EDITORS NOTE: In 2024, I’m going to try and have a guest post on Saturdays. Today’s guest post is from prolific miles and points burner and host of the Churn and Burn podcast, James. He’s probably tied in fourth place for the most number of shared Telegram and WhatsApp groups with me too, so you know he’s legit.
Cents per point. It’s a fallacy that we’ve all fallen victim to. To feel so desperately that you’re right, only to realize you’ve been led astray.
All of us have been there: “Well, this is a $1000 restaurant purchase, so obviously, I want to put it on my Amex Gold card for 4x, right? On paper, it makes sense. TPG values Membership Rewards at 2 cents per point. That’s 8% back on every restaurant purchase, right?
If you’re rolling your eyes, you should be. Even when cashed out via Charles Schwab, it’s a $44 money maker. Contrast that with throwing the same $1000 spend on a Chase Sapphire Reserve: it’s 3000 points earned, which when transferred to Hyatt, is arguably worth the same in value for many people.
Some of you are probably saying “Wait! When redeemed via Aeroplan, my Membership Rewards are worth 7 cents per point if I book Lufthansa First Class!”
There’s two problems with this line of thinking. 1. My guess is that no one currently reading this is going to pay $15,000 for a one way ticket on a seven hour Lufthansa flight. If you are, I’d seriously consider scheduling a cat scan next week. And 2. Not everyone wants to fly Lufthansa First Class. Most of you are already familiar with #1 already, because TRUE cents per point is not based on the actual cash value of the ticket/hotel, but the cash value that you were willing to pay in the first place.
Think of it this way. There’s a Hyatt Regency in Jersey City that currently goes for an average of 15,000 Hyatt points per night or $250. Alternatively, for 40,000 points or $931, you can book the luxurious Park Hyatt New York City. Some of you are already doing the table math in your heads. The Regency gives a cool 1.6 CPP valuation. Meanwhile, the Park Hyatt is a whopping 2.3 CPP. Easy decision, right? Of course, not. Because many people in the game (myself included) would never pay $931 for a night at the Park Hyatt. Alternatively, I probably would spend $250 a night for the Regency, especially if I was getting free breakfast and Hyatt Globalist benefits on top of that. In reality, I might be comfortable paying $450 for the Park Hyatt, which amounts to a measly 1.12 CPP value. Yikers!
We can use the same logic on an Air France fare. I just booked my father in law on a flight from RDU to CDG for 12,000 Virgin miles + $155 in taxes. The actual cash price of the fare was $1668. So, subtracting the taxes from the ticket, the CPP is 12.6 cents per point. Some might even say that I saved my father in law over $1500. But I didn’t, because there is no world where he would have paid $1500 for that flight. “As cheap as humanly possible” were the words he said to me. Myself? I’d have ponied up an extra 36,500 points + $127 and splurged for business class. Of course, I offered up this option to him, and he scoffed at it. What I saw as a no brainer, he saw as unthinkable.
The point is: all the blogs and trip reports have us using inflated fat cat valuations for our treasure troves of points. In reality, it’s the price you would pay for the experience you want that matters. Don’t fall victim to the same logic that leads people to list their Pokemon memorabilia on Ebay for the price of their mortgage because they saw an episode of Pawn Stars once where the “expert” told Chumlee that a 1st edition Charizard card was worth $300,000 at auction.
– James
Yes, you earned 4,124 Membership Rewards, but would you really have tipped $1,000 if you didn’t? Don’t answer.