This post goes against conventional wisdom and even contradicts my own advice from the past. But bear with me anyway. On Monday I wrote about some of my points’ balances that I could convert to cash/groceries if needed. Among them was my stash of Rapid Rewards points which you can redeem for various gift cards.
There is one requirement, however: you have to have a Chase Southwest co-branded credit card. It can be Business, Plus or Premier version, doesn’t matter (see more details on these offers here). Right now I happen to have Premier and so does my husband. I got it for the sign-up bonus, which is 50,000 points after spending $2,000 in 3 months.
Without the card, you can only redeem points for Southwest flights. In reality, that is where you should be spending them anyway. After all, you can get around 1.6 cents per point toward Wanna Get Away fares.
But what if your real emergency fund is very low at the moment? Then you, my friend, should make sure you have that Southwest credit card active. Of course, there is one problem. Plus version gives you 3,000 points upon renewal, and you have to shell out $69 for the privilege. So even if you redeem points for flights, you would be taking a loss.
Things, however, get more interesting with Premier version. You get 6,000 points in exchange for renewing and paying $99 annual fee. Assuming you redeem those points for flights, it’s possible to break close to even.
Neither card is worth it for everyday spending because you earn 1 Rapid Rewards point on most purchases. You would do better with Citi Double Cash or any other “keeper” card on my list. And the perks are “weak sauce” because you already get free checked bags on Southwest flights anyway.
But I do think renewing Premier card could make a lot of sense for many middle-class families. There are a couple of reasons:
1) If needed, you can liquidate your Rapid Rewards points for Walmart, Target or Amazon gift cards, and buy food and household supplies.
The first option is probably the most valuable because you can rarely get a decent discount on those, plus Walmart is everywhere. Sure, nobody wants to give up Rapid Rewards points at 30% loss when it comes to flight redemptions. But if you can’t afford to travel, what difference does it make?
If your spouse loses his/her job or you have an unexpected bill, it’s unlikely that you will be planning a trip to Caribbean. But you will still need to eat.
Here is how to find this option:
First, you go to your Southwest profile and log in. Then, go to “more rewards,” a section accessible only to Chase Southwest cardholders.
Then browse through gift card selection. Normally, you will get the best ratio when you redeem at least 5,000 points, but the amount varies by retailer:
2) Your Rapid Rewards points will have real, tangible value.
If you are on a tight budget, it will make you think twice before you burn points that can be easily converted to food. Sure, the whole point of this hobby is to encourage families to travel more. But balance is important, and this will serve as restraining mechanism of sorts.
It will make you more sensible when it comes to your travel budget, I guarantee it. Hmm, take that flight for only 10,000 points or get a $100 worth of groceries?
Maybe it will even encourage you to look into Spirit credit card. No? OK, fair enough. Baby steps. Speaking of, my cousin-in-law said her Spirit flights were great. The planes were clean and left on time. Most importantly, she is still alive.
To renew or not to renew?
You might be wondering what my plans are for Southwest Premier credit card. I honestly don’t know what I will do. I have till next March to decide one way or another. It will mostly depend on the amount of real savings I have at the moment. Obviously, I would rather burn the points on flights, and Southwest has very good coverage where I live. Caribbean, Mexico, plus most of lower 48 States, possibilities are endless… And that’s the problem!
Of course, I will probably call and see if I can get a retention bonus of some sort for my Chase account. And ideally, that’s what you should do as well. If you are approved for a different version of Southwest card down the road, you may not need to worry about any of it. Otherwise, don’t automatically dismiss renewing your Premier card and paying $99 for those 6,000 points. Your real savings account will thank you, I promise.
Readers, what are your thoughts?
Click here to view various credit cards and available sign-up bonuses
Author: Leana
Leana is the founder of Miles For Family. She enjoys beach vacations and visiting her family in Europe. Originally from Belarus, Leana resides in central Florida with her husband and two children.
Color me curious, how do you figure on 1.6 cents per wanna get away points? I’m a companion pass holder and both Premier and Plus cards. I don’t do daily spend on either card but have been considering it just to increase the # of points to use with the companion pass.
@Elejefewatson Thanks for stopping by! Well, officially, you get 1.43 cents, although, it looks like Southwest has recently decreased it to 1.4 cents. However, if you factor in tax, the amount is higher, especially on international routes. Southwest has changed the scheme somewhat last year and went with dynamic pricing. So, it’s impossible to say how much Rapid Rewards point is worth on any given fare, but on average, it’s 1.5 to 1.6 cents.
If you are after Rapid Rewards currency, you really should look into Chase Ink Plus/ Chase Freedom combo. Alternatively, consider Chase Sapphire Preferred/Chase Freedom. It will allow you to accumulate points much faster. Southwest cards really aren’t that great for everyday spending.
It’s true that Companion pass make this program very appealing. But remember, you can just pay for your ticket and get companion fare for free. If you have a card that earns 2% cash back, it really makes more sense to go with that instead rather than earning Rapid Rewards points. When you earn 1 point pre dollar, you are only getting 1.5-1.6 cents return via Southwest flights. I hope this makes sense. Send me an email or comment if you have further questions.
So I’m paying $69 for 3k points (good for $30 worth of gift card) or $99 for 6k points (good for a $60 worth of gift cards). Even with the retention offers, the amount I’d get with a gift card is less than the annual fee itself. If I’m low on budget and not traveling, then I wouldn’t be able to take advantage of the 2x points from partners.
So then why does it make sense to even renew the card?
Chris, I think maybe I didn’t make myself clear in the post. I’m not advocating redeeming points on gift cards, it’s more of a last resort. Basically, the idea is to have this option available for those who don’t have a lot in savings. Let’s say a family signs up for Chase Southwest card and has around 55,000 Rapid Rewards points, but almost nothing in a savings account. It could make sense to renew the card just in case.
Yes, if they redeem those 6,000 points on a Walmart gift card, they will obviously take a loss when you factor in renewal fee. The upside is that they will have the option to cash out the points, which they otherwise wouldn’t have without the card. Best case scenario: they redeem 6,000 points for flights and break even. Does it make sense?
well I’d imagine if they didn’t want to travel, they would’ve liquidated the points already. That’s what a friend of mine did before he cancelled his card. He knew he wouldn’t travel anytime soon and the amazon gift cards were more useful to him, so he just cashed them out before cancelling his card.
Funny enough, about a few years later, he wished he had the points to travel with his family. So what did he do? Apply for two more SW cards 🙂
Chris, thanks for your comments! Glad your friend could get those Southwest cards again. Living in US is a beautiful thing, people in other countries just don’t have the sign-up bonuses we do. And you can even get some several times.
Yeah, in my post I was referring to families who actually DO want to travel, but don’t have a lot in savings. So, renewing the card would provide insurance of sorts in case things go wrong. Of course, redeeming points for flights is optimal. No argument there. It’s unlikely I’ll burn my Rapid Rewards stash on Walmart gift cards. But it would be nice to have the option. Many regular folks in US (my target audience) have no emergency fund to speak of, and live paycheck to paycheck. That’s who I mostly refer to in this post.
Gotcha. Having those points really do come in handy (for travel or gift cards), especially if it’s tougher getting $ these days!
Chris, no worries! I understand where you were coming from. The advice in my post is very much YMMV It’s contrarian, for sure, and I’m not saying it applies to everyone.