Five Basic Concepts for Miles and Points Novices

Most people who stumble across miles and points universe find it extremely confusing (at first). I’ve always said that a certain level of intelligence is required, but you don’t have to be a genius. I know I’m not.

So, in this post I would like to break this hobby down into five simple concepts. If you are a grizzled miles collector and find yourself exclaiming “elementary, my dear Watson!” while reading the below info, that’s exactly the point.

1) It’s all about ROI

As is the case with any job or side business, you have to ask yourself whether the juice is worth the squeeze. This sounds simple, but there is more to it.

Let’s say you like the idea of collecting miles and points, but switching credit cards causes you stress that spills over into other areas of your life. This hobby can drive one mad (more on that later), so if you are having a hard time keeping it together as is, maybe it’s best to walk away.

Or perhaps you have a hard time with credit cards, and end up spending more than you would with cash. In that case, whatever short-term gain you  achieve will be negated by debt that will take you years to pay off. Your ROI will actually be negative.

But maybe you are disciplined with plastic and like to use credit cards for everything. Up until now, you thought that even a few new inquiries will ruin your credit score permanently. You would like to have a sizable stash of miles and points, but your low yearly spending doesn’t allow it. In that case, take a look at my Beginner’s Guide

I try to maintain an up-to-date list of the most lucrative sign-up bonus opportunities, so let me quickly highlight just one example. Capital One Venture Rewards currently offers 50,000 points after spending $3,000. It also comes with $100 application fee credit for Global Entry or TSA Pre✓. The first year annual fee is waived.

Most families will have no trouble spending $3,000 in 3 months, am I right? The bonus points are worth $500 that you can redeem towards travel charges or $500 gift card to Target and other retailers. That seems like a win to me, and you don’t even have to worry about complicated award charts.

Think about it. If someone offered you $500 for doing things you are doing anyway, would you take it? I know I would. Yes, there is some hassle involved, but once again, look at the ROI.

2)Miles and points currencies are not created equal

Determining value of specific currency is extremely confusing for beginners. Should I go for this Amex Delta offer or apply for Chase United card instead? Is Ultimate Rewards program better than Membership Rewards? The answer to all those questions: It depends. The good news is, many bloggers and other hobbyists will be happy to give you free advice, so don’t hesitate to ask.

I offer Free Consulting Service   and will be glad to give you suggestions tailored to your specific needs. I make no secret that this website is currently monetized via credit card affiliate commissions, so there is obviously a conflict of interest. Blogging requires a huge time investment, and I make no apologies.

Still, I do my best to give honest advice that helps readers first and foremost. If you don’t feel comfortable asking me for suggestions, there are plenty of miles and points forums, not to mention Facebook groups. Google is your friend.

In general, flexible points are the most valuable type of currency, followed by cash, then miles, with hotel points being last. But even that statement is not absolute because circumstances vary and at times, hotel points will actually be better… for some.

3) Value is relative to each individual, but there is a floor

Some who live near Delta hub will find Delta miles to be extremely useful. For others they will be borderline worthless. And so on and so forth. But all miles and points have a floor when it comes to value.

Ultimate Rewards can be redeemed for 1 cent each, so if you transfer 20,000 UR points to a mileage program in order to cover a ticket that is worth $190, you just lost money.

The same logic applies to individual miles. Most can be redeemed towards gift cards. It’s extremely poor value, but at least it gives you a floor. You may despise AAdvantage miles due to poor domestic sAAver availability, but if you happen to have a co-branded AA credit card, it allows you to redeem them towards hotels and get around 1 cent apiece.

Sure, you may normally get your hotels via discount website, but at the very least, those miles are worth 0.7 cents each. I’m not telling you to drain your AA miles on hotels. My point is, determine the absolute lowest value of each currency and don’t redeem below it.

The same principle applies to buying miles and points. This is something I recommend you avoid doing in the first place, unless there is a compelling (and immediate) reason to do so. Let’s say you want to book an IHG resort and see that IHG is a partner of Ultimate Rewards program. So, you transfer 50,000 points on 1:1 basis. Yay, free hotel!

Except, like I said, UR points can be redeemed at 1 cent each every day of the week, and IHG points frequently go on sale for 0.5 cents apiece. It’s a very poor use of UR currency, and you just got a terrible deal by buying IHG points at 1 cent each.

4) Diversification is good, but only to a point

Collecting various currencies can be very useful, especially in the case of an emergency. That way, if there is no award availability in one program, you can move on to the next one.

However, don’t over-diversify. It’s much better to have 21k miles in an unstable program like Avianca then to have 7k United miles, 7k AA miles and 7k Alaska miles.

Better yet, stick to collecting flexible points when it comes to your everyday spending. That way you will be protected in case one program decides to significantly devalue its award chart.

Sign-up bonuses are different. I view them as a way to buy miles and points at a deeply discounted cost. I may not like AAdvantage miles, but I will happily pick them up at 0.2 cents apiece by applying for a co-branded AA credit card.

5) The goal is (or should be) to have fun

This hobby is about getting to do fun things you normally wouldn’t be able to afford, right? But you would never know it if you follow certain discussion boards or  comments sections of popular blogs. So much whining, moaning and groaning. It seems like folks always find something to complain  about, whether it’s devaluations, bloggers killing deals, you name it.

Please don’t get caught up in it. True, some programs and companies behave in a dishonest manner, and deserve to be called out. However, if a deal is too good to be true, and a company gives a couple months notice before killing it, then what’s the problem? In this hobby, as well as life, there are no guarantees. So my advice is to enjoy the ride and focus on more important things.

Click here to view various credit cards and available sign-up bonuses