Do you consider credit card and airline reward points an asset? I have never seen anyone include them on a net worth spreadsheet, but travel reward points definitely have a calculable value. I use the Points Guy as the market maker for reward points and I think his estimates are a pretty good barometer for their value.
I don’t really plan on including these in my net worth tracking, but it is a good exercise to see what the current value is and make sure I can avoid point devaluation by having a plan to use the points. You could make an argument to include the credit card rewards that are easily turned in to cash, though.
If you just collect points and don’t plan to use them, the points will either lose value (or even expire) over time. I lost a lot of rewards from MGM Casinos because I let enough time lapse between visits, I also lost my elite status with them (probably cost me over $500). I also don’t get to cut in line at the buffet anymore!
Most people probably just accrue points slowly over time or when they travel for business. If you want to really accrue points quickly, you need to get credit card bonuses for opening new accounts. It requires a solid credit score (FICO of over 750) and you must be organized to make sure to avoid annual fees, late fees, etc. from using multiple cards each month. Also, if you are planning on purchasing a car or house (or refinance) any time soon be careful about opening a bunch of new accounts. It can take several months for your credit score to recover. Travel hacking is not for the faint of heart!
Our Points Net Worth
Here is my breakdown of points as of 12/31/14. I have combined our accounts for the purposes of this exercise (myself and my wife). This is the first time I have tried to publish this analysis, so bear with me. My wife is new to the game, so she was at effectively zero 6 months ago.
The only time that causes problems is for large redemptions having to use points from more than one account. Some programs let you transfer points to a spouse or family member (you can always book awards for someone else, just can’t give them the points). While we acquired a huge amount of points in 2014 (several hundred thousand), we also used over 100,000.
|Program/Card||Points||Point Value||Total Value ($)||Notes|
|American Airlines||65,000||$.017||$ 1,105||Banking these for a trip to the Midwest for the 2015 holidays and used some recently for our Hawaii trip|
|Barclays Arrival Card||5,000||$.011||$ 55||Used up most of these, not using the card much right now|
|Chase Ultimate Rewards||130,000||$.021||$2,730||It is tempting to redeem for cash right now! Would be about $1,365 in cash…|
|Marriott Hotels||205,000||$.007||$1,435||Building for a 1 week Caribbean reward that will make the points worth much more than this rate|
|United Airlines||66,000||$.015||$ 990||Not happy with them right now and the value of the points decreased|
|US Airways||80,000||$.019||$1,520||Soon to be rolled over to American Airline accounts|
|Total||551,000||$7,835||Wow, more than I thought!|
I am not sure what to use the Chase Ultimate Reward (UR) points for right now, but it sure is tempting to move some to cash. I could actually use it to start funding our Roth IRA or Traditional IRA for 2015! Most likely I will keep them to transfer to United, Southwest, or one of the other airline partners. That flexibility is what makes them more valuable than the actual cash value (and the highest value on my list). I can keep them as Chase points until I need to transfer them.
The Chase Sapphire card is our default card, so it is always earning us points. It is probably the only card that I will willingly pay the annual fee. We also have the Chase Freedom card (no annual fee and 5x bonus categories), but you can’t transfer it to airlines without having one of the Chase premium cards like the Sapphire or Ink cards.
My recent trip to the Mid-West for the holidays was on United. It was a nightmare trip back to California, so I am not happy with them right now. The only bright spot was getting them to pay for a night at a Marriott for us (credit towards elite status). However, we spent over $60 on diapers, medicine, snacks, personal care items, etc. since we had nothing with us and our meals were about $50 more than the $80 of meal vouchers they gave us. The net result was me burning an extra vacation day and us spending over $110 more than we planned due to the one day delay. Not to mention, that the boys and I were all sick as well. It was not a fun time at the airport to say the least!
I am not sure what to do with the Barclays card now. It gives a free FICO score, which is nice, but I don’t think I want to pay the annual fee later this year. Maybe I will call ahead and see if they will waive the fee and keep it longer.
Since US Airways is merging with American Airlines, we will probably close those cards before the annual fee comes up. The American card gives the free checked bag, so it seems more valuable to me.
Potential Point Additions
Right now we have a targeted offer for 50,000 American Airline points for my wife which we plan on opening soon. We also can open another Barclays card for my wife to use on our Hawaii trip to get some of the incidentals for free. We can also try to get her a Chase Sapphire card which gets about 40,000 points (or wait until we see a 50,000 point offer).
There are less out there for me to add, but an American Express offer might be a worthwhile opportunity. Or maybe finally adding a Starwood Hotels card to the stable would work as it has extra value from transfer partners like the Chase UR points. I wish I had added a British Airways card previously; we could have used that for our Hawaii trip as being on the West Coast makes it a cheap redemption option for that reward program according to Million Miles Secrets.
I am contemplating opening the Ritz Cartlon card. Right now it has a 140,000 point offer, which can be linked with my Marriott Rewards account to really push our balance up. The only issue is that the $395 annual fee is not waived, though there is a $300 airline incidentals credit to help out, too (calendar year, so you might be able to use twice on one annual fee). It also comes with Gold Elite status, so that could help earn some extra points as well. Check out Daraius’ review of the Ritz Carlton Visa card.
The current point offer makes the acquisition cost about $.0028 per point. It would ensure we can convert about 100,000 points to United or whichever airline we use for that vacation. That factor multiplies the value of the points. If you look at it like a prepayment, the cost is like getting an 80% discount on the airfare.
For example, if 100,000 of the points were converted to United (as part of the the Marriott 7 day vacation package redemption) and then used for round trip flights costing about $750 each, the $395 fee gets turned into a $1,500 flight package with 40,000 Marriott points left over. 40,000 points is at least a night (or two) at a decent Marriott, making the total value potentially $1,750 or so. Is it worth it?
There is one other note to add. On our Hawaii trip we are staying at a Marriott Vacation Club resort. In exchange for us attending a time share presentation, we will get either 50,000 Marriott points or $150 towards hotel costs. Using the rate above, the points are worth $350, so we will take them over the resort credit. If we did not have a trip planned to use those points towards, I would probably just take the credit and use it for meals or something.
Is It Worth It to Collect Points?
Some people just use cash back cards because it is easy. I think the amount of effort that I put in is worth the significant increase in redemption value that I get. I don’t even use the points for international flights, which seems to be where the BIG dollar value is (using for a business class ticket can make the point worth double or triple what I am showing here).
In 2014, I used points to get 4 flights to Hawaii for under $700 dollars. I also get free checked bags for currently having the credit card for that airline. I also used it for 3 flights to the Mid-West for $600 by using points for 2 of the flights (and again free bags on United saving $150 round-trip). You could easily say I saved $3,700 in flights and baggage fees for those two reservations alone.
Let’s just say I spent $150 in fees to manufacture the spending for those points (this is just a guess; sometimes we have plenty of regular bills to get the bonuses). A $150 investment yielding a return of $3,700 is a 2,467% return on investment! I would say that is worth it, though I must mention that I probably spent 7-8 hours making the reservations for the two trips between internet research, phone calls, and booking multiple segments.
Overall, I plan to continue to collect points in 2015, though not at the same pace. It lets me not feel guilty about booking nice vacations. Otherwise, we would not be planning such lengthy trips. I might just try to maximize a few opportunities and just coast the rest of the year, but I will continue to track my travel reward point values.
Have you ever valued your points? Any good deals out there you know about?