Why Do We Constantly Hoard Our Points In This Community?
If you have read my writing then you already know my feelings on this. I believe that people should be using their points first, and almost never use cash. If you are diversified or have transferable currencies there really isn’t a bad redemption out there. Bank’s travel portals can make a bad points redemption into a decent one. Why am I bringing this up again? It is because I read a post by Greg at Frequent Miler this morning and something really stuck out to me.
In Greg’s post “On My Mind (Goodbye Sapphire Reserve?)” I got hung up on something he said when talking about the 1.5 cent Ultimate Rewards travel portal redemptions:
“That last emotional excuse, above, is actually a reasonable one. I should start booking travel through Chase. Specifically, I should book airfare this way. My wife and I have millions of Chase points that we rarely use. That’s crazy.”
That is indeed crazy! It’s not crazy that he has millions of points, although impressive, it is crazy that he still pays cash for any travel at all!
This seems to be a theme among readers and bloggers alike. They save points for their ideal redemptions or will only use them for values above a certain point. If you have limited points earning potential then by all means go that route. But when you have millions of points, which means you can easily accrue them, then why are you ever using cash?
You most likely already spent some money in acquiring those points and now you are gonna double down and spend cash on travel in place of using them? It is just insanity to me and what is even crazier is that I think I am in the minority in this way of thinking.
Running Some Numbers
Let’s say someone has 3,000,000 Ultimate Rewards points. That is a minimum of $45,000 in travel that can be booked (if they have the Chase Sapphire Reserve card). Every booking they make is like making a deposit into their bank account (the money they saved). So that could be looked at $45,000 in savings if they were going to pay cash anyway.
And it isn’t like they are going to stop earning points. They will continue to add to that stash while they spend it down. That also doesn’t include other currencies which they probably have similar figures in. They should save their cash and use the points.
Don’t forget these are an asset that is always being devalued. Who knows how much longer the CSR gets 1.5 cents per point. If they drop every card to 1.25 cents per point that means you just lost close to 20% in value. I am not saying it will happen but it could. Chase could also reduce transfer amounts to Hyatt and make it 2 UR to 1.5 World of Hyatt points etc. Chase kicked around the idea of ending points pooling which means they are looking to cut costs in some way. That means there will be a devaluation of their points whenever they decide what that change is.
But What About Hotels?
Hotels are the hang up. Flights are easy, there is no reason you should ever pay cash for a flight. Either use airline miles or the portal since you earn miles and status booking flights through bank travel portals.
Now for hotels you don’t get the credit, get to use status, or earn status elite nights when booking through a travel portal. That can be a problem. Or is it? I have already shown you why I think you should kick everyone but Hyatt and Hilton to the curb. If you have a particular hotel you like at those other brands etc. use their points until you have none left and then just book it through the portal. I don’t think you should be worried about status with them since their system is broken.
Now down to Hyatt and Hilton. Hilton gives you status with their credit cards so you don’t need to worry about earning it. When you need status at a particular property then book the room with their points. When you don’t need it then book the hotel through a travel portal to save their points for status needed bookings. This would include Hampton Inn stays where everyone gets free breakfast or one night stays where you are leaving early etc. Think of an airport hotel before or after a flight etc.
For Hyatt their award stays count towards status so just transfer points to Hyatt and book the stay with their points. If the redemption is really terrible (which is pretty hard to find with Hyatt) and it is a not a full service property then book it through the portal at 1.5 cents each. That is unless you needed the stay credit then use the points at a less than ideal redemption.
I don’t want you to think this is me calling out Greg or anything like that. It seems like he is starting to come around to my thinking some in his piece. I see this as a common issue in this hobby. Just the other day I had a similar conversation with reader Gaurav on my hotel programs post (go to the bottom of the comments). My goal was to add to the conversation and offer a differing view.
My summarized point is this – if you are able to easily accrue points & miles then use them in place of cash almost every time. You can then save the cash you would have used and put it into savings or invest it. Using points will often give you a better return than simply manufacturing cash back. If you bought gift cards at Office Depot for 5X Ultimate Rewards then cashed them out at 1.5 cents each towards travel that is 7.5% cash back in your pocket (the money you saved by not paying cash for that hotel room etc.). That is better than using the Amex Simply Cash for 5% or cashing the UR points out at one cent a piece.
The only time I could see cash making sense is if there was some amazing promo where you got huge value in return. An example is the old Accelerate promos where you could get 50,000 points for a $100 hotel room stay.
Here is my challenge to those that don’t agree with me. Add up all the money you spent on travel last year where you could have used points. Set that amount aside in savings or invest it. Also set aside the points you could have used in it’s place. Which account will be worth more in 1, 5, and 10 years?