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When Nick Ewen, editor-in-chief of The Points Guy\u2014a publication which exists entirely on the premise of how to best consume one\u2019s credit card points and miles\u2014found out a friend had just redeemed his Amex Membership Rewards points for a vacuum on Amazon, he had the reaction any points obsessive would.<\/p>\n
\u201cI was like, you can\u2019t do that,\u201d Ewen told Fortune. Not because Amex points can\u2019t be used on Amazon (they can) but because using them that way destroys their value. Transferred to the right airline partner, those same points could have covered a round-trip flight. Instead, they bought an appliance at a redemption rate that valued each point at less than a cent.<\/p>\n
It\u2019s the kind of mistake that happens when someone collects all their points in one place and never learns what they\u2019re actually worth, or what they can be used for.<\/p>\n
Ewen has spent two decades in the points and miles space, and one of the principles he returns to most often is diversification. Not just of cards, but of the currencies they earn. <\/p>\n
\u201cIt\u2019s just like an investor strategy,\u201d he says. \u201cYou don\u2019t want to be all in on one stock, because if that stock tanks, you\u2019re going to be left out in the cold.\u201d<\/p>\n
The same logic applies to loyalty programs. If you\u2019ve put every dollar of spend toward Delta SkyMiles and then Delta devalues its award chart, raises redemption prices, or eliminates a route you rely on, you\u2019re stuck. You have a pile of currency that just lost purchasing power and have no backup.<\/p>\n
\u201cIf you are fully in on Delta SkyMiles and then Delta changes something that you don\u2019t like, that doesn\u2019t give you a ton of flexibility,\u201d Ewen says. \u201cWhereas, if you have some miles with Delta, some with United, some with Chase, that allows you to be protected from some of those changes.\u201d<\/p>\n
The points comparison to portfolio management isn\u2019t just a metaphor. Airline loyalty programs are now valued in the tens of billions of dollars\u2014in some cases worth more than the airlines themselves. During the pandemic, United, Delta, and American collectively raised $26 billion in debt backed by their frequent flyer programs. United\u2019s MileagePlus alone was appraised at $22 billion, more than double the airline\u2019s equity value at the time. American\u2019s AAdvantage was valued at up to $30 billion while the airline itself was worth less than $7 billion. When there\u2019s a points program that large that adjusts its pricing, the ripple effects hit millions of point balances simultaneously. That\u2019s why Ewen said diversification is the hedge\u2014but it comes with its own negatives, too.<\/p>\n
\u201cThere is such a thing as being spread too thinly and being too diversified, especially if you are not spending a ton of money from month to month,\u201d he said. \u201cIt\u2019s harder to kind of generate significant balances of points.\u201d The person spending $3,000 a month across four different programs may never accumulate enough in any one of them to book anything meaningful. The person concentrating $3,000 on two well-chosen programs has a better shot at a real redemption.<\/p>\n
The right approach is somewhere in the middle, and it starts with matching the card to what you actually spend on, not what an influencer told you to sign up for. \u201cThe first thing is, what are you trying to do with this?\u201d Ewen asked. \u201cIf someone says, \u2018I don\u2019t know, maybe a trip, I only travel about once a year, it\u2019s normally a road trip\u2019\u2014great, a cash back card is going to be the best fit.\u201d<\/p>\n
How should I spend my points, then?<\/p>\n
For people who do travel enough to justify a travel card, Ewen recommends starting with a flexible points currency (like Chase Ultimate Rewards, Amex Membership Rewards, or Capital One miles) rather than a co-branded airline or hotel card. A flexible currency can transfer to multiple airline and hotel partners, meaning you\u2019re not locked into one program\u2019s pricing. <\/p>\n
Take, for example, United credit cards, issued by Chase and popular with loyal United flyers. But the Chase Sapphire Preferred, which has a lower annual fee, actually earns at better rates on dining, general travel, and online groceries. And because Chase points transfer to United at a one-to-one ratio, you can end up with more United miles through the Sapphire Preferred than you would through the United card itself. Plus, you retain the flexibility to send those points to Hyatt, Southwest, or any other Chase transfer partner if United\u2019s pricing doesn\u2019t work for a given trip.<\/p>\n
\u201cThere are, weirdly, oftentimes much better options than having a co-branded credit card,\u201d Ewen said.<\/p>\n
Richard Kerr, GM of Travel at Bilt, sees the same dynamic from the issuer side. The co-branded landscape has become so crowded consumers face decision fatigue before they even start optimizing.<\/p>\n
\u201cIt\u2019s now an incredibly competitive world,\u201d Kerr says. \u201cNot only a million options between different airlines and hotels, but each airline and hotel has four or five different options for you to take a look at.\u201d<\/p>\n
More cards means more annual fees, more interchange revenue, and more opportunities to lock a customer into a single ecosystem. For consumers, the antidote is the same one any financial advisor would give about an investment portfolio: spread your risk, know what you own, and don\u2019t chase performance.<\/p>\n
\u201cStart with one. Get comfortable with that,\u201d Ewen said for anyone looking to get into the points game. \u201cAnd then if you add a second one with maybe a couple different bonus categories, have that for six months or a year. Make it part of your muscle memory.\u201d <\/p>\n
His wife is the proof of concept: She went from needing a handwritten cheat sheet to knowing instinctively which card to pull at the grocery store, the gas station, and the restaurant. <\/p>\n
\u201cIt just became part of her muscle memory,\u201d he said. \u201cIt took time to get there, but it\u2019s important to not bite off more than you can chew.\u201d<\/p>\n
For everyone else\u2014the person who doesn\u2019t want a cheat sheet, who doesn\u2019t want to track quarterly bonus categories, who just wants to stop leaving money on the table without making it a second job\u2014 both Ewen and Kerr arrive at the same place.<\/p>\n
\u201cNever a wrong way to go,\u201d Kerr says of a no-annual-fee card with a flat 2% cash back on everything.<\/p>\n
#wouldnt #put #entire #401k #stock #credit #card #points<\/p>\n","protected":false},"excerpt":{"rendered":"
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