The basics about points and miles
- Money&Travel
- Jun 28, 2022
- 5 min read
Updated: Jun 28, 2022
If you are interested in earning and redeeming points and miles to travel almost free but don't know how to start, you will find the information needed to get you started here.
Almost every large hotel chain and airline has their own points or miles program. They work as a currency on their own ecosystem, giving your the opportunity to pay for travel expenses, like, flights, hotel stays, tours, etc. Large credit card providers also have their own points programs and many of them will allow you to transfer points to other hotels and airlines reward programs, making them much more flexible, as you can use them on many different ways. The largest credit card points ecosystems are Ultimate Rewards (Chase), Membership Rewards (American Express), ThankYou Rewards (Citi) and Capital One Rewards (Capital One).
Learning the main rewards programs, how much are their points worth, how to earn points, who are their travel partners and how to redeem, will get you started on the points and miles game. We will touch these points briefly below to serve as an introduction. There is a lot to learn and plenty of resources online to help you build up your knowledge on specific programs that may be particularly important for you.
Before getting started, read carefully rule #1 and always remember it.
Rule #1. Never overspend or buy things you wouldn't
have bought in the purse of extra points
What is CPP?
Once you start getting familiar with travel rewards programs, you will hear the term CPP (cents per point), which is an approximated value in cents for each point. It is extremely important to learn to calculate this, as this will help you determine if you are getting good value from your points.
Take a look at the following two stays from Hyatt website. The first one at Andaz 5th Avenue is $506 or 21,000 points per night. In this case, if you were to book with points you will get 2.4 cpp from your Hyatt points. To make this calculation, divide your cash value / points required for redemption x 100 (it will look like this, 506 / 21,000 x 100 = 2.4). The second one at Hyatt Place New York/Midtown-South is $217 or 17,000 points per night. In this case, if you were to book with points you will get 1.27 cpp from your Hyatt points (217 / 17,000 x 100 = 1.27). I will consider the first redemption a good value, as I will get 2.4 cents for each Hyatt point. However on the second one I will only 1.27 cents for each Hyatt point, in average Hyatt points are value at 1.7 cpp, therefore I will not consider getting only 1.27 cpp a good redemption. I will avoid this second redemption and I would consider instead saving my points for a future stay or better redemption.
Be aware that many credit card companies will allow you to use points to pay your credit card balance or make purchases online, typically getting 1 cent per point. This is almost always a poor redemption, since you can easily get much more value from your points.
Travel Reward Programs and value.
The value of points changes over time and some programs tend to devalue their points. The list below serves as a guide, it may not apply to your particular redemption, keep in mind that value can change at any time. Sometimes you are able to get more value than others for your points. I will usually avoid a redemption were I get less than the value listed below for my points. In those situations I may decide to find an alternative redemption or pay cash and save my points for a future redemption.
How do I earn points?
There are a lot of ways to earn points and I try to use as many of them as possible to maximize the number of points or miles earned. Make sure you sign up for rewards program from any airline you will be flying and every hotel that you are staying. These programs are free and will earn points or miles based on your spending.
Sign up to at least one and likely multiple cashback sites to earn points or miles when doing online purchases. Follow this link for my post on Cashback sites and how to take advantage of them.
Sign up for a dining rewards program. Multiple airlines and hotels have dining rewards programs, including American Airlines, Delta, Southwest, United, Hilton, IHG, and Marriott. Once you create your account, you are able to link your cards with your account and you will start to earn miles when eating at participating restaurants and paying with a card that is enrolled.
Signing up for a new credit card will usually reward you with a large amount of points or miles as sign up bonus. Overtime you will also earn points or miles based on your spending, typically at a minimum of 1 point/mile per dollar spent on the card. Many cards will offer multipliers on different categories, where you may be able to earn up to 10 points per dollar spent and few times more than that on different categories, like travel, groceries, gas, etc. These multipliers will boost your points earning capabilities immensely. However keep in mind credit cards are not for everyone, if you are not able to control your spending and pay your credit card in full every month, you should stay away from credit cards. If you end up paying fees and interest on your credit cards, this will negate any potential benefits from earned points. If this is your case, I will suggest that you stay away from credit cards.
Transfer partners
I have compiled a list of the most commonly used credit card companies reward programs and frequently used transfer partners. Take a look at the tables below for Airlines and Hotels.
How to Redeem?
Once you find the hotel or flight that you would like to book and you have decided this is a good redemption, you will just need to transfer your points to that partner. Hotels may require that you have the points available before you are able to complete your reservation. However for flights usually is best to make a reservation and put it on hold, then transfer your points and complete the reservation. You don't want to transfer your points and then find out the flight you wanted to book is not available anymore, since you will not be able to transfer your points back. The process may be slightly different for each airline and hotel, and sometimes you may need to complete reservation over the phone.
See the screenshots below for an example. Direct flight from Punta Cana to Charlotte will cost $526. However you could book the same flight with 11,000 points and $68.37 for taxes and fees through British Airways.
American Airlines is not a transfer partner with American Express, but British Airways is and they are partners with American Airlines. So I booked a similar flight transferring 11,000 Membership Rewards (American Express) points to British Airways, got approximately 4.16cpp on this redemption. Used my American Express Platinum card to pay the $68.37 for taxes and fees. This card earns 5 points for each dollar spent on airlines, therefore collecting approximately 340 points while saving money on my flight redemption.
And here breakdown of the math.
$526 (cash price) - $68.37 (award taxes and fees) = $457.63
457.63 / 11,000 x 100 = 4.16 cpp
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