Beginners Guide to Miles & Points

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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?

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.

“Miles” are typically what the reward currency is called on airline credit cards, and all other programs (hotel or credit card) generally call them “points.”

British Airways goes a completely different direction and calls their currency “Avios,” while Starwood uses the term “Starpoints.”

Bottom Line: These different names all refer to the same thing–an award currency. For ease of explanation, we’ll just refer to them all as “points” from here on (the most generic term).

Where Do All the Points Go?

Points are typically accrued into 3 different categories of accounts:

  1. Airline loyalty accounts
  2. Hotel loyalty accounts
  3. Credit card rewards portal 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.

Large carriers such as American Airlines or United Airlines have a fixed price award system, where taking an award flight will cost the same amount no matter the cash value of the ticket.

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.

Check Out Our New Express Guide to Chase Ultimate Rewards Points >>

(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:

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.

Bottom Line: It’s best to start with one of the 4 most popular rewards portals mentioned above, as they provide the most flexibility for redeeming and earning points.

Part 5 Different Scales of Points
When trying to weigh in on which loyalty program to use, you will need to consider a number of factors like where you spend your money, what’s your credit score, and how you want to use your points!

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?

Part 6: Get Started by Setting Your Travel Goals >>

Photo Credits/Credit/Copyright Attribution:
Different Currencies Featured Image: pichetw/Shutterstock
Man With Scales: Visual Generation/Shutterstock

Chase Sapphire Preferred® Card

Chase Sapphire Preferred® Card
  • Earn 50,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $625 toward travel when you redeem through Chase Ultimate Rewards®
  • Named Best Credit Card for Flexible Travel Redemption - Kiplinger's Personal Finance, July 2016
  • 2X points on travel and dining at restaurants worldwide & 1 point per dollar spent on all other purchases.
  • Earn 5,000 bonus points after you add the first authorized user and make a purchase in the first 3 months from account opening
  • No foreign transaction fees
  • 1:1 point transfer to leading airline and hotel loyalty programs
  • Get 25% more value when you redeem for airfare, hotels, car rentals and cruises through Chase Ultimate Rewards. For example, 50,000 points are worth $625 toward travel
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What are airline miles? How do airline miles work?
Airline miles are the currency of reward that you earn for flying on an airline when you are signed up to their loyalty program and provide them with your frequent flyer number.

Miles work by accruing in an account in your name each time you fly that airline (or fly with one of their partners). Once you have enough accrued, you can use miles to redeem an award flight or some other type of reward through their loyalty program.

What are hotel points? How do hotel points work?
Hotel points are the currency of reward that you earn for staying in hotels when you are signed up to their loyalty program and provide them with your hotel loyalty number.

Points work by accruing in an account in your name each time you stay with that hotel (or with one of their partners). Once you have enough accrued, you can use points to redeem free nights or some other type of reward through their loyalty program.

Are frequent flyer miles worth it? Are hotel points worth it?
We certainly think so. They are free to accrue and can provide you with benefits and rewards that would otherwise cost you extra money. It only requires you to sign up and provide your account number whenever you use services from that company.

When do airline miles expire? When do hotel points expire?
Points usually expire after not using their services for a certain period of time, like 6-18 months for example. Sometimes, if you have certain cards or in certain programs, points never expire.

The policy is different for each company or loyalty program.

Who offers the best credit card rewards?
There are a number of subjective reasons one business may be the best credit card reward for you. However, we generally think that Chase Bank offers the best overall rewards program due to the variety of cards and ways to earn points.

You may also be interested in some of the fringe or secondary benefits that credit cards offer. Many cards offer insurances on top of their points potential, which can be very valuable.

What the best credit card for a beginner?
This is a subjective question, as there may be multiple different cards that would work for you but wouldn’t work well for someone else. That being said, we generally think the Chase Sapphire Preferred® Card is the easiest beginner card.

If you need help finding a card you qualify for, you could use the Card Match Tool.

Alternatively, you could check out our Express Guide to Points and use that as a guide.

What are the top 10 credit cards?
We think these cards provide the best credit card rewards right now.

What is the best frequent flyer program? Which hotel has the best points program?
The best programs are subjective, but you may be able to find some good information about loyalty programs through the Freddie Awards.

We also provide reviews of the hotel and airline loyalty programs on our site.