Points 101: What, Why, and How of Points
Points that. Points this. You may have heard about this vague idea of points, but never really understood or figured out how they exactly work. You might even have many points accumulated from your credit cards but aren't sure the best way to use them.
Our goal in this article is to help you understand the basics of points so that you can book your first free flight.
Points can be tremendously useful for a wide variety of people. I'd argue it captures an extremely large portion of people, even with varying traveling preferences. Do you fit in any of the travel archetype categories below?
Type of Traveler | Our Review |
|---|---|
I travel full time and want to always go somewhere | I've (conservatively) saved over $50,000 in travel expenses for me and my family over the last 4 years. If you like to save money on your travels, this article is for you. |
I can only travel once per year / once every few years | Even if you don't travel a lot, learning how to use points can still save you thousands of dollars on your trips. Wouldn't it be cool to travel for almost free for those times you do end up taking a vacation? |
I'm a student with not a lot of cash, but want/need to travel for fun or home | I was a student when I cracked the points world and its been history since then. Being able to fly around the world in business class (~25,000 miles) for just $600 out of pocket when I was just 22 speaks volumes to the potential of points |
I'd like to experience flights that I would never be able to do normally | Trust me—I never had $20,000 lying around to book flights. I love to do things that I would never be able to do within my means and points can let you book business or even first class flights that are unaffordable otherwise! |
I travel for work a lot | A lot of people I met at my prior job that required business travel actually did not use their points to the fullest extent possible. There's a lot of missed value to be gained here as well |
There's a very good chance you fit at least one of the archetypal categories I've listed here. If you don't travel at all, then going team cashback might be better for you. However, if you're reading this and realizing you fit into one of these categories (I'm guessing more than 95% of you), then continue reading on!
We'll be breaking down this article into three pieces:
WHY... are points so powerful?
It might seem a bit illogical to start with WHY points are so powerful if you don't know much about points themselves, but showing the aspirational side of points might help inspire you to dig further.
Our story with points:
Both my Co-founder, Zi Liu, and I grew up in immigrant families that achieved the American Dream through education. We could have never imagined traveling in first class without points.
Flying Japan Airlines first class for just 70,000 points!
I have always loved understanding the full set of rules of a complex system and optimizing it. If you think about it, the world of points is really like trading and optimizing algorithms.
I remember there was a time when I stumbled upon points when reading Brian Kelly's first blog posts at The Pints Guy. Learning about secret saver fare sweet spots that was possible through points, was fascinating. It intrigued me and I sought to dig deeper.
What I ended up kickstarting was my journey into the points world. I opened my first two points card—the Chase Sapphire Preferred (50k point sign up bonus) and the Chase Freedom (20k points)—which helped fly me home for the holidays and other short hops. I then accumulated more points with the likes of:
These are only some of the cards I ended up getting when I was just 20/21 years old. By then, I was flying fully on points and had basically cut the majority of my travel expenses by over 90/95%. Before I started working full-time, here are some of the flights I ended up booking for me + my family:
This is only a snapshot of the last 100 flights I've taken, but it's actually kind of shocking to look back at what points have enabled for me and my family to date. There's endless stories of point successes, but I hope this can convince you why points are important. If they can unlock the travel dreams of a 22 year old, then imagine what they can do for you!
WHAT... Are points? What can I do with them?
Credit card and airline/hotel loyalty points are a type of reward that companies give you in return for spending with or on their products. While they may be broadly referred to as "points," typically you earn credit card points and airline miles by (this is not an exhaustive list):
American Airlines was the first big company to develop the concept of the loyalty program, rewarding consumers for spending on AA flights. Back then, you could get a free flight for 25,000 points (if only that was the case now!). However, the idea of the consumer loyalty program is almost everywhere in life. There's a large oversaturation of loyalty programs out there today, but there's still a lot of opportunity to derive significant value.
What Are Credit Card Points?
Several card issuers have cards that issue "points" that can be used for travel. Generally speaking, by spending on the card, you're rewarded with "points." Accumulating enough points should (in theory) lead to some type of reward. Points here usually fall into two broad categories:
Why do nontransferable/set-value points exist if they're basically just cashback in disguise? It allows banks to potentially offer promotions that give you more than 1 cent per point (e.g. redeeming your points against Apple purchases might give 25% more value). Additionally, it might incentivize you to get a travel card so that you can actually use your points for transferable travel. In the case of the Freedom Flex, if you get a Sapphire Reserve concurrently, suddenly, you can transfer all your Freedom Flex points to travel partners!
What Are Hotel Points?
Hotel points are used to get free/discounted hotel stays. When staying at hotel chains, always put down your hotel loyalty number to accrue points.
For example, when staying at Hilton chain hotels and booking under an eligible, points earning rate, you earn Hilton points. Eventually, when you stay at enough properties, you'll accumulate points to redeem against future Hilton stays.
Notably, points you earn at one hotel chain can't be transferred or redeemed at other properties. So, your Hilton points are completely siloed/separated from Marriott, IHG, Hyatt, Choice, etc.
The World of Hyatt Credit Card
Earn 2 Free Nights after you spend $4,000 on purchases in the first 3 months from account opening. Plus, earn 25,000 Bonus Points after you spend $12,000 on purchases in the first 6 months from account opening.
What Are Frequent Flyer Miles?
Frequent flyer miles are points that are earned with airlines that can then be redeemed for free flights (excluding taxes/other fees).
For example, if you take an American Airlines flight, you can add your AAdvantage loyalty number to then earn AA miles. With enough miles, you can oftentimes travel to a wide variety of places (try using Roame to search for some options!).
Something important to understand is that miles you earn on one airline cannot be transferred to another. For example, you cannot book Delta flights using American Airline miles. However, this idea gets more confusing when you discover that you can typically book "partner flights" with your airline miles. For instance, you can book British Airways flights with your American Airlines miles.
The capability to book other airline's flights is because of the three major airline alliances: One World, Star Alliance, and SkyTeam. These alliances formed because airlines believed working together in groups would allow them to cover more of the world collectively than individually. Consequently, since they all work together, it's possible to book flights on another airline through one carrier's website.
Members of the Star Alliance
What Are The Typical Ways To Use Your Points?
Card issuers give you many avenues to use your points, but it's typically best to just transfer them to travel partners. Otherwise, you risk missing out on a lot of high value opportunities. For example, in the case of AMEX Membership Rewards points, there are many ways to use your points, but a lot of them are not very valuable:
Redemption Method | Point Valuation |
|---|---|
Shop with points | 10,000 points = $50 (0.5 cents per point) |
Use points for statement credit | 10,000 points = $60 (0.6 cents per point) |
Pay with points at checkout | 10,000 points = Up to $70 (up to 0.7 cents per point) |
Redeem for gift cards | 10,000 points = Up to $100 (up to 1 cent per point) |
Book travel via the AMEX portal | 10,000 points = Up to $100 (up to 1 cent per point) |
Transfer points to partners | 10,000 points = varies by partner, but commonly starts at 1.2 cents per point, with potential to exceed 10 cents per point |
Moral of the story: transferring your points to partners can provide tremendous value when compared to the alternatives.
American Express® Gold Card
As high as 100,000 Membership Rewards® Points after you spend $6,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
HOW... Can You Get Started?
Points aren't too difficult to get started with. For many of you readers, you may have already accumulated points via the likes of the Chase Sapphire Preferred® Card or an American Express® Gold Card. However, you also may not have any point earning cards. Scroll down to the part most relevant to you!
I Already Have A Point Earning Card!
Ok good! You have points you can use. Now what?
First, check the list of partners your card can transfer to. For the sake of discussion, let's say you have the Bilt Mastercard® (our favorite card to earn points on rent). You can transfer to an incredible slew of partners via Bilt:
You can try starting by searching for award availability. Let's say we're trying to fly to Tokyo from the West Coast. A quick Google search reveals a plethora of options.
Now that you can see options, go ahead and search for options at one of the transfer partners relevant to the alliance. For example, American Airlines is part of One World, so you can even book Japan Airlines flights using your AA miles by logging into their website (AA.com), entering your search criteria (departure & arrival airport, dates, etc.), and selecting “Redeem Miles.”
Instead of searching for each of these partners individually, you can also use Roame to accelerate your search experience. Simply input your starting and destination airports, click the search button, and wait for the results to roll on it! Our goal at Roame is to help save you precious time—we know just how long it can take to find a good award deal.
Within just a few minutes, you can see the cheapest way to get to Tokyo from the West Coast is via Virgin Atlantic (a SkyTeam partner). Normally, to find this, you would have to search through all the major airlines individually. This effort adds up considerability given you would need to search through multiple airlines within each alliance.
I Don't Have A Points Earning Card
That's a ok as well—we all start somewhere.
I'd suggest you start off by getting a strong, points-earning credit card that accrues transferable points that you can use for a wide variety of flights. These cards offer a lot of awesome benefits, including travel insurance, lounge access, and more... feel free to click onto each to read more about them!
//Chase Sapphire Reserve® ($550 annual fee): Earn 3x on dining, receive up to $300 in annual travel credit, gain complimentary lounge access, up to $100 in TSA Precheck/Global Entry credits every 4 years//Chase Sapphire Preferred® Card ($95 annual fee): Earn 3x on dining, 2x on travel purchases, receive up to a $50 annual hotel credit//Chase Ink Business Preferred ($95 annual fee): Earn 3x on the first 150,000 spent in combined purchases on shipping purchases; advertisements (social media sites & search engines); internet, cable and phone services; and travel per account anniversary year
Once you accrue some points, you can start digging into the beauties of award travel. We have a lot of awesome articles that help detail the process from A to B!
Conclusion
Points are extremely powerful tools when used properly, unlocking tremendous value and opportunity that you might not be able to access otherwise. If you haven't delved into the points game, it is never too late—better to start now than never.
Capital One Venture X Rewards Credit Card
Earn 75,000 miles after you spend $4,000 on purchases using your new card in the first 3 months after account opening
