Are you getting it yet? Hopefully this guide is filling you in on the reasons why points can be valuable and the methods by which points strategies work.
Now, let’s get into a little more detail:
- What are these “miles” and “points” you are actually earning?
- How do they work?
Beginners Guide to Miles & Points
Table of Contents
Different Words, Same Idea: The Awards Currency
In reality, miles and points are the same thing: they’re a reward given to you for being a loyal customer of a business or by using a certain credit card.
Your reward balance becomes a number in an account in your name, and as you accrue more points/miles, your account balance grows just like a bank account.
Where Do All the Points Go?
Points are typically accrued into 3 different categories of accounts:
In a few instances, some credit cards accrue points outside of the company’s rewards portal. These are fixed assets (and not really “accounts”) that can be used for fixed redemptions like statement credit.
If you’re earning points as a fixed asset, the value of the points is typically preset and cannot be manipulated. You’ll find points are worth $0.01 each in most of these cases, though some are less valuable.
These generally aren’t the best types of cards for points-earning. Because you don’t have any option of how to redeem your points, you cannot increase the value of them.
However, when points are deposited into an awards portal, there are typically many options for redemptions. Your points are good for awards in the portal itself, as well as awards with all the portal’s partnerships and alliances.
This makes these types of cards extremely powerful!
Fixed Price Versus Variable Price Awards Options
Each airline and hotel loyalty program has a different system in place for using your points and miles for awards.
For instance, you can fly one-way domestically for 12,500 miles on most airlines. These values do not change often, although there has been a recent industry-wide devaluation movement.
Other airlines such as Southwest, JetBlue, and other low-cost carriers have a variable price award system. In this system, the awards you redeem are based on the cash value of the ticket at any given time.
Existing simultaneously, these 2 systems can make the value of your points vary quite a bit!
What Is the Best Option, or Where Should I Start?
We believe the best option, at least to get started, is with cards that earn points in the credit card company reward portals.
Through these, you typically have the most flexibility, since the variety of partnerships available could conceivably cover all the alliances and partnerships in one way or another.
(Editor’s Note: As we mentioned in a previous section, we will be building a guide to all these alliances and partnerships to better help you navigate the system, redeem rewards, and even earn bonuses along the way!)
The real value of keeping your points in the flexible systems is that you can greatly increase their value by finding deals and knowing the best way to redeem them. In some cases, the value of your points can go from $0.01 all the way up to $0.20+!
There are 4 main points portals that are recommended among most points travelers:
- Chase Ultimate Rewards
- American Express Memberships Rewards
- Citi ThankYou Rewards
- Starwood Preferred Guest
These portals offer the most flexible options for transferring and redeeming points, and typically carry the best value.
You may be wondering why we included a hotel portal in this list. Simply put, they offer 2x-3x the number of partners as the other 3, though many hotel chains have much less valuable points.
Citi’s portal is the least valuable overall in our opinion, but it still offers a variety of options.
In all cases, you are looking to maximize value, NOT just sheer number of points.
Each points system has its own scale, and while many are the same or close (airlines typically all share very similar value structure), some are completely different.
Learn More About Each Rewards Portal and How to Maximize Value
We’ve put together guides to each of the various portals, and each of our credit card reviews discusses the best way to utilize that card within the parameters of its available partners. Don’t feel too overwhelmed yet; all will be explained!
Some Questions To Get You Thinking
In the next section, we’ll be talking about how to start planning your trips. Some questions to consider beforehand are the following:
- If I travel, how do I want to get there?
- Do I really care about all these “status” benefits, or is the destination and experience most important?
- Would I rather stretch the benefits out (i.e. get as many flights, hotel nights, or general redemptions as possible), or is the swanky experience of higher value redemptions more appealing?