Why Do We Constantly Hoard Our Points In This Community?
If you have read my writing then you already know my feelings on this. I believe that people should be using their points first, and almost never use cash. If you are diversified or have transferable currencies there really isn’t a bad redemption out there. Bank’s travel portals can make a bad points redemption into a decent one. Why am I bringing this up again? It is because I read a post by Greg at Frequent Miler this morning and something really stuck out to me.
Greg’s Post
In Greg’s post “On My Mind (Goodbye Sapphire Reserve?)” I got hung up on something he said when talking about the 1.5 cent Ultimate Rewards travel portal redemptions:
“That last emotional excuse, above, is actually a reasonable one. I should start booking travel through Chase. Specifically, I should book airfare this way. My wife and I have millions of Chase points that we rarely use. That’s crazy.”
That is indeed crazy! It’s not crazy that he has millions of points, although impressive, it is crazy that he still pays cash for any travel at all!
This seems to be a theme among readers and bloggers alike. They save points for their ideal redemptions or will only use them for values above a certain point. If you have limited points earning potential then by all means go that route. But when you have millions of points, which means you can easily accrue them, then why are you ever using cash?
You most likely already spent some money in acquiring those points and now you are gonna double down and spend cash on travel in place of using them? It is just insanity to me and what is even crazier is that I think I am in the minority in this way of thinking.
Running Some Numbers
Let’s say someone has 3,000,000 Ultimate Rewards points. That is a minimum of $45,000 in travel that can be booked (if they have the Chase Sapphire Reserve card). Every booking they make is like making a deposit into their bank account (the money they saved). So that could be looked at $45,000 in savings if they were going to pay cash anyway.
And it isn’t like they are going to stop earning points. They will continue to add to that stash while they spend it down. That also doesn’t include other currencies which they probably have similar figures in. They should save their cash and use the points.
Don’t forget these are an asset that is always being devalued. Who knows how much longer the CSR gets 1.5 cents per point. If they drop every card to 1.25 cents per point that means you just lost close to 20% in value. I am not saying it will happen but it could. Chase could also reduce transfer amounts to Hyatt and make it 2 UR to 1.5 World of Hyatt points etc. Chase kicked around the idea of ending points pooling which means they are looking to cut costs in some way. That means there will be a devaluation of their points whenever they decide what that change is.
But What About Hotels?
Hotels are the hang up. Flights are easy, there is no reason you should ever pay cash for a flight. Either use airline miles or the portal since you earn miles and status booking flights through bank travel portals.
Now for hotels you don’t get the credit, get to use status, or earn status elite nights when booking through a travel portal. That can be a problem. Or is it? I have already shown you why I think you should kick everyone but Hyatt and Hilton to the curb. If you have a particular hotel you like at those other brands etc. use their points until you have none left and then just book it through the portal. I don’t think you should be worried about status with them since their system is broken.
Now down to Hyatt and Hilton. Hilton gives you status with their credit cards so you don’t need to worry about earning it. When you need status at a particular property then book the room with their points. When you don’t need it then book the hotel through a travel portal to save their points for status needed bookings. This would include Hampton Inn stays where everyone gets free breakfast or one night stays where you are leaving early etc. Think of an airport hotel before or after a flight etc.
For Hyatt their award stays count towards status so just transfer points to Hyatt and book the stay with their points. If the redemption is really terrible (which is pretty hard to find with Hyatt) and it is a not a full service property then book it through the portal at 1.5 cents each. That is unless you needed the stay credit then use the points at a less than ideal redemption.
Conclusion
I don’t want you to think this is me calling out Greg or anything like that. It seems like he is starting to come around to my thinking some in his piece. I see this as a common issue in this hobby. Just the other day I had a similar conversation with reader Gaurav on my hotel programs post (go to the bottom of the comments). My goal was to add to the conversation and offer a differing view.
My summarized point is this – if you are able to easily accrue points & miles then use them in place of cash almost every time. You can then save the cash you would have used and put it into savings or invest it. Using points will often give you a better return than simply manufacturing cash back. If you bought gift cards at Office Depot for 5X Ultimate Rewards then cashed them out at 1.5 cents each towards travel that is 7.5% cash back in your pocket (the money you saved by not paying cash for that hotel room etc.). That is better than using the Amex Simply Cash for 5% or cashing the UR points out at one cent a piece.
The only time I could see cash making sense is if there was some amazing promo where you got huge value in return. An example is the old Accelerate promos where you could get 50,000 points for a $100 hotel room stay.
Here is my challenge to those that don’t agree with me. Add up all the money you spent on travel last year where you could have used points. Set that amount aside in savings or invest it. Also set aside the points you could have used in it’s place. Which account will be worth more in 1, 5, and 10 years?
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I never hoard! What’s lol the point! Time is not infinite maybe you get next year maybe you don’t. I can not list any wow trips as so many commentators have ,but I am smiling right now thinking of all the great American cities I’ve been able to visit with my husband, all the carribean beaches we have gone swimming at, and maybe in the future all the greek history we’ll see and Italian food we’ll eat. Find a way to enjoy today!!!
Carpe Diem – I love it Leslie!
Greg reminds me of the guy I read about years ago, who had a bottle of Lafite Rothschild cabernet, a very classic vintage, worth some ridiculous amount of money, and, when asked what occasion he was saving it for to drink, he said he wasn’t- the bottle was an investment, and would remain in his cellar.
I remember thinking it must be nice to have that much money that you could ignore the wonderful things money can buy.
[…] Should you book with cash or points? Save your points for maximum redemptions or just save your cash and always use points first? Check out Mark’s post, which I agree with. Read more here. […]
You’re spot on. There’s this pesky little thing that permeates every situation and will always be a part of every decision you make, otherwise known as opportunity cost.
If you have thousands of dollars in points and miles and you opt to use cash then the opportunity cost is where that money could’ve been better invested. We don’t need to get into the weeds on this but it’s a safe assumption that anyone using cash when they’re sitting on thousands in miles is in a position where they’re investing this money. A yearly loss of 1-6% ROI compounded over the years adds up.
I won’t even get into how easily you could argue the risk of devaluation outweighs any investment risk.
Thanks for the comment Anthony – very good point.
Hyatt example:
Booking 4 rooms for for four nights over Christmas at the Hyatt Regency in New Orleans. Club room = 21,000 pts/night/room, so 336,000 UR. Rooms often go for >$300. I watched for the price to drop and booked with URs through the Chase portal. Each room cost ~57,000 URs for 4 nights, total ~228,000 URs. Who needed status? We just booked Club rooms.
Nice Dee! Being flexible is key
I still desire EXP status on AA so I continue to pay money for flights. But someday I will stop chasing status and start cashing in the miles I have accumulated. I understand your post but I like my system for the time being.
I still desire EXP status on AA so I continue to pay money for flights. But someday I will stop chasing status and start cashing in the mile I have accumulated. I understand your post but I like my system for the time being.
Makes sense Scott. Have you ever consider booking those same flights through the ThankYou portal or UR portal etc. so that you save the money and still earn the status you desire?
Timely post. I literally just switched a cash reservation for our trip to Santa Fe to points. It was $320 after taxes or 24,000 points for 3 nights (Hyatt Place @ 8k per night). Below my desirable cpp for Hyatt, but hey, I’m saving cash. ‘Cause there’s, you know, a hospital bill coming our way.
And somehow my wife and I *still* have 1.2 million points and miles.
Damn hospital bills 🙁
I agree with everything you’ve said, although everyone’s situation, of course, will be different.
My sister has over 200,000 UR points but needs a new phone. The phone she wants costs ~$1000. She doesn’t have the cash outright without redeeming some investments and does not want to the ATT Next thing (which at the end is actually more than paying the phone and taxes up front). So I told her instead of hoarding all her points, it would be better for to cash it and get what she wants since she’ll probably only use 100,000k of it for actual travel this year.
So, sometimes it confuses me when people say they wouldn’t use points because it’s not a good redemption. To me, if you have 100,000k points to use but don’t have $1000 just go for it. Or even if you have $1000, that’s still $1000 out of pocket you’re spending.
Yeah everyone’s situation is different for sure and earning ability plus income plays a big part in decision making.
I agree using points for what you actually need is the most important thing. I had a dishwasher break down once and cashed in points for $500 in gift cards to get a new one. A bad redemption but I had more points than I needed and wanted to spare us the expense. I get more use out of that dishwasher than I would have one flight :).
I have a feeling that a good chunk of the cash Greg is spending is tax-deductible/reimbursable from his business.
Same with me.
Can easily tip you one way or the other.
Tax write offs would change the calculations some. It amounts to a 20-30% discount which is tempting but you still need to spend money to get the write off. Lets say it is a $250 room for 12,000 Hyatt points. Even when taking a 30% tax discount into play you would still get about 1.5 cents per Hyatt point. Not great but that is $175 in after tax money is still yours plus you earn interest or income on the full $250.
If that is the case I would suggest start racking up cash back instead of points. Use the cash earned to book the flights and take the tax deduction since the cash back should be tax free. No need to continue to earn points at high rates if you are not going to use them or end up using cash more often.
Well, it could be much more than 20-30%. CA state income tax can easily be over 10% alone.
But 2%(+) cashback I agree is best for a lot of people a lot of the time on unbonused spend. I am starting to look that way myself, unless going for things like Hyatt nights or a signup bonus.
Just finding so many ways to get 3x, 4x, 5x.
That is true – where you live could make a large difference.
I want to get into more cashback but I find myself putting all of my non bonus spend towards welcome offers or spending bonuses and there is rarely enough left over to do much damage. That is the main reason I have resisted signing up for the Alliant card…I just don’t think it would get enough use from me at this point.
Another problem I have which Im sure may upset some is I earn around 50k bonus MQMs with 60k spend on Delta Reserve & 50k spend on Delta Buss Plat. 50k MQMs is already Gold and I only need 2-3 paid flights per year from Hawaii to reach Delta Platinum status. Problem is $110k spend a year on Delta I think many would argue I could put that spend to much better use? As I hear most refer to Delta miles as Sky Pesos.
Yeah better to book the cash flights than spend on the Amex cards.
I always end up stashing Delta points I currently have around 600k. I get pulled between using points or paying cash to earn MQMs in order to make it to Platinum status by the end of the year. Plus I have a ton of $50 Delta gift cards I don’t think I’ll ever burn through (Delta 3 gift card limit). Normally ill pay cash until end if the year when I can determine if I will have enough MQMs to make the next status or not, if I will come up short then I’ll end up burning some miles on a free flight which does not earn MQMs.
Is there a reason you couldn’t book those flights through a travel portal and use points at 1.5 cents each while still earning status?
It makes sense though with you needing to burn Delta gift cards. Their terrible policy is why I decided to start going with Southwest for my credits. I don’t know if the book a flight and canceling it still combines Delta gift cards or not.
That makes more sense, I guess I need to change my mindset and move my spend to another spend card I can use with a travel portal. I do not know of any travel portal I can use with AMEX Delta cards to earn an extra 1.5 points? I can only acheive that if I’m using AMEX Plat or a Chase card correct?
My current mindset has me generating $110k spend on delta cards to earn the 50k MQM boost bonuses. Anything over $110k spend I start racking up Hilton points and earning extra free weekend stays.
Unfourtially from Hawaii I’m limited to Delta, United or Hawaiian Airlines. In the big picture deep down I know with me flying 2-3 times a year Delta status truly is not worth much as ill never receive a free upgrade in/out of Hawaii but I do on flights within the mainland. I’m probally better to get a different card and earn 1.5 points through a portal as you said. Then I could use those points as cash to fly, earn status and for flight upgrades.
Time to develop a new 2019 game plan..
When you are spending at those levels you can probably book into whatever class you want and don’t need status – through portals or with airline miles. I would definitely look into a transferable currency card with a travel portal and if you are only flying a handful of times per year status isn’t really worth all that spend. That 110K could net you a lot more putting it other places than that status gives you for 3 flights imo.
If you have a 2 player system you could each get the Blue Business plus and get 200K MR out of 100K in spend which could be transferred to Delta miles. You could also use them to book United flights via their partners when that is a better option or use Virgin Atlantic to fly Delta when it is cheaper or there is a transfer bonus etc. Or you could pair it with a Biz Plat and redeem 200K at 1.5 cents a piece through the MR travel portal.
He probably takes a tax write off.
Greg? For sure he gets to write off cash travel because of his site. I was talking about people in general though not focusing on Greg really.
I don’t hoard my points per se, but I also don’t like low value redemptions. I would love to redeem my Hyatt points for nothing but stays at PH NY, Milan, Paris, Tokyo, etc and only use my AA miles for partner awards, and Alaska miles only for CX F but it’s not practical. And often, paid J and F flights are so cheap now that it hurts me to use points
Those mistake fares have been crazy. That is when booking through a travel portal at 1.5 cents a piece etc. comes into play for me. You save the cash, earn redeemable miles and status, and still get to take advantage of the lower price.
I don’t actually mind folks holding on to points. From the bank’s perspective, when points are redeemed they hit the income statement as an expense, which may create earnings pressure a bank feels the need to counter with a devaluation. As long as they stay unredeemed, the banks may presume some portion of them will go unredeemed and they don’t feel the earnings pressure of their liabilities which may hold off devaluations.
I like it Rob – everyone hold onto their points except for me and Rob!!! 🙂
Well, I’d prefer you held your points too 🙂 LOL
🙁 haha
Unredeemed points stay on bank balance sheet as debt. They like that even less.
+1 It’s an accrued liability. An IOU with no indication of when the bill will come due. I know that I wouldn’t like it.
How does one accumulate millions of UR points? I don’t see how you get there even doubling up on Chase biz cards and using two player mode.
Most likely multiple Ink accounts x2 players earning 250K per card via office store spend each year.
Wow, that most take an obscene number of trips to stores for VGCs and MOs. I guess if you have the time and motivation…
Yup many out there do. Although people that find friendly stores and Walmarts etc. could 10’s of thousands in one trip in the past so not as much time once you get it all set up.
Here is an example of why I still sometimes pay cash. I booked 3 nights at a Luxury Collection property (using MRs before the merger, saving 16,000 points/night).
My room was upgraded to the Presidential Suite, largest room at the hotel, & useful for a family NYE party. I asked if I could add another night & keep that room. When they said yes, I had the option of spending $202 cash for another night (with free upgrade) or use 50,000 MRs worth $450. I paid the cash so I keep hold of MRs for similar over-the-top upgrade opportunities.
I know you don’t chase upgrades, Mark, but they to me are the heart & the soul of messing with most of this. $100 Hamptons etc are boring, if useful & sometimes necessary, propositiins. My own points are used for $1,000 upgraded rooms.
Cash has it’s place from time to time no doubt. I know you don’t chase bonuses as much as many of us which would make more sense to maximize the points since the earn rates are going to be lower overall.
Agreed…this is mostly about maximizing spend/bonus categories for me. Risking more-than-a-few gift-card’s chance of running afoul of financial institutions is a deal breaker for me.
That said, I still stay/fly pretty much where/when/at the level I want so accumulating rewarding travel points/miles can definitely work using both our methods. Mine is the tortoise v the hare but once you’ve been doing this stuff as long as I have there is never a shortage of rewards to pull from anyways!
There is more than one way to skin this cat for sure!
Want you to know too, Mark, that today is the last day Chase gives me for upgrading to Chase Reserve checking & earning 60,000 URs.
It’s worth $900 – $1,080 to me dep on my typical use & represents 1/2 your entire cash bonus haul from last yr but by opening only 1 acct rather than several+.
Will probably do, but point being I got the offer by maintaining a solid banking relationship with Chase & represents one transaction for a lot of benefit rather than many.
Whether it’s points to upgrade offered by credit cards or cash from banks, it’s nice to sit back & let good offers come to me rather than pounding the pavement for perhaps inferior ones.
That is more about the money you have in your accounts with them than anything 🙂
Congrats on the offer though it is a good one!
50,000 MR’s is worth a lot more than $450. More like $750.
Yes…agreed (that was for Mark’s sake who isn’t much about Marriott these days if you hadn’t already noticed!).
Haha
😉
What do you think is the threshold for having a lot of points? I have about 250k UR and 200k MR but my family of 4 flies to Europe every year to visit family. I feel like I have to keep about 250k points on hand at all times so I can move people around. I totally get stashes in the 7 figures should be earning and burning. I seem to waffle between cash and points prices, opting to pay for rooms in the $150/nt range and save my points for higher priced nights that I can’t stomach. Similarly, I pay for domestic flights and save points for International redemptions (Economy, because I’m not points-rich enough to get everyone in Business).
When you involve families it gets a little trickier since one trip to Europe can eat a hole in your stash. I would say your system makes sense for your situation. If you were able to increase your earning rates then that could change but I think it works for where you are at now.
Beautiful post!!!! Thats exactly why i have been using my points every time i can.
Thanks Leo – appreciate you taking the time to read it.