Transferring reward points to airlines often yields great value
That strategy can seem complicated but can save you more money than using points at travel portals
Ask a question.
Dear Cashing In,
I live near Boston. I am saving up to visit a friend in New Zealand. I have 50,000 American Express points and 52,000 Capital One points. I need tickets for two. I imagine this will cost a fair bit of cash as well, which is OK. We can go anytime over the next year or so. How do I use my points to their max? -- Nate
A lot of times, people in your situation focus on what card they should have to earn the most miles to take a trip. Your question, though, is a reminder that the redemption side of rewards miles and points is as important as the earning side. Ideally, when you are beginning to accrue miles and points through credit card spending and travel, you have an idea of both what card is going to benefit you the most in terms of earning rewards and also how you might cash in those points.
Many times, people start piling up reward points without an idea of how they plan to spend them. That's fine. I do that, too. However, if you had known a few years ago that you wanted to go to New Zealand, you might have chosen different cards.
At first blush, my impression is that you probably lack the points you need for a free ticket to New Zealand to visit your friend, as you realize. I would think the best move would be to buy your tickets and defray some of the cost with the points, or perhaps take advantage of an additional card's sign-up bonus to get you more American Express points or airline miles so you could at least get one free ticket. Let's look more closely.
It looks to me as though most round-trip flights between Boston and Auckland, New Zealand, go for between about $1,400 and $2,000.
You can use American Express Membership Rewards and Capital One miles to purchase travel at rate of 1 cent per point. To do that, you would use the banks' travel portals. If you book through American Express, you could use your 50,000 points to knock $500 off the price. However, you can't use your Capital One miles unless you can pay for the entire ticket on points. Here, your points are worth $520, but the price of a single ticket is triple that. You could just save these miles and use them for smaller travel expenses, such as rental cars, hotels or train tickets, for instance.
Nate, we might be able to do better if we look at transferring some of those American Express points into a frequent flier program. This might become a little complicated, but if you stick with it, you can get a better value. You can transfer American Express points to carriers in the major airline alliances, then book tickets through those carriers. American Express points can be transferred to Air Canada (Star Alliance), British Airways (Oneworld alliance), Delta (SkyTeam) and several other international airlines.
To take one example, you could transfer your 50,000 American Express points to Air Canada, then book a reward ticket through Air Canada. However, North America to New Zealand costs 80,000 Air Canada miles round-trip at the lowest level, so you are about 30,000 miles short. Availability is tight, but there are some dates that work: I found one on Sept. 23 from Boston to Houston then Houston to San Francisco on United, then San Francisco to Auckland on Air New Zealand. It would return two weeks later: Auckland to San Francisco on Air New Zealand, then San Francisco to Boston on United. Total cost: 80,000 Air Canada miles (called Aeroplan), plus $120 in fees.
How could you get those extra 30,000 Air Canada miles? Assuming you can't quickly spend $30,000 on your American Express card, you could apply for the TD Aeroplan Visa ($95 annual fee, waived first year), which gives 25,000 Aeroplan miles after spending $1,000 in three months. That would put you almost there. Or you could look at the American Express Premier Rewards Gold card ($175 annual fee, waived first year), which gives you 25,000 American Express points for spending $2,000 in three months. (If you don't want another card, consider using 40,000 miles to book a one-way award ticket and pay to fly the other direction.)
So with one card application, a little bit of spending on a new card, a transfer of American Express points and $120 in fees, you could book a ticket to New Zealand on Air Canada that is worth more than $1,500, while saving your Capital One points for other travel expenses.
This strategy -- or a similar one using other airlines and cards -- seems to me to be the best for maximizing your miles. Yes, it is complicated. But if it were easy and obvious, everybody would do it!
Meet CreditCards.com's reader Q&A experts
Does a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.
- Is it worth it to transfer Hilton hotel points to American Airlines? – If you want to transfer hotel points to an airline to get a free flight, check the transfer ratio first to make sure you're not losing value ...
- Which credit cards should I carry in my wallet? – If you have a stack of credit cards and are trying to decide which ones to keep in your wallet, here are some ways to decide which to keep and which to stash ...
- With Citi Costco card, which gas stations earn 4 percent cash back? – You can earn rewards most places you fill up, with a few exceptions ...