We Just Redeemed 150,000 Airline Points For Gift Cards… Oops?

In the interest of full disclosure, One Mile At A Time earns a referral bonus for anyone that’s approved through some of the below links. These are the best publicly available offers that we have found for each card. Please check out our advertiser policy for further details about the partners we work with. Thanks for your support!

Update: This offer for the Citi Prestige® Card is expired. Learn more about the current offer here.

I don’t think there’s more of a mileage faux pas than redeeming your hard earned miles for gift cards or merchandise. With saver level award availability seemingly more limited than ever before, airlines are offering more ways for you to redeem your miles, including for merchandise and gift cards.

For example, through the United MileagePlus Merchandise Mall, you can redeem 40,600 MileagePlus miles for Bose headphones that would retail for $300. That’s like getting less than three quarters of a cent of value per mile.

Bose-Headphones

Or you can redeem Membership Rewards points for gift cards at the rate of one cent per point. Given how many great uses there are of Membership Rewards points, I couldn’t imagine redeeming points that way.

Staples-Gift-Card

So this isn’t how you should redeem your points… but I also just advised Ford to redeem 150,000 airline points for gift cards. Let me explain.

Ford has a lot of Southwest points…

Last night Ford and I were planning a trip with Chase Ultimate Rewards points (more on that later), and as part of that we were logged into his Chase account. I noticed he had the Southwest Rapid Rewards® Premier Credit Card, which I didn’t previously know he had. I asked him about it, and he said back in the day he flew Southwest a lot, and for years that was the main credit card he used.

We logged into his Southwest Rapid Rewards account, and we found out he had over 150,000 Rapid Rewards points — yow! I manage all of Ford’s mileage balances through my AwardWallet account, yet the Southwest one wasn’t on there, since I didn’t realize he even had it.

It’s not that either of us refuse to fly Southwest. I think they’re a great airline for what they do. But in practice most of my travel nowadays is international or part of larger itineraries. Furthermore, Ford is on the verge of earning Executive Platinum status with American, so American is his go to carrier domestically (though we’ll see what that looks like next year).

We sort of agreed that it’s good he has the points, and maybe he can use them for friends or family in the future, or perhaps if he needed to go somewhere. After all, 150,000 Rapid Rewards points will get you $2,000+ worth of travel on Southwest.

…and he just redeemed them all for gift cards

Before we settled this I said “let me just see if there are any other decent ways to redeem Southwest points.” Southwest Rapid Rewards has a “more rewards” section, where you can redeem points for merchandise, gift cards, etc.

The best value I found was the ability to redeem points for one cent each towards the cost of an Amazon gift card. To me, Amazon credit is good as cash, since it’s where we buy most of our stuff anyway. So 150,000 points could get $1,500 worth of Amazon gift cards.

Southwest-Gift-Card

So Ford redeemed his 150,000 points for $1,500 worth of Amazon gift cards. I never thought I’d advise someone with a big points balance to redeem their points this way, but in this case I’m feeling pretty good about it.

What was the opportunity cost of those points?

For Southwest Rapid Rewards, points can generally be redeemed at the rate of 72 points per dollar of airfare on Southwest’s cheapest fares (for more expensive tickets, they require more points per dollar of airfare). This doesn’t factor in the federal excise tax on air travel, so in reality you’re getting a bit more value than that.

For example, take the below itinerary, where you can either pay $203, or redeem 12,082 points plus $5.60. That means you’re getting ~1.6 cents per point.

Southwest-2

Southwest-Rapid-Rewards

What that doesn’t factor in, however, are the points you’re forgoing by redeeming points. If you were paying cash you’d earn anywhere from 6-12x points per dollar spent, plus the 3x points on airfare you could get on a card like the Citi Prestige® Card or Premier Rewards Gold Card from American Express.

Altogether I’d say I value those 9-15x points per dollar spent at around 15%.

Southwest-Earning-Points

That means in reality Southwest points are only really getting you ~1.36 cents per point of value, when you factor in the opportunity cost of booking an award ticket.

So I figured it made more sense to redeem those points for one cent that’s “good as cash,” rather than ~1.36 cents of value per point for travel on Southwest. Why?

  • Southwest has devalued several times in the past few years, and their per point value seems to be getting lower and lower
  • As the value of Southwest points continues to decrease, there’s also the chance that they won’t allow gift card redemptions for one cent each anymore
  • Ford doesn’t know when he’d actually use these points towards flights on Southwest, so there’s an opportunity cost to holding onto those points; also, the above rates are the absolute best rates you can get using Southwest points, while last minute tickets will get you less value per point
  • There’s no way to get outsized value for redeeming Southwest points, since the program is revenue based on the redemption side; so he’s not otherwise giving up some incredible potential redemption opportunity

Bottom line

I never thought I’d advise someone to redeem their airline points for gift cards, and actually feel good about the decision. It also gives me a new perspective on the Southwest Rapid Rewards® Premier Credit Card, which has a sign-up bonus of 50,000 points upon completing minimum spend. While you’ll get the most use out of those points if you’re actually flying Southwest, they can otherwise be redeemed for $500 worth of Amazon gift cards, which is pretty good, in my opinion.

What do you guys say — am I crazy for suggesting Ford redeem his 150,000 Southwest points for $1,500 in Amazon gift cards?


Non-Affiliate Product Disclaimer: The information for the Southwest Rapid Rewards Premier Credit Card has been collected independently by One Mile At A Time. The card details on this page have not been reviewed or provided by the card issuer.

Regarding Comments: The comments on this page have not been provided, reviewed, approved or otherwise endorsed by any advertiser, and it is not an advertiser's responsibility to ensure posts and/or questions are answered.

Comments

  1. Just as a clarification, if you were to put that $1500 amazon spend on a card that gives you 1.5% cash back you would get back $22.50 so redeeming 150,000 points for $1,500 isn’t a true 1 cent per point but rather a little less.

  2. Of course Lucky leaves out that if you get Companion Pass (possible via bonus and spend plus maybe minimal flying) you can essentially get double value on your points.

    It’s OK. We all know you don’t fly coach. And especially not Southwest.

    😉

    Funny how we can be advised to buy Lifemiles when Avianca does no notice devaluations but we should cash out Southwest because of no notice devaluations…

  3. Ben, you may not be aware of it, but using the More Rewards portal you can redeem RR points for international travel on foreign carriers. The redemption value/ratio is usually crappy, but every now and then you can find some fair value. For example, RT from LAX to HEL in economy on Finn Air in mid-May for a 7 night stay departing/returning can be had for about 72K in RR points. Business and First seats can also be searched and acquired. Your post seems to imply a more limited utility for using the More Rewards portal than in fact can be the case if someone is willing to go and dig.

  4. ^^Not to mention that if you’d have bought the GCs through United’s MileagePlus X app, you’d have earned an additional 1500 United miles. Or if you’d have bought the $1500 in GCs on a Discover card for 5% back, you’d have earned $75 back :-).

    That’s what always gets me about crunching the fractions of a cent — I know that the true math on SW considers the points forgone when buying in points rather than cash….but then where’s the math to determine the value of being able to cancel a points ticket for an instant refund in points that can be used any time vs. refunding a cash ticket and only having 1 year to use the credit? That’s obviously a subjective valuation, but one that often makes me much happier to book speculatively on SW points rather than cash with SW.

    At the end of the day, the GCs aren’t a terrible redemption….but they’re a redemption one only makes when not willing to fly Southwest. And while some folks will be judge-y on that unwillingness, I certainly won’t. There are plenty of carriers I’m not interested in flying, so I won’t judge someone who doesn’t want to fly SW. Of course, I happen to be very happy with SW domestically as I’m not often flying transcontinental and with a CP it typically blows our other options out of the water domestically. For flights in the 2-4 hour distance range and including at least 1 non-major airport, a SW CP is killer. If most of your flying is JFK-LAX and you have status on a major carrier, I could see why you’d dump these points.

  5. The simple reason you redeemed it that way is because Ford doesn’t fly coach anymore.

    Better to just admit that than do these calculations

  6. @ KahunnaTravel — While all of that is true, I haven’t found an instance where you’d get more than one cent per value through their partner airline travel portal. Someone correct me if I’m wrong.

  7. @epymdus — you don’t get double value out of the points with a companion pass. It took me a while to wrap my mind around it, but you don’t. Well — let’s put it this way: if you get double value out of the points, you also get double value out of a $1 bill in your pocket. At the end of the day, if you have a CP and a flight costs, say, $200 or 13k points — it costs either $200 or 13k points for 1 seat or 2 seats. You’re not actually getting $400 in value out of the 13k points because, as a companion pass holder, it wouldn’t actually cost you $400 to buy the two seats — it’d only cost you $200.

    Believe me, I get your idea — I’m a CP holder and we’ve gotten plenty of use out of it. I’ve just come to realize the math doesn’t work out as the points having “double” value. Their value relative to the cash in my pocket is constant. The value of the Companion Pass is in having the Companion Pass. It’s definitely valuable. It’s nice to get two tickets for the price of one. Very nice. But the points still have the same amount of purchasing power as compared to cash.

    And that’s why I wouldn’t focus on earning a single SW point more than necessary for a CP unless I’m getting a heck of a lot more return than I would in some other way. For example, if I’m looking at a shopping portal that earns 10% versus the Rapid Rewards Portal at 5 points per dollar, by your math (doubling the value of SW points), I should take the Rapid Rewards points. After all, if they are worth, say, 1.5cpp towards airfare and the companion pass doubles the value, I’d be getting 3 cents per point — or about 15% back. But that’s not reality. In reality, I would definitely take the 10%. A $1,000 purchase would earn me $100 or 5,000 points. 5,000 points won’t buy me more airfare than $100 will with Southwest — with a companion pass, my 5k points don’t become worth 10k points. The 5k points are worth around $75 in airfare whether I have the CP or not — so my $100 is more valuable. Follow my math?

  8. @ Jamie — Nowadays, no. I used to certainly be a lot more “creative,” and sometimes it got me in trouble. Nowadays I always play by the airlines’ rules 100% of the time.

  9. @ eponymous coward — I’ve written several times about the value of Companion Pass. But in our case we wouldn’t get all that much value out of it, given that we don’t fly domestically that much. So I’m not sure how that’s relevant in this case when we’re struggling to redeem 150,000 points on Southwest, let alone looking to get more travel on them.

  10. How long have you two been dating, and you’re already managing his miles and points? Wow! I think I hear wedding bells soon!

  11. You are definitely underestimating a value of southwest, seems I will have to go with the rest of the crowd that you don’t fly economy any more(And priceless value of companion pass even when redeeming miles). From flying economy with United, Delta and American, I can guarantee that southwest is more comfortable and service is better.

  12. I have a good stash of chase points by earning 5 points per $1 at office supply stores if I am staying at a Hyatt or marriott on points and use some extra points to get giftcards for those properties I think that is s very good value !! Free stay and spending money at the hotel .

  13. “Ford doesn’t know when he’d actually use these points towards flights on Southwest, so there’s an opportunity cost to holding onto those points”

    I think what you’re suggesting is time preference and also risk, rather than opportunity cost. Your opportunity cost of the air redemption is the gift card.

    There’s some probability of having an opportunity/need for tickets at a higher value per point in the future, but you have to discount that based on risk.

    There’s some probability that Southwest will devalue points between now and then.

    And since that redemption will happen in the future, you should discount that future risk-adjusted value further.

    What you want is to compare the risk-adjusted net present value of your redemption opportunities.

    This is all highly sensitive to your assumptions, however:

    * say you have an 80% likelihood of having an opportunity to redeem at 1.4 cents 3 years from now

    * there’s a 90% likelihood that’s even still an option. (I’ve simplified the devaluation risk to say 90% likelihood you can redeem at a high value per point on airfare in the future when really there’s a very high likelihood of some additional devaluation within 3 years but odds on that devaluation will be quite small.)

    The current risk-adjusted value of that future option is $0.0095 per point. ($0.014 x 80% x 90% and then discounted to present value using a 2% rate)

    And that would suggest a gift card redemption today that’s equivalent to cash (and an Amazon gift card is just about a cash equivalent) at 1 cent apiece, would be the better or at least equal option. In fact, an Amazon gift card isn’t quite cash, so let’s just call them of equal value.

  14. I think you made the right choice. Yes, you *might* have been able to redeem them for flights at better value…but you might not, and you have no real expectation of domestic flights. Getting the value now is best IMO.

    Let’s also remember that *you didn’t even know they were there.* Treat it as found money. A fair chunk of it to boot!

    I know I’d find a way to use them if I discovered a balance like that. You could have also used them to arrange positioning and last-minute flights, thereby saving your transferable points. But in the end it’s your (well, Ford’s) points to use. Don’t let redeemer’s remorse get to you. 🙂

  15. @Lucky – I did redeem before for an international flight and got right at/a bit over 1 cent per point. While it is a nice way to use SW points if you aren’t flying them, their redemption department is not them and a cancelled flight gave me a nightmare in trying to get the points back. In the end, SW gave them as a CS gesture because their 3rd party wouldn’t budge (I did a post on it a while back).
    You probably made the right choice between the two…

  16. I don’t like Amazon. They have many third party retailers selling crap on their website. Amazon doesn’t care because there are many memes that haven’t updated their shopping preferences vis a vis amazon and amazon now makea most of its money from aws.

    With taxes, minimum spend forr shipping, slow shipping and other shenanigans that Amazon engages in, it’s not such a great deal anymore.

    Eff trump

  17. @Gary: Can you please put all this on an Excel spreadsheet and show your net present value calculations for each of the fifteen best options?..but then remember you’ll have to perpetually deduct the cost of your time to prepare the spreadsheet. Maybe you can provide some macros to automate that.

    Ben, you’ve clearly failed on the lowest value proposition: Mc Donalds. It’s likely the best use of stolen MR’s though.
    As to Amazon, I actually ordered toilet paper on June 28 and the larger size turned out to be from a 3rd party seller. It was scheduled to arrive August 12. I still don’t have it. so I’ve been using the bathroom in the park next to my house. It’s a littler sketchy after midnight given the presence of coyotes, but it’s still in a guard-gated neighborhood.

  18. @Ben – you are correct and in Ford’s case I think making the swap for Amazon gift cards offered more utility and value based on his/your use of Amazon for buying things and your other account balances. Rather my point was that your post was “light” about what other options are available under More Rewards and how, in some instances, readers who don’t have any future need for RR points in their accounts can also look for more beyond gift cards to get value for something they no longer have a need for.

  19. Southwest points are valuable as you get free cancellations on award tickets. Being able to do placeholder flights for trips you “might take” is a valuable perk.

  20. @Matt – fair point, but with Lucky and (soon) Ford both having status on a US network carrier, they’ll get their bags free anyway, have a shot at domestic upgrades, etc. And with a lot of their domestic positioning flights being longer then average, the upgrades and earnings on paid domestic travel also have to be factored in.

    Plus the benefit of not flying Southwest.

  21. I am planning on converting Fairmont card points to Amazon GCs as it doesn’t seem that the hotel usage of those points is all that good and I get enough free nights through the program. Essentially gives me 5% cashback on my stays.
    Anyone advise otherwise?

  22. Agree with @Ryan. Invaluable for booking ‘security’ flights in case I need to cancel or something else more preferable opens up.

  23. Seems like an odd redemption and a rash decision. Being based in LA, it seems like there would be a situation where you could get a direct flight on WN that would save you time compared to the other carriers. WN has a lot of flights from Burbank too which can save a lot of time relative to LAX.

  24. @gary Your breakdown is spot on. A+

    At the end of the day the valuation of your mileage balance is based on your needs and wants. For someone who’s planning Southwest travel in the immediate future this redemption may seem absurd. However, given the logical reasoning behind the redemption it appears that Lucky got what he considered to be a good redemption.

    Just because its not the redemption you would’ve made does not make it inherently “bad”.

  25. Great discussion going on. I live in Hawaii and don’t have an idea on how to use my SWRR miles. I’ll be honest, I’ve used my wife’s 110K miles to redeem towards Target gift cards last year as we didn’t see any other way to use them that made sense. I saw this as paying $158 ($99 + $59 for plus and premier cards) for $1100 worth of gift cards. We then used the Target gift cards to buy Disney gift cards and used those at Disneyland.

    I’m looking for advice for someone who lives off the continental US. I have about 170K SWRR to use and I’m thinking about getting Best Western GC with them. We have a trip planned for May at Disneyland and we have a Best Western Plus booked for about $1300. If I use the SW portal it will cost me 156,625 points. I can get $1300 in BW GC for 130,000 points.

    Is there any other way to use these points that would benefit us more? Is it possible to trade miles without a fee? I’d be willing to trade SW miles for Hawaiian Miles if anyone has any.

    Thank you,
    Keola

Leave a Reply

Your email address will not be published. Required fields are marked *