soon, the program has become unsustainable given the large number of points that are floating out there and the costly redemptions.

    Ah if we had Lucky’s free time, just to plan and get ready for the next day’s departure……

  20. Overall I think you propose a pretty sensible approach, however remember that we don’t all have access to such massive sign up bonuses, massively generous earning rates or programmes such as Chase UR – therefore although one wants to burn the points there’s also the difficulty of replacing them, which changes the equation slightly!

  21. Hi Lucky- what are your thoughts on diversifying within the same airline alliance? If you have top tier status on one airline already and lots of miles with them, what about continuing to fly that airline but crediting miles to a different airline’s FF program? I’m thinking specifically about BA and AA.

  22. Lucky- Maybe this is not a common problem, but I can’t seem to both burn points AND keep my status. I travel a lot for work and then supplement with a mileage run or mattress run to lock in that status. In the end, I have no more time off to use the miles or points. Right now I have 1.7 million airline miles and 900k hotel points. How do diversify or use these?

  23. @Lucky,
    Great advice. Question: how do you categorize 1. Delta skymiles, 2. Southwest Rapid Rewards miles, 3. US Airways miles? I don’t think they are efficient but can they be trusted?

    Btw, do you still US Airways and AA are able to eventually merge? If so, do you guess 1 AA mile equals 1 US Airways mile?

  24. @ Farringdon — I think the main issue is if you have top tier status and credit to another program you won’t get your elite benefits. So you can’t get your Executive Platinum upgrades while crediting to BA, for example, which could be a problem and probably makes it not worthwhile.

  25. @ Paul — Yeah, and that’s an issue a lot of people face. I think at some point it’s worth evaluating how much value you’re getting out of your status vs. the miles you’re being prevented from redeeming as a result of it. It might be worth no longer pursuing status or only going for a lower tier, if it means you can start redeeming miles for international first class.

  26. @ Andy — Tough to say whether the merger will go through or not. I’d guess yes, but I could be wrong. If it does go through, points will definitely transfer at a 1:1 ratio.

    I don’t think Delta SkyMiles can be trusted as a program — they’ve made plenty of changes without any advance notice. US Airways is a bit better, and I do think Southwest can be trusted.

  27. Can’t United miles be redeemed at 1 cent per mile towards reimbursement for flights purchased with their credit card? Not the best value, but a put option of sorts if there is a MASSIVE devaluation.

  28. @Lucky- Yea, I thought about that but I’m flying about 88k miles a year (so close to 1K) and have about 20-22 work related hotel nights a year (close to the SPG 25 nights for Platinum). Guess I’ll keep hoarding points!

  29. @Lucky,
    Thanks for great advice. I have 60,000 US Airways miles, 100,000 Southwest miles and 420,000 Delta Skymiles. I have accumulated 420K delta skymiles for over 3 years and did find a good way to burn it out — this becomes my major concern.

    Each year I intend to buy award tickets (for my relatives) to fly China, either delta raises its award ticket mileage (from 70K to at least 90K) on most desirable dates, or delta only sells one seat at 70,000 skymiles (i.e., its online price is 70K skymiles when I type one seat but 90K skymiles when I type 2 seats). So, each year I always end up at buying AA award tickets instead.

    One particular example: I plan to bring my family to Orlando in Nov or Dec. Delta sells the lowest price $213 (Southwest about $260, AA about $330) but delta’s award ticket asks for 65,000 skymiles. That is why I have never found a reasonable way to burn my delta skymiles.

    Questions: are there sweep spot deals, either domestically (in US) or internationally (europe or asia) to burn my delta skymiles?

  30. @Lucky,
    I missed a point: my outbound tickets are always from NY city. Delta LGA MCO sells at $213 in early/mid Nov and mid/late Dec.

    I also have 130,000 BA miles. Besides NYC to Toronto via AA, I did not find a sweep spot to burn BA miles.

  31. Hoarding points all depends on your cost of earning them. I try to ensure I’m negative net cost, using cash back cards to subsidize my MS activities – will get around 4MM this year, and will redeem about 1.4MM.

    I find it’s a lot easier to earn miles than to burn them – time is more important commodity for those with a life.

    As such, worrying about devaluation is a non-issue – and something I can’t control. I worry about the things I can control – the cost of earning points.

  32. @ Sam — They can be, though I think a more realistic valuation of United miles is 1.5-18 cents per mile. So if the value of the miles dropped to the point that a one cent per mile redemption is a good value, that would be a huge devaluation.

  33. @ Andy — You can’t rely on Delta’s award search to give you the best options for award flights. They have partners like China Southern, Korean Air, China Eastern, etc., and these often can’t be booked on Delta’s website, so it pays to do your research and then call to book.

    Generally speaking I think the best value on the Delta award chart is business class to Australia for 150,000 miles and business class to Asia for 120,000 miles.

  34. @ Paul — If you don’t mind sharing, how are you earning the points then? While you may have a negative net cost, at the end of the day you have to look at the opportunity cost of those points, which is whatever you’d otherwise get with a cash back card — that may very well be over a 2% return!

  35. @Lucky,
    Thanks a lot for great advice. Could you please again advise which airline(s) offer the business class to Asia (Shanghai or HongKong or elsewhere) for 120,000 delta skymiles? And, which airlines to Australia for business class of 150,000 skymiles ?

  36. @ Andy — For 120,000 miles to Asia in business class you could fly any partner airline that releases saver award space, including Korean Air, China Southern, China Eastern, and even Delta if they have “low” level award space.

    To Australia the best option is flying Virgin Australia, which is also a Delta partner.

  37. I have about 30,000 Delta Skymiles points with the American Express card and no immediate use for them. Is there a chart somewhere that shows me how I can transfer these points into something else or the most efficient way to use these?

  38. That’s good to know, thanks! Based on your prior article, it looks like the Delta miles can transfer to various other airlines. However, I happen to have 77k Southwest Rapid Rewards + Companion pass, so I’m doing all my flying on Southwest in 2014. Do you suggest just holding on to my American Express Delta Skymiles for now or is there a good way to redeem them for something other than airfare (I know your article says to NOT redeem for gift cards/merchandise)?

  39. Lucky – would you please list your latest link that discusses your current points and miles valuations. Also, please comment on what we travelers should be thinking/planning in anticipation of most airlines switching to a revenue based FFP rather than mileage based.

    Thanks.

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