Travel Rewards Points: When to Use, When to Transfer, & When to Pay Out-of-Pocket
I’ve written many posts about the insane value of travel credit cards, but understanding how to strategically redeem the hard-earned points is equally as important as earning them. There’s a lot to weigh when it’s time to purchase a flight or book a hotel with points - should I pay for the flight or use points? Should I redeem the points through my credit card’s site or should I transfer to a specific travel partner? Typically, the answers to all of these questions come in the form of some simple math.
Understanding Point Values
The travel rewards card you hold and how you redeem your points ultimately determine how your points are valued. For example, I am a Chase Sapphire Reserve cardholder. If I redeem my points through Chase Ultimate Rewards (a travel booking portal exclusively for cardholders), each point is worth 1.5 cents. That is the max value of each Chase Ultimate reward point. Not all cards’ points are created equal, though!
The Reserve card’s little brother, the Preferred, has points valued at 1.25 cents a piece through the Chase Ultimate Rewards program, and my Southwest Priority card (also from Chase) has points valued at 1.37 cents per piece. If you’re unsure of your credit cards’ point values, give it a quick Google. You’re likely going to see several search results fromThe Points Guy, a super reliable resource for all things travel reward related.
Understanding point values is KEY, because each point’s value should be used as a baseline in determining whether or not to use points when booking travel.
Disclaimer: Because I have the Chase Sapphire Reserve, most of my examples are going to use the Chase Ultimate Rewards site, but most major travel credit cards have an equivalent system. For example, if you have the AMEX Platinum, your equivalent would be American Express Travel, if you have a Southwest card, your points would be redeemed directly through Southwest’s site, etc.
Let’s take a look at this American Airlines flight within the Chase Ultimate Rewards system to understand the value of each Chase point.
This flight costs $647, and Chase tells me that this cost equates to 43,069 in points. If you do some quick math, you can see that each point isvalued at 1.5 cents.
$647 / 43,069 points = 0.015022
First, we’re going to look at two different scenarios - a bad point transfer decision and a good point transfer decision. Once we feel confident in knowing when we should and should not transfer points, we’ll dive into the pros and cons of paying for travel out-of-pocket versus using points and how to practically make that determination.
Bad Point Transfer Decision
When I say “transfer” I’m referring to the process where you move points earned on your credit card to a travel partner (like Delta Airlines) to make a purchase versus using those points to book travel directly through the credit card’s rewards site.
Bad Point Value Transfers are really easy to spot. Ask yourself: Does booking through a specific airline or hotel’s website cost me more points than it would for me to book through Chase Ultimate Rewards (or your credit card’s equivalent)? If it costs more, it’s a bad deal. If it costs less, you should transfer the points. Here’s a really obvious example of a bad transfer deal:
In this example, a flight from Dallas to Maui on Delta would cost $1,197.97 or 79,864 rewards points if purchased through Chase. I know each of my points is valued at 1.5 cents if redeemed through Chase Ultimate Rewards, but I make it a habit to do some quick math so that it’s second nature when I’m comparing the value of my points across travel partners.
$1,197.97 / 79,864 points = $0.01500 cents per point
I checked Delta’s website and found it would cost me $1,218 out-of-pocket or 126,000 points for the EXACT same flight on Delta’s website. What?! — see below.
The numbers don’t lie — transferring your Chase points directly to Delta to be redeemed for the exact same flight would be a bad move. We can easily see that, even if we took the complexity of points out of the equation, it’s just plain ole more expensive to book through Delta’s site:
$1,197 Chase Cost - $1,218 Delta Cost = $21 difference
Okay, fine. A $21 difference isn’t that compelling, so let’s compare point values instead:
Chase Point Value: $1,197.97 / 79,864 points = $0.015 per point = 1.5 cents
Delta Point Value: $1,218 / 126,000 points = $0.0096 per point = 0.96 cents
Clearly, you’re getting more “bang for your point” by booking through Chase, because each point has more buying power.
If you didn’t understand point values and blindly transferred 126,000 points to Delta instead of redeeming them through Chase, you would have essentially paid $1,910 for this flight instead of the stated $1,218. Why? Because you have to factor in the opportunity cost, or the value that you’re giving up, by making that transfer.
We know 126,000 points is worth $1,890 if redeemed through Chase Ultimate Rewards (126,000 x 1.5 cents.) Through Delta’s rewards program, the same number of points is only worth $1,218 (refer back to the picture above.) By doing some simple subtraction, you can easily see that you’d basically throw away $672 worth of points by transferring them from Chase to Delta to book this flight.
Delta Ticket Cost: 126,000 points or $1,218
Additional Necessary Points to book via Delta: 126,000 - 79,864 = 46,136 points
Value of those Additional Necessary Points: 46,136 x 1.5 cents each = $692
TOTAL Cost for the flight: = $1,218 + $692 = $1,910
In this scenario, purchasing your flight through Chase is more advantageous from both an out-of-pocket AND points perspective!
Good Point Transfer Decision
One thing I want to note before we dive too deep into this section is that, in general, you’ll likely receive a higher return on your points when you redeem them for flights vs. hotels.
Hyatt, however, is an outlier.
They have a really easy-to-understand and super valuable point system, because Hyatt places their properties into categorizes and then assigns fixed nightly point values based on that category.
In the following example, we’re looking at the Hyatt Regency Maui, a Category 6 hotel, where each night costs 25,000 points.
To show the incredible value of these points, let’s first understand what this hotel reservation would cost you in cash for a 6-night stay. If you were to book your stay directly through the Hyatt website, your out-of-pocket cost would be $4,985 — including taxes and fees.
In the next picture, I mocked up the same 6-night stay at the Hyatt Regency Maui through the Chase Ultimate Rewards Portal, and it was a little cheaper — $4,902.74.
Total Cost if booked through Hyatt: $4,985.62
Total Cost if booked through Chase: $4,902.74
Cost Savings by booking through Chase: $83
Saving $83 by booking your stay through Chase isn’t insignificant, but the fact that you’re still spending almost $5,000 for your place to stay is significant. Since this dollar amount is a little hard to swallow, let’s see if using points for this stay would be more affordable.
We have two options:
1) Book with points through Chase Ultimate rewards or
2) Transfer Chase Ultimate Rewards points to Hyatt and book through their website directly
Option 1) Book through Chase Ultimate Rewards
Booking the 6-night stay with points through the Chase portal would cost a whopping 326,849 points (see photo above). That. Is. Insane. That’s $4,902.74 worth of Chase points that you could use to fly 2 people round trip from NY to Europe…twice. (Based on what we just spent on flights for an Aug ‘22 trip to Italy.)
Since that feels wildly costly, let’s hurry up and explore our second option.
Option 2) Transfer points to Hyatt
The first step is to figure out how many points we’d need to transfer from Chase to Hyatt for the same stay. When you visit the Hyatt website, you can choose to view room rates in Points or in USD. When you select the points option, it will display the nightly room in points instead of dollars, as shown in the picture below. The room in question would cost 25,000 Hyatt points per night, a total of 150,000 for our trip.
25,000 points/night x 6 nights = 150,000 Hyatt points
Chase was quoting 326,849 points for the exact same stay! Since Hyatt requires fewer points overall to stay in the same room, the right move would be to transfer 150,000 Chase Ultimate Rewards points to World of Hyatt to book your stay. This is an insanely good value, right? (Spoiler alert: Yes, the answer is definitely yes.) Let’s look at the point savings in dollars to really drive home what a steal this is:
Chase Point Cost: 326,849 x 1.5 cents = $4,902.74
Hyatt Point Cost: 150,000 x 1.5 cents = $2,250.00
Savings compared to Chase = $4,902.74 - $2,250.00 = $2,652.74 or 176,849 points
Because I currently don’t have the adequate number of Hyatt points to actually book this stay, they make it incredibly hard to see your total cost in points through their website without purchasing or transferring points first. BUT, I am 100% certain that when you book a stay with Hyatt points, the resort fees and taxes are included in that value. (I know this because we stayed at this exact same hotel a year ago and paid with points. You can read more about that trip’s savings here.)
This is a prime example of an excellent use of transferred points!
Do I pay out-of-pocket, or do I use points?
Grrrrreeaaaat question. This section doesn’t have as many cut and dry answers as the examples above. This is where I tend to use reasonableness and look at the cost of a trip in its entirety.
Reasonableness
I recently booked round trip Southwest flights for my husband and me from Dallas to Long Beach, CA for $162.95 each, $325.90 in total. It’s pretty hard to find weekend flights that are that inexpensive for that distance. Instead of using 23,788 points and paying 11.20 in taxes & fees for each ticket, I opted to pay out of pocket and earn 1,494 points instead.
Since you know what an opportunity cost is from an earlier example, you probably just realized that earning points is an opportunity cost of using points. Typically when you book a flight with rewards points, you don’t get to earn points on top of it, since they’re already giving you the flight “for free.”
If the point value is equal to our higher than the “in house” value - use points.
At the beginning of the article we learned that understanding your point values was KEY in knowing when to redeem them and when to hold. As I’m SURE you know by know, when I redeem my points “in house” through Chase, each one is guaranteed to equal 1.5 cents. We saw in the Delta example that each point had less purchasing power when redeemed through Delta at .096 cents each, so we opted not to transfer them.
The same logic applies here. If you’re looking to redeem your points for travel, ensure that they’ll be worth at least the “in house” value or MORE to ensure you’re getting a good value.
Hopefully this helped provide some peace of mind for your next travel booking! It can be intimidating to let go of those hard earned points and to be 100% certain you’re making the right decision. Understanding your point values are key. Once you’ve nailed down your values, a little bit of math can tell you when to redeem and when to hold.
Happy booking!