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What's Covered Today:
Transferring points to travel partner loyalty programs to extract maximum value.
This is true for flights and hotels, but today I'll cover flights specifically.
A real-life example using Amex Points
Step-by-Step Guide using Amex Platinum Points
Setting the Stage
Summer is here, COVID is officially a thing of the past, and people really, really want to travel. All of this means that demand for airfare is high, and when there's high demand, prices usually go up (inflation). This makes optimizing the maximum value from credit card points all the more important.
Exhibit 1: Air Carrier Load Factor - planes are crowded once again!
Exhibit 2: Average Airline Fare - air fares are pricey once again
Travel Partners and Loyalty Programs
Major airline chains often have loyalty programs that award passengers points for flying with them. These points can be redeemed for things like flight upgrades, in-flight Wi-Fi, etc.
Major travel credit cards, like the Amex Platinum or Chase Sapphire Reserve, partner with these loyalty programs and allow you to exchange credit card points for airline loyalty points. In many cases, there's not a huge economic incentive to do this because there's no "point arbitrage", meaning the dollar value of your credit card points ends up being about the same when exchanged for airline loyalty points. BUT…there are instances when you can exchange credit card points for airline loyalty points and significantly increase the dollar value of your points…point arbitrage!
Let me show you an example.
Amex Platinum Points ---> exchange for ---> Singapore Airlines Loyalty Points
The Background:
I had booked two economy tickets from NYC to Singapore for a nice summer trip. The thing is, the flight is direct and is nearly 19 hours…brutal. So I wanted to upgrade our flights to business class in order to have a seat that turns into a bed and an overall better experience. I've never flown this way before because these seats are so expensive, but I had read about people getting luxury seats on international flights with points, so I decided to look into it. Fortunately, with Amex points and transferring to Singapore Airlines' loyalty program, I found a way.
How Do You Know if the Exchange Is Worth It
It's really pretty simple.
Do the math: how many Amex points do you need to book or upgrade your flight? Then, calculate the dollar value of those points vs. the cost to upgrade directly (with cash).
If the Amex points are worth substantially more in dollar terms when converted to loyalty points, consider the trade. If not, save the points for a better deal down the road.
In my example, upgrading each seat to business was $5,500. So $11,000 for two tickets. Now, you might be better off than me, but personally, I can't afford that. However, a transfer of Amex Points to Singapore Airlines comes with significant point arbitrage.
Here's how the math worked out:
This means that in exchange for $1,323 worth of Amex points, I can upgrade two seats to business class, which is worth $11,000, meaning I multiplied the value of my points by over 8x! Note that in order to have $11,000 worth of spending power using Amex points the standard way, you would need 1,571,429 points!
Step by Step (if you have an Amex Platinum)
Assuming you've done your math and the value is there, here's a step-by-step breakdown of how to transfer points to an Amex travel partner.
Note: you can see what the exchange rate is between your points and the loyalty program in Step #3 below. To see how many points you need to book/upgrade, check the airline's website.
Add'l Note: In this example above, I purchased economy plus tickets and then used points to upgrade our seats.
You will need to create a loyalty account with the airline you're choosing. Head to their home page and sign up.
Navigate to the Amex Rewards and Benefits page and then click Transfer Points at the bottom
Select the travel partner and click “Show Details”
Select the number of points you want to transfer and enter your airline loyalty account number
Your points will transfer from your Amex account to the airline loyalty program. Head to the airline’s website and book/upgrade your flight directly on their site. Note: It may take some time for your points to appear in the loyalty account.
Conclusions:
Credit card points can be a valuable asset if used the right way. While it may be tempting to take the easy route and use them simply to book a hotel or a flight directly from your cards travel portal, being patient and doing a bit of homework can have a big payoff. In my experience, leveraging travel partner programs can result in the greatest value, and 8.3x is personally the best I've managed thus far. While my specific example above is for Amex, other popular cards, such as the Chase Sapphire Reserve, have similar programs and can offer similar "point arbitrage" opportunities.
While credit cards can prove valuable, they can also exacerbate financial challenges. Be sure not to spend more than your budget and avoid credit card debt to the fullest extent possible. It’s not worth scoring some points at the expense of your overall financial wellness.
If you are in the market for a new travel credit card and are considering the Amex Platinum, I’ve provided a link below to learn more about its features.
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