Understanding rewards programs is key to maximize the value of your points. For example, buying points and redeeming them for gift cards is usually a no-no – here’s why.
Dear Cashing In,What recourse do customers have when reward points are inflated and the redemption of reward points are deflated?
Choice Rewards offers a customer the opportunity to purchase 16,000 points at a 20 percent discount for $160. If the points are redeemed, you get a $50 gift card. That seems insulting. – Jeff
Reward programs can be tricky. When you participate in them, you have to develop an understanding of how you accumulate and how you spend the points – and what redemptions make sense and which ones don’t.
You can receive a lot of value from reward programs, especially if you receive a boost from a credit card that gives you points when you sign up.
See related:7 hotel rewards mistakes you should avoid
Earning points via a credit card is easy
The card has no annual fee and gives you 32,000 Choice points after you spend $1,000 on the card in the first 90 days. That’s enough points to get you up to four free nights at a hotel.
Like a lot of reward cards, that’s a pretty good deal: You sign up for a card, pay no annual fee, and get a few hotel nights.
But the value becomes trickier when you start participating in the program in other ways, and when you try to redeem the points on something other than hotel rooms.
You can earn points by using the card and staying at hotels, but as you point out, you can also buy them.
You can redeem the points not just for hotel stays, but also for gift cards and magazine subscriptions, and you can trade them in for airline frequent flyer miles.
Redeeming points is usually a bit more complicated
Depending on how you acquire your points and how you spend them, you will receive very different values.
In general, reward programs offer the best value when you redeem points for something that the company has direct control over. In this case, that’s hotel rooms. If we are talking about airline programs, the best value tends to be redeeming for flights on that airline.
The value declines when you start using your points on things the company does not control and has to buy from an outside business, like points from another airline and gift cards.
Redeeming points for gift cards: Usually a bad idea
In your example, you happen to have chosen what are probably some of the worst earning and redemption options.
Buying points seldom makes sense, even if the company is offering them at a discount. (It is almost always cheaper to pay for the hotel room itself than to pay for the points to stay in a hotel room.) And redeeming hotel points for something other than hotel rooms will almost always be a poor value.
Ignore points offers that make no sense
That’s how you would get into a situation where you are faced with paying $160 for a $50 gift card.
Obviously that makes no sense. Just buy the gift card and save yourself $110. You are probably not even able to get $160 worth of hotel rooms by spending $160 on hotel points.
A lot of people get carried away with these programs and become enamored with playing the points game.
But if you play, play to win: Understand precisely how these programs work and how you can find the best value.
Buying points and spending them on gift cards is almost always a sure way to lose.