What You Can Do With Your Travel Rewards If You’re Grounded
Dear Rich Lifer,
On March 19, the U.S. State Department issued a global “Level 4: Do Not Travel” advisory, discouraging all travel abroad.
Airlines grounded planes, flight schedules were limited, and cities around the world went into full lockdown. You know this already.
Suffice it to say your summer travel plans were probably put on hold. But what about those points and miles you’ve been racking up?
You might be wondering what you should – or can – do with your travel rewards right now?
Before you panic and cash in all your points on gift cards, let’s walk through a few scenarios and some of your best options. But first, you’ll want to…
Check if your points expire
The good news is your points or miles likely won’t expire inside a credit card rewards program as long as you keep your account in good standing.
This is the case for most issuers, including: :
- American Express (Membership Rewards)
- Bank of America
- Capital One
- Chase (Ultimate Rewards)
- Citi (ThankYou Rewards)
However not all policies are the same. It’s worth looking up the fine print online or calling your card issuer to make sure your points don’t have an expiry date.
Be extra cautious with your rewards if you have a co-branded card, like a hotel or airline credit card. Loyalty programs tied to these cards typically follow their own rules with regards to expiry, and your card issuer can’t control that.
What should you do if your points are going to expire?
If you find out that your points do have an expiration date, regardless of your account activity, you have a few options.
Your first is to book a flight far into the future. Most airlines let you book as far as 11 months in advance.
If you decide you can’t make the flight when the date arrives, you can either not show up, most airlines don’t charge no-show fees. Or, try to cancel your flight, pay any redeposit fees, and get your miles back.
The same idea applies to hotel points. If you can book travel far into the future, you might be able to benefit from lenient cancellation policies if you decide not to go through with your plans.
Alternatively, you can also redeem your points through your reward program’s shopping portal. The drawback here is you likely won’t get the same value for your rewards versus booking travel or hotel accommodations. But we’ll get to that in a second…
What should you do if your points don’t expire?
There’s no right answer here but in our opinion if your points aren’t going to expire, there are a few things you should consider.
Scenario 1: If you’re carrying a balance on your credit card and accruing interest.
The pandemic has definitely stretched a lot of people thin. If you’ve been getting by on credit and you’re accruing interest, consider using your rewards to pay down your balance, since the interest you accumulate is setting you further back than your rewards are worth.
Scenario 2: If you’re not carrying a balance and your points have no expiration date.
Your best bet is to hold on to your points and book something once the pandemic is under control. Most frequent-flyer programs and hotel reward cards offer the best value if you book flights and accommodations. Redeeming your points for cash or gift cards rarely offers the same value. But if you think you’ll never fly again, then consider them your best option.
Scenario 3: If your credit card only allows for cash back.
Redeem your rewards. There’s no point in hoarding cash back. Now is as good as ever to fatten your wallet and cushion your emergency fund.
What happens to your miles if an airline files for bankruptcy?
If you’re on the fence about saving your miles or cashing in for gift cards, then this scenario has probably crossed your mind.
You’ll only lose your miles if an airline goes bankrupt and ceases operation — usually because it doesn’t merge with another carrier or there’s no bailout money. Should an airline declare bankruptcy and continue operating, your miles will likely still be valid.
When should you consider your other redemption options?
By now, you probably can tell we’re big on saving your rewards for travel. The reason being that you get the most value for your points versus redeeming them for gift cards, statement credit, or other merchandise you might find through your loyalty program’s shopping portal.
But don’t take our word for it. It’s best to run the numbers yourself. A quick way to calculate the value of your points is like this:
Divide the value of the redemption by the number of points or miles required.
For example, say you find a $100 Amazon gift card that requires 10,000 points. Divide $100 by 10,000 and you’ll get 0.01, or 1 cent per point.
That’s actually not too bad.
If, however, the $100 gift card cost 13,500 points, you’d be looking at 0.007, or 0.7 cents per point — which is mediocre at best.
The Bottom Line
Everyone’s situation is different and it ultimately depends on the card you carry. If you’re paying a high annual fee for a travel rewards card that offers perks you can’t take advantage of right now, then it might be in your best interest to transfer your points to a cashback credit card or a travel rewards card with no annual fee.
Or maybe doing nothing with your points and continuing to accumulate until you can find a great deal is a better option. Either way, taking a few minutes to think about your strategy will go a long way to ensuring you come out ahead.
To a richer life,
The Rich Life Roadmap Team