Earning & Redeeming Miles and Points
Now it’s time to get to the good stuff! These next few sections are going to be devoted to teaching you the specific strategies behind earning and redeeming miles and points for free travel.
You’ll have to earn the points before you can start redeeming them, but I think these strategies are easiest to understand when we look at the situation backward. So I want to start by explaining how you can redeem the different types of points. After you understand that, the last thing we’ll cover is how to earn points.
Redeeming Miles & Points (and how much they’re worth)
As we established earlier, there are four different types of miles and points (fixed value points, frequent flyer miles, hotel points, and transferable points). Each type of point requires a different strategy for redemption, so we’ll look at the strategy for each type below.
Fixed Value Points
These are the most straightforward to redeem because, as the name implies, they have a fixed value. As you may remember, you’ll earn fixed value points by signing up for bank credit cards. Each bank requires you to redeem them in slightly different ways, but more or less, each point is worth between 1 - 1.5 cents each, and you can redeem them for almost any travel expense.
One of the most popular travel credit cards on the market is the Capital One Venture Rewards card. You can get more value by signing up for other travel credit cards, but it’s the simplicity that draws people to this card. The Capital One Venture Rewards card earns fixed value points that are worth 1 cent each.
In order to redeem your Capital One miles, all you need to do is use your credit card to buy something travel-related, and your points can be used to cover that purchase. For example, if you purchase a $300 flight, you can redeem 30,000 points to remove that expense from your credit card statement.
Another popular fixed value program is American Express Membership Rewards, but it operates slightly differently (these points can also be transferred, but I’ll explain that later). Membership reward points are not quite as flexible as Venture miles when it comes to how you redeem them. You can’t use your Membership reward points to erase a purchase. Instead, you must shop through Amex Rewards Travel, and you can use your points to book the travel deals you find on their website.
You can normally find the same flight and hotel options that you would anywhere else online, but you won’t be able to use your points for other travel purchases like trains, taxis, or vacation rentals. However, they still make it super easy to redeem your points for flights, hotels, or vacation packages as long as you do it through their travel portal.
The biggest benefit of fixed value points is that they are really easy to redeem. You’ll see below that it’s a lot more complicated to redeem frequent flyer miles and hotel points. The drawback to fixed value points is that they aren’t as valuable as some of the other points you can earn. If you’re willing to put in the effort to learn how to maximize frequent flyer miles, you can usually get more value out of them. But for those who want to keep things simple (especially in the beginning), there’s nothing wrong with starting with a card with fixed value points.
If you feel like this is right for you, I’d highly recommend signing up for the Capital One Venture Card that you can find HERE.
If you want to learn how you can earn way more miles and squeeze the maximum amount of value out of them, keep reading!
How Much Are Fixed Value Points Worth?
These points have a fixed value that ranges between $.01 and $.015. There’s no math needed to determine the value of these points because, as the name suggests, it’s fixed.
Frequent Flyer Miles
Frequent flyer miles are the most complicated miles to redeem. The most popular U.S.-based frequent flyer programs include American Airlines AAdvantage, United MileagePlus, and Delta SkyMiles. All of these programs generally work the same way, with some notable differences.
Determining How Many Points You Need - Award Charts vs. Dynamic Pricing
In the past, the amount of miles you would need to fly from one place to another is determined by which “zones” you are flying between. This is commonly referred to as a “Zone-Based Award Chart.” An award chart is a fancy name for a chart that tells you how many miles you need to book a flight. Sometimes the flights you book with points are referred to as “award flights,” hence the name “award chart.”
Below is a portion of the American Airlines zone-based award chart.
As you can see, the world is broken up into zones, and it costs a certain amount of points to fly between each zone. For example, the contiguous 48 U.S. states are a zone, and Europe is a zone. It doesn’t matter where you fly to or from in each zone; it’s going to cost the same amount of points.
If you fly from New York to Lisbon, it’s going to cost 30,000 points. (highlighted in red above)
However, if you fly from Los Angeles to Berlin, it costs the same amount of points even though it’s a much longer flight.
In case you’re having trouble understanding the award chart above, below are a few more examples of how many American Airlines miles you’ll need to fly to different places around the world.
U.S.A. to Caribbean - 17,500
U.S.A. to Northern South America - 20,000
U.S.A to Southern South America - 30,000
U.S.A. to Europe - 30,000
U.S.A. to Central Asia - 35,000
U.S.A. to South East Asia - 35,000
U.S.A. to Australia/New Zealand - 40,000
The sad news is that American Airlines is the only major US airline that still offers an award chart like this. In recent years, most airlines in the US (and the rest of the world, for that matter) have shifted to a dynamic pricing model. Basically, this means that the points price is tied to the cash price, and can vary widely.
Unlike the award charts where a $2,000 ticket to London would cost the same number of points as the $1,000 flight to London, with dynamic pricing it will cost roughly double the points. In general, this move is considered to be a devaluation (points with these programs are less valuable than they used to be).
The current system of dynamic pricing applies to United Airlines, Delta Airlines, Southwest Airlines, and most other airlines around the world.
The points cost for the same route on the same day can now vary widely.
What is an Award Flight?
In the next section we’re going to walk you through how to book an award flight, but first we need to explain what that even means. Award flights are essentially flights that are bookable with points. But here’s what you might not know - just because a flight exists doesn’t mean you can book it with points. You might find search results for a normal cash booking that won’t show up when you do the same search with points.
This is because airlines only dedicate a certain number of “award seats” per flight, and these seats are only available to book when airlines “release” them. Some airlines only open up award space a week or two before the flight while others will show award space months in advance. It’s important to keep this in mind as you begin your travel hacking journey, because flights that show up today might disappear tomorrow, and vice versa.
How to Find Award Flights
Now that you know how to determine how many points you’re going to need for an award flight, I’ll walk you through how to go about finding one of these flights on United’s website.
Step 1: Type in your departure city and destination, and make sure to click “book with miles.” This is what tells United that you want to search for a flight you can book with points instead of a paid flight.
Step 2: Expand the calendar so you can see all of your options
Step 3: Look for the flights that cost the least amount of points. These are the “Saver Awards.”
Step 4: Once you’ve found a departure date that offers Saver Awards, click on that date on the map. Below the map you’re going to see all of the Saver Award flights offered on that day. Find the flight option that looks best to you, and select it.
At this point, you’ve selected your outbound flight. If you’re only flying on a one-way flight, congratulations! You’ve found your award flight. Now all you need to do is book it using the points that are already in your account.
If you’re booking a round-trip flight, all you need to do is repeat the process to find your return flight.
Now I want you to try it for yourself. If you had enough points to fly anywhere in the world, where would you fly? Do a search between your home airport and your dream destination to see if you can find a Saver Award flight.
Taxes and Fees
You may be wondering why there are charges in addition to the points required to book your award flight. Unfortunately, some of these taxes and fees are unavoidable, so you’ll always have to pay at least a few dollars to book an award ticket. The good news is that some of the bigger fees are avoidable if you’re strategic. Let’s look at the different types of fees that can be tacked on to an award ticket. The other piece of good news is that every country has different laws regarding taxes and fees, and the U.S. has some of the cheapest airline taxes in the world.
There are several unavoidable fees that you may see when booking an award flight. The most common fee you’ll see is the 9/11 security. I’m actually not exactly sure what it’s for (I assume it has something to do with paying for additional airport security after 9/11), but it’s a fee that’s added to any flight that passes through a U.S. airport.
As you can see from the image above, there are other airports outside the U.S. that also tack on unavoidable fees. In the example above, the flight from New York to Singapore has a connection through a German airport, and they are assessing a “Germany Passenger Service Charge” fee of $24.20.
The amount you’ll pay in airport fees varies depending on the countries your flight travels through. Unfortunately, these fees are unavoidable, but thankfully these fees are usually relatively low compared to the avoidable fees I’m going to tell you about.
Fuel surcharges are sneaky fees that some airlines tack on to award flights for no apparent reason. These are the fees you really want to watch out for because some of them can be really expensive. For example, if you use your American Airlines miles to book a flight on British Airways, you’ll usually pay a high fuel surcharge when flying to Europe (especially if you’re flying through London).
The good news is that these fees are usually voidable just by changing which airline you’re flying with. In this specific example, you can avoid the majority of these fees by using your miles to fly on American Airlines instead of British Airways.
I won’t go through all of the strategies for avoiding fuel surcharges here because it’s not something I want you to get hung up on at this point in your travel hacking journey. You just need to be aware that they exist. If you run into them while using your points in the future, use Google to figure out how to avoid them (ex. How to avoid fuel surcharges when redeeming American Airlines miles). The internet is full of helpful people. :)
How Much Are Frequent Flyer Miles Worth?
Let’s say you want to redeem your frequent flyer miles for a round trip flight from Los Angeles to Bangkok, Thailand. In order to determine the true value per point, you first need to determine how much it would cost you to buy that flight without the points (the out of pocket cost).
An average price for this round trip flight might be $1,200.
Next, you should determine how many frequent flyer miles you need to redeem to get this flight for free. Let’s say for the sake of this example that the flight will cost 80,000 points and an additional $25 in taxes and fees.
So now we have all of the numbers, and we can do the math. It’s important to first subtract the taxes and fees from the cash cost, because you are still paying this fee and therefore not getting any value from your points toward it. This is important to remember when you’re looking at airlines with really high taxes and fees.
[$1,200-$25/80,000 = $.014]
This gives you a value per point of roughly $.014
This gives you an idea of the value you’d be getting by signing up for an airline credit card. If you sign up for an airline credit card that has a 50,000 point sign-up bonus, and you redeem those points at a value of $.014, the sign up bonus on that credit card would be worth $700!
[50,000 x .014 = $700]
However, the value per point can change depending on the cost of the flight. The miles needed to fly to the destination won’t change. So if the flight is more expensive, you can get even more value out of your points.
For example, if you are booking the flight from Los Angeles to Bangkok at the last minute, usually that’s when flights get more expensive. So this flight could cost as much as $2,000. You would still only need 80,000 points for the free flight. Therefore, your value per point would increase to $.025.
[$2,000/80.000 = $.025]
The reason you can’t determine a fixed value for frequent flyer miles is because the costs of flights are always changing, and as the costs of the flights change, so does the value of the point.
That covers the basics of using your frequent flyer miles to book award flights. It can seem a bit complicated at first, but with a little practice you’ll get the hang of it. It will eventually become easier to find the award flight you desire. Even if you’re still a bit confused, I don’t want you to get hung up on the details at this point in the process. You still need to go through the process of earning the points which will take you at least a couple of months. So you have plenty of time to practice!
Redeeming Hotel Points
Thankfully, redeeming hotel points is simple, and the process doesn’t vary much between hotels like it does for airlines. Before I dive into redeeming hotel points, I want to make sure you understand how hotel brands are structured.
In most cases, multiple hotel chains are grouped together under one major brand. There are really only four major hotel groups that you’ll be earning points with, and each one of these groups owns a bunch of different hotel properties.
Each group has its own loyalty program which means if you stay at any of the properties owned by that hotel group, you’ll earn the same type of points. For example, Hilton is a hotel group and they own 18 different brands. If you stay at any property from any of these brands, you’ll earn Hilton points. If you stay at a Hampton Inn, you’ll earn Hilton Honor points. If you stay at the Conrad, you’ll earn Hilton Honor points. If you stay at the DoubleTree, you’ll also earn Hilton Honor points. After you earn these points, you can also redeem them at any property that falls under the Hilton brand.
Similar to airlines, hotel chains used to have award charts. Like with these airlines, most have transitioned to a dynamic pricing model (points cost is tied to the cash cost). The only remaining holdout is World of Hyatt, which still uses its award chart (fingers crossed it stays that way!)
The only way to know how many points you’ll need for a trip is to search for the city you want to stay in and then see exactly how much different properties cost based on that search. Searching for hotel award nights is super simple, and they all work pretty much the same way. Just search for the city you want to stay in, the night you want to stay, then just find the button that changes your search from cash to points. I’ll show you where to find that button for each of the major hotel groups.
After you’ve searched for the city where you want to stay, you’ll see a results page with all of the hotels available in that city. At the top right of the results page, you’ll see the button that allows you to see the price in points.
On the Marriott homepage where you’re doing your initial search, you’ll see a check box in the lower right hand corner that says “Use Points.” Just check this box before hitting the search button to search for award nights.
World of Hyatt
Similar to Marriott, there is a check box located in the bottom right hand corner of the search bar on the home screen. Just check the box that says “Use Points” before clicking the button that says “Find Hotels”
IHG One Rewards
After you’ve searched for the city where you want to stay, you’ll see a results page with all of the hotels available in that city. At the top right of the results page, you’ll see the drop-down menu that allows you to change from money to points (or a combination of the two).
Once you find a room that you want to stay in, all you need to do is complete the checkout process by using the points in your account. The great thing about award nights is that you normally don’t have to pay taxes and fees when you use your points, so you can actually book a hotel room without spending a single penny.
How Much Are Hotel Points Worth?
This is going to give you a better idea of why all points aren’t created equal. For the most part, airline miles will always be more valuable than hotel points. You’ll see why in the example below.
For this example we’ll use a hotel stay at a Hilton Hotel in New York City. A Google search tells me that the out of pocket cost to stay at the Hilton Times Square is approximately $215.
You’d need 80,000 points for a one night stay here (I’ll show you how to determine the amount of points you’ll need in the “redeeming points” lesson below).
So now that we have both of our numbers, we can do the math:
[$215/80,000 = $.0026]
As you can see, our value per point in this example with hotel points is substantially lower than the value we got from our airline miles in the example above.
So when you see a hotel credit card has a sign-up bonus of 100,000 points, and an airline credit card has a sign-up bonus of 50,000 points, remember that not all points are created equal. Just because one sign-up bonus offers more points than another, it doesn’t mean you’ll get more value out of those points. In order to determine the value of a credit card sign-up bonus, you need to figure out the value per point. In most cases, the value you get from frequent flyer miles will be substantially more than the value you get from hotel points, which is why I mainly focus on earning frequent flyer miles.
Free Night Certificates
Another thing you’ll probably run into during your travel hacking journey is free night certificates. These are certificates that you can redeem for free nights at hotels, and you usually earn them by signing up for different credit cards. There are even credit cards that offer you a free night award every year just for keeping your card open. Check out our Top Credit Cards page, which usually includes at least a few cards in this category!
There are three main types of transferable points you can earn. These include:
Chase Ultimate Reward Points - Earned by signing up for and spending money on certain Chase credit cards.
American Express Membership Reward Points - Earned by signing up for and spending money on certain American Express credit cards.
Citi ThankYou Rewards - Earned by signing up for and spending money on certain Citi credit cards.
Transferable points are super valuable because of their flexibility. Since transferable points can be transferred to the loyalty program that will earn you the maximum amount of value, most people consider transferable points to be the most valuable points you can earn.
In order to redeem transferable points, you pretty much just add one extra step on top of the steps you take to redeem frequent flyer miles or hotel points. To redeem transferable points, you first have to transfer them to a hotel loyalty program or a frequent flyer program. Once the points transfer, you redeem them just like you would with any other hotel points or frequent flyer miles.
Let’s dive into the details of all three of these programs, starting with my favorite!
Ultimate Reward Points
The great thing about Ultimate Reward points is they can be transferred to all of their travel partners at a one-to-one ratio. This keeps transferring your points super simple.
Ultimate Rewards has 14 different transfer partners. You can transfer your points to 11 different airlines and 3 different hotel groups.
In order to transfer your points, all you have to do is:
Step 1: Login to your Ultimate Rewards account
Step 2: Select Transfer Points to Travel Partners
Step 3: Choose a travel partner
Step 4: Enter the loyalty number of the account where you want to transfer
Step 5: Choose how many points you want to transfer
Step 6: Confirm your transfer
Once you’ve confirmed the transfer, the points will show up in the loyalty account. Most of the time the points transfer will happen almost immediately, but some can take up to 2 days. Once the points are in your loyalty account they are stuck, and there’s no going back. So make sure you have a plan for the points before you transfer them. After the points appear in your loyalty account, you’ll redeem them just like you would any other hotel points or frequent flyer miles.
American Express Membership Rewards
American Express Membership Rewards points work the same as Chase Ultimate Reward points except for a few key differences.
They have different transfer partners.
The points transfer to 17 different airlines and 3 different hotel partners.
2. The transfer ratio is different.
Unlike Ultimate Rewards, not all of your points will transfer at a one to ratio. The transfer ratio is listed on the profile of each transfer partner.
The time the points take to transfer is different.
The last main difference between Ultimate Reward points and Membership Reward points is the amount of time it takes the points to transfer. While most UR points transfer almost immediately, Membership Reward points can take anywhere from 3 - 10 days to transfer to the travel partner. This can be really annoying if you find an available award flight you want to book because it could vanish before your points have time to transfer. However, Membership Rewards do give you an estimate of how long the points will take to transfer. At least this way you have an idea of what to expect. (transfer times are highlighted in blue on the image above)
Citi ThankYou Points
Citi ThankYou Points can be transferred to 14 different airlines and 2 hotel programs:
The drawback is that none of the airlines are major U.S. airlines. This makes it more challenging to redeem your miles because you need to learn how the foreign airlines’ frequent flyer programs work. With that said, there is a lot of value to be had when transferring Citi ThankYou points to international airline loyalty programs, as long as you’re willing to put in the effort to learn something new.
All Citi ThankYou points transfer to airline partners at a 1 to 1 ratio except for Choice Hotels. You’ll get slightly less value when transferring your points here because the transfer ratio is 2 to 1.
In terms of transfer time, Citi ThankYou points vary dramatically. Points transfer to some partners immediately while others can take up to 7 days.
If you’re just getting started, I would focus my attention on earning Ultimate Reward points and Membership Reward points before moving on to earning Citi ThankYou points.
Capital One Miles
One of the newer players in the world of transferable points in Capital One. In the past they did not offer the ability to transfer miles to other programs, and didn’t have very exciting cards. However, in recent years they have really expanded their program to include new premium cards and amazing perks like the ability to cover travel purchases using your points directly toward your credit card statement.
Capital One is adding new transfer partners all the time and are building up quite the list.
It is important to know that while most transfer ratios are 1 to 1, some of them are different, so be sure to look carefully before transferring your points out of your account.
Of these many transfer partners, the only U.S. airline is Jetblue. As we covered earlier in this guide, that doesn’t mean you can’t use your points to book travel on any of the other U.S. airlines. You could transfer points to Air Canada or Avianca to book United flights, transfer points to British Airways to book flights on American Airlines, or transfer to KLM/Air France (which use the same points currency) to book Delta flights.
How Much Are Transferable Points Worth?
Transferable points are some of the most valuable points because they are very flexible. You have multiple different ways to redeem these points so you can make sure you’re getting the most value out of them.
An example of transferable points are Ultimate Reward points earned by signing up for Chase credit cards such as the Chase Sapphire Preferred credit card. One Ultimate Reward transfer partner is United Airlines. You can transfer your Ultimate Reward points to United airlines at a 1:1 ratio. This means that these transferable points are just as valuable as United miles.
In the example above, we determined that we could redeem our United miles for a flight from Los Angeles to Bangkok for a value of $.015 cents each.
I could go into 10 more examples of transferring your points to different loyalty programs, but I think you get the point. The important thing to understand is that transferable points are just as valuable as the program you transfer them to.
Try This Really Simple Exercise:
Don’t just lie there! It’s time to start taking action!
That wraps up the redemption portion of this guide. At this point, you should have a clear understanding of how to redeem the 4 major types of miles and points. If you’re still a bit confused, don’t worry, practice makes perfect. I highly recommend practicing finding award flights and award nights. Once you do a few of these searches on your own, you’ll gain a much clearer understanding of how it all works!
If you could travel to any city in the world, where would you go? Write it down.
Now, go to United.com and search for an award flight. See if you can find a lower-level award flight. Find it? Great!
Now, go to Marriott.com and search for hotels in that city that are bookable with points. Did you find one? How many points does it cost per night?
Write all of the information down, because in the next section, I’m going to teach you how to earn enough points to take your dream trip.
Signing Up For Loyalty Programs
Now it’s time for you to start taking action! The first step is signing up for loyalty programs. You have to be a member in order to earn points, and it’s completely free to sign up! So now I want you to stop reading this guide, and go sign up for the three most popular Frequent Flyer Programs and the two most popular Hotel Loyalty Programs. I’m making it as easy as possible for you. The links below will take you directly to the sign-up page of each program.
Make sure to keep track of the email you use to sign up, your new membership number, and your password. Write these down, and keep them in a safe place!
Now that you’re signed up for the programs, let’s start focusing on earning points!
Earning Miles and Points
As we have already established, there are multiple ways to earn miles and points. The two ways we’ve focused on so far have been through traveling and credit cards, but you can also earn points through online shopping portals, dining programs, and you can even buy miles and points. In this section, I want to give you a quick overview of the three options we haven’t discussed yet.
Online Shopping Portals
Shopping portals are essentially online shopping malls. They have a list of different online stores, and they allow you to earn bonus points by starting at the shopping portal and clicking through to the online store to make your purchase.
For example, United Airlines has a shopping portal called the United MileagePlus Shopping Portal.
If you were to click on the Macy's logo in the shopping portal, you'd earn an extra 3 United miles on every dollar you spent on Macy's website. So if you spent $100 at Macy’s, you’d earn 300 frequent flyer miles. These shopping portals are a great way to earn a few extra points when you’re shopping online. The bonus points you get for shopping at specific stores vary by shopping portal, so make sure to use the site evreward to find the shopping portal that’s offering the highest bonus.
Most airlines offer dining programs. These are programs you can sign up for that will give you bonus miles when you dine at participating restaurants. All of these programs are run by the same company, so they operate the exact same way. We’ll use the MileagePlus dining program as an example.
As an "online member" you'll earn 3 points per $1 spent at participating restaurants. All you have to do is become an online member and agree to receive emails from the dining program. If you were to dine at one of the participating restaurants and spend $50, you’d earn 150 United miles.
Dining programs can be a great way to earn a few extra miles, but I’ve found the selection of participating restaurants to be very limiting. With that said, it’s still worth taking a few minutes to sign-up for the dining program offered by your favorite airline (you can only be a member of one at a time).
My least favorite way of accruing miles and points is purchasing them. This is rarely ever a good deal because loyalty programs always charge a high price to purchase their points.
Take American Airlines, for example:
You can purchase 142,500 points for $2,950. With the best current bonus being offered, you’re still paying $.02 cents per point.
[$2,950/142,500 = $.02]
In order to justify buying these points, you’d need to make sure you were getting more than .02 cents worth of value each when redeeming them. Usually, the only time it makes sense to buy points is if you have a specific business class flight that you plan on using the points to book. Since business class tickets are much more expensive than economy tickets, you’ll get more value out of your points when redeeming them for business class.
Here are a couple of other examples of when it makes sense to buy points:
A great example of when it makes sense to buy points is if you’re booking travel with cash, but buying points and booking the same travel with those points end up being cheaper. This might sound silly, but it’s more common than you may think (usually with hotels).
Let’s look at an example that I recently used:
I recently booked a stay at a Hilton property in Kuala Lumpur. Because hotels are so cheap in Southeast Asia, it made sense to make a cash booking and save my points for something that offered better value.
However, because Hilton was offering a 100% bonus on purchased points (something that happens at least a few times every year), it actually made sense to BUY points, make the same booking, and save money in the process.
As you can see in the screenshots above, the 5-night stay in Kuala Lumpur only costs 24,000 points. You can also see that buying 24,000 points from Hilton only costs $120, or $24 per night. Given the cash price of the room was nearly $60 per night, I saved over 50% by BUYING points from Hilton and booking the room I was about to pay twice as much for.
The other reason you might want to buy points is if you need to top off your balance. Let’s say you’re trying to book a business class flight to Japan for 80,000 points, a flight that otherwise would’ve cost you thousands of dollars. If you only have 75,000 in your account, it would TOTALLY make sense to buy the 5,000 points to book your flight. If you need to spend $50 or $100 to get enough points to book a flight worth thousands of dollars, you’re still coming out way ahead.
Banks love new customers. They love them so much that they’ll pay YOU if you can send some their way. A great way to earn points is through Referral Bonuses.” Many of the big banks will give every customer a set of unique referral links which they can send to friends, family, colleagues or strangers (don’t send them to strangers, please). When someone uses your link to sign up for a card, the bank will give you a bonus, typically in the form of points.
Referral bonuses range from 5,000 points per successful referral to 20,000 or even higher. It depends on which card you’re referring someone to and whether or not the bank has any referral promotions going on.
As I said, banks love customers. They also hate losing customers, which is why they’ll incentivize them to stay in the form of, you guessed it, more free points. Let’s walk through what this looks like:
You open a new card, get amazing value out of it in the first year because of the excellent welcome bonus, but when the annual fee hits for year 2 you realize that the card doesn’t provide much value without that bonus. So you decide you want to cancel it. You call the bank, explain that you’re not getting value from the card and you want to close it.
As long as you’re in good standing with the bank and you’ve been putting regular spending on the card, there’s a good chance that before canceling your card, the bank will offer you something in exchange for keeping it open for another year. This could be points, statement credits, annual fee waivers, or other things. It differs for every customer and every card, so there’s no formula to determine exactly what to expect. There’s also no guarantee that you will get a retention offer at all.
I’ll give you an example: let’s say there are two customers with American Express. One of them has 10 cards open (yes, that’s a thing), pays their bills every month, keeps a low credit utilization, and puts a ton of spending on each card. The other person has one card open. They also pay their bill, keep a good utilization, but don’t put a ton of spending on their card - just a few hundred dollars a month.
Who do you think is more likely to get a retention offer?
If you said person one, you’d be wrong. Why? The bank doesn’t need to incentivize them to stay because they’re confident that the customer will stay anyway. After all, they have TEN cards - It’s highly unlikely they’ll be leaving anytime soon. Plus, they put so much spending on the other cards that even without the card in question, they are an extremely profitable customer.
Person number two, on the other hand, is much more likely to get a nice retention offer. If they follow through with closing their one card, the bank loses them as a customer and may not get them back. Therefore, the bank wants to do everything they can to retain them.
It’s important to know that you shouldn’t close any credit card or attempt to get a retention offer until you’ve held the card for at least one full year.
When you join the loyalty programs I suggested above, you’ll occasionally get emails with opportunities to earn a few hundred or a few thousand miles here and there. Airlines, hotels, and credit card companies are constantly running different promotions. For example, below is an email I recently received from United Airlines to earn an extra 2,250 miles when I book a rental car with Hertz.
It’s worth taking a look at these when they enter your inbox, but most of the time the points you earn won’t be worth the time you invest. Sticking with this example, I’m not going to go out and book a rental car. I don't need just to earn 2,250 points, but if I needed to book a rental car anyway, this could be a good promotion to take advantage of.
Another example is taking surveys. Several different loyalty programs allow you to earn points by taking surveys. In most cases, it’s not going to be worth going through the trouble to fill out these surveys for a few hundred points.
Just because you CAN earn a few extra points, doesn’t mean always SHOULD. I’ll explain more of my points-earning philosophy in the next installment.