Derek Brameyer

There’s more than one way to redeem awards points for travel. Following the best strategy, however, can result in a lot more value for your miles or points. Here’s the best and worst way to use your rewards for each major travel category.

Finding the right way to use your hard-earned credit card points can be an arduous task. Traveling takes many different forms: it might involve flights, hotels, rental cars, or cruise bookings. In general, flights and hotels are your best bet for earning the most bang for your buck.

Let’s walk through each of the major travel categories, highlighting popular travel chains, and showing you how to stretch your points and miles.

Flights

• Best bet: International business and first-class flights
• Worst case: Short-hop domestic flights in coach

Purchasing international flights with miles will generate the largest benefit. An international flight can easily run you over $1,000 just flying in coach. When you look at first-class flights, the cost can be several thousands of dollars. The cost makes them ideal for miles redemption.

One of these flights, however, is going to cost you a lot of miles. A single flight can easily run well north of 100,000 miles. Be prepared to lose a big chunk of your miles if opting for this route. The luxury provided by a first-class experience when flying for 12+ hours, however, can be worth it!

There’s still, however, an argument to be made for domestic flights as a sound redemption. While they’re not the most cost-effective use of your miles, you can stretch 100,000 miles into more than 3 or 4 domestic flights in coach. I recently booked two flights from Raleigh, NC to Miami, FL at a cost of 30,000 American Airlines miles, and return flights to the tune of 25,000 United miles. While those flights aren’t the most expensive if I were to pay in cash, I prefer using my miles for multiple different trips rather than all on one or two. This is all personal preference, and you should know that strictly from a cash value standpoint, business and first-class flights are the most optimal.

Hotels

• Best bet: All-inclusive resorts for certain hotels, international destinations
• Worst case: Lower tier economy bookings

Hotel redemptions are a bit trickier. They vary so much by location and amenities that comparing options is no simple matter. Even within a specific line of hotels, for example, Marriott, nights can range from 7,500 to 45,000 points based on just the location.

Some of the best redemptions can be very dependent on the hotel chain. Wyndham properties, for example, redeem at a flat rate of 15,000 points per night at any property, anywhere. Spending 15,000 on a Days Inn or Super 8 would be silly. Wyndham also has some excellent properties in locations like Boca Raton and Miami, and even all-inclusive resorts in The Bahamas.

Finding the best redemption can be tedious, but luckily most hotel chains make things pretty easy for you. Just use the brand-specific site to book and you’ll see dozens of location-based bookings and their associated rates. It might take a bit of cross-referencing with your favorite travel booking website, but you can easily find room rates and hotel reviews to line up something to your liking.

Rental Cars

• Best bet: A credit card with primary car insurance
• Worst case: Redeeming credit card points for a rental

Your best bet when it comes to arranging a rental car is to simply use a credit card that provides you with insurance. Specifically, you want a card that offers primary insurance, meaning direct driver coverage on rental cars. American Express cards offer this for a fee. The Chase Sapphire Preferred® Card and United MileagePlus® Explorer Card cards offer primary insurance for free.

Redeeming points or miles for a rental car is going to be poor value, no matter how you cut it. I’d suggest saving those points and applying them to nights or flights.

Cruises

• Best bet: Use points to get to your port
• Worst case: Burn points at 1x rates

When it comes to taking a cruise, your points and miles are probably best spent on flights or hotels to get to your port of call. The unfortunate reality is that redeeming miles or points for cruises just doesn’t get you great value. The best you can do would be something like booking through Chase’s travel portal at a 20% discount. This approach would barely put you at a 1.25x earning rate for your points, which is easily beaten by most flights and hotel bookings.

I would strongly recommend instead using those points to take an inexpensive flight to wherever your cruise will be departing from. Alternatively, you could book a stay the night before to make your trip easier.

Travel Partners

One final thing to keep in mind is that travel partners can make a big impact on your redemption value. Following the recent merger of SPG and Marriott, for example, you can transfer SPG points to Marriott at a 3x rate. This can result in some huge values if you’ve managed to accrue significant amounts of SPG points.Other flexible programs like Chase’s Ultimate Rewards can provide you with significant opportunities, or at the very least, the flexibility to use the airline or hotel chain that you prefer.

Other flexible programs like Chase’s Ultimate Rewards can provide you with significant opportunities, or at the very least, the flexibility to use the airline or hotel chain that you prefer.

Valuing the points or miles you earn on credit cards is challenging. The values vary from one rewards program to the next. They also vary based on how you redeem them. In this guide, we provide a methodology to help you determine the value of miles or points you’ve earned.

A common question I see when discussing rewards cards from various issuers is how to compare the different rewards redemptions available.  For example, which is more valuable: 50,000 Chase Ultimate Rewards points, or 50,000 Starwood Preferred Guest points?

The answer in many cases is, unfortunately, “it depends”.  Let’s walk through some quick back-of-the-napkin calculations that you can do to determine the value of your points or the value of your redemptions.

Defining the CPP Metric

The easiest way to value points redemptions is to look at the cash value, or “cents per point” metric.  If you’re able to purchase a $50 gift card for 5,000 points, that gives you a CPP of $0.01 or 1¢ per point.  It’s a very simple calculation: simply take the dollar value of your redemption, turn it into cents (shift the decimal), and divide by the number of points you used for redemption.  Some examples:

• $250 night hotel stay for 12,500 points: 2 CPP ($250 / 12,500 * 100)

• $450 flight for 15,000 points: 3 CPP ($450 / 15,00 *100)

• $100 Bluetooth speaker for 10,000 points: 1 CPP ($100 /10,000 * 100)

Naturally, you want to be looking at rewards that maximize your CPP, so we’ll examine some below.  First, though, a note on “points” vs. “miles”: Many airline cards use “miles” as their metric instead of points.  Treat them as equals; they use the word “miles” because it has marketing value for them and can be immediately and subconsciously associated with flying, but miles and points are one and the same.

The Bad Redemptions

You can go ahead and scratch off certain categories or redemptions as an effective usage of your points.  Redeeming for cash back, gift cards, or merchandise are all generally a terrible usage of points.  In most of these scenarios, you will be redeeming points at 1 CPP at the most.

If you’re in desperate need of one particular item, or have a rare need for a gift card or statement credit, by all means use your points.  But if you’re finding yourself doing that regularly, you’d be better served switching to a cash back credit card instead of a rewards card.

Travel Redemptions

In general, redeeming your points and miles for travel rewards will provide you the best return.  For example, an American Airlines round-trip flight from Richmond, VA to New York City would cost around $500.  Using AA miles, it comes out to 15,000 points with $86.20 in fees.  It’s important to factor in those fees when counting CPP, so here’s how:

(Travel value – reward fees) / points

It’s very similar to the original formula, but discounts the associated fees to reflect the pure value of the points you’re using.  In our American Airlines example, we’re still coming out at 2.75 CPP, which is a pretty reasonable return for your miles.

Your points can actually become more valuable when looking at business or first-class redemptions.  A round-trip first-class flight from NYC to London could cost you over $9,000.  Using American Airlines miles again, you’d be looking at around a $1,100 outlay in fees and 170,000 miles.  That works out to around 4.6 CPP, nearly doubling what you’d get from an economy redemption.

Related: Read our Review of the Chase Sapphire Preferred Card

The First Class Trade-off

Redeeming for more luxurious flights can be really enjoyable, especially for longer trips.  I know I wish I’d flown first-class when I traveled a couple of years ago from DC to Seoul, South Korea.  You should consider, however, the trade-off in quantity.  For the price of a first-class flight, you could usually redeem at least 2 (and usually 3!) economy or saver flights.  While the economy flights may not be as great of a value for your points, you’ll stretch your miles further and be able to travel more by going economy.

Taking it Further

In future articles, I’ll explore the value of cash back cards, and compare rewards points from different issuers.  The rewards landscape is competitive, but some types of points, for example Starwood Preferred Guest points, are widely considered to be more valuable than others.  We’ll take a closer look at which points are best to accrue and how to redeem them for maximum value.  Stay tuned!