Friday, January 18, 2013

What's the Best Way to Use My Credit Card Rewards and Travel Points?

What's the Best Way to Use My Credit Card Rewards and Travel Points?Dear Lifehacker,
I've racked up a lot of credit card rewards points and travel miles recently. I know I can trade these in for gift cards or flights and such, but I'm really confused about what's the smartest way to use them. I'd rather get as much value out of them as possible. How and when should I use up all these rewards?

Signed,
Rewards Rookie

Dear RR,
Credit card bonuses and travel loyalty programs are great ways to score free stuff, including cash back and even complete vacations. Figuring out exactly how to use those miles or points so you're not wasting them can, however, be confusing. You might have options to convert points into cash, transfer them into other loyalty programs, buy gift cards, book a vacation, or buy an actual item. Often, using your rewards for one thing (an international ticket, for example) is better than another (e.g., buying a toaster egg McMuffin maker from your credit card company's overpriced catalog). Here's a look at the many ways you can capitalize on your rewards and when or why they make sense.

The Simplest, Most Flexible Reward: Cash Back

What's the Best Way to Use My Credit Card Rewards and Travel Points?Using your rewards for cash back or statement credits is the most straightforward and transparent route. Most credit cards that show rewards as points offer a simple 1 point = 1 cent conversion, so you know the true value of each point, unlike other reward categories. (If you shop a lot on Amazon, you might also consider credit cards that reward you for Amazon purchases to kind of pay you in cash.)

You might also be able to turn your frequent flier miles into cash or gift cards at Points.com or sell your miles to a mileage broker?useful if you're sitting on a ton of miles with no plans to travel.

Pros: You know what you're getting and can use the cash back for anything you want. Plus, cash is king.

Cons: Other reward types can make your points or miles go farther. Also, most programs require you to meet a certain threshold before you can redeem your rewards for cash.

For Discounted Gifts or Things You Need Anyway: Gift Cards

What's the Best Way to Use My Credit Card Rewards and Travel Points?Redeeming your rewards for gift cards can be a great value on two conditions: 1) You actually would use those gift cards for things you were going to buy anyway or to give as gifts and 2) You get the gift cards during your credit card company's rewards sale. Photo by 401(K) 2012

The first condition is fairly obvious; gift cards are useless if you won't use them or they cause you to buy unnecessary stuff. For the second rule of thumb, it's better to get your gift cards when they're discounted, e.g., 8,000 points for a $100 gift card instead of the typical 10,000 points requirement. Each point is then worth more than typical cash back rewards (in this example, 1.25 cents). It also doesn't make sense to use your rewards for gift cards unless they're discounted when there are lots of other ways to get gift cards for less than cash value.

Look for a "rewards on sale" section in your program to see what's available or keep an eye on deals forums like FatWallet and Slickdeals where members post frequent rewards sales.

Pros: Gift cards can be as good as money if you have a use for them, and rewards sales offer them at a great discount. Heck, you can even turn that discounted gift card around and sell them to a secondhand gift card site for even more return on your rewards.

Cons: Gift cards can sometimes make you spend more than you intend to, and they're easier to lose track of than cold hard cash unless you do some card tricks.

Not the Best Value, But Your Mileage Might Vary: Merchandise Awards

What's the Best Way to Use My Credit Card Rewards and Travel Points?Redeeming rewards for merchandise like digital cameras and blenders rarely makes financial sense, since you can often get those items cheaper on Amazon or use your miles or points for more expensive things like travel. It also takes a little more work doing the price comparison, converting the points or miles into a dollar value and comparing that with what the item would cost you elsewhere.

USA Today tested three airline's merchandise rewards programs (United, Frontier, and Continental) and found that some items on United cost twice as much (in the dollar value of miles) as they did on Amazon. Frontier and Continental fared better, though, with some significant savings when redeeming miles for products. So whether or not merchandise awards make sense for you will depend on the individual item.

Pros: If you never plan on redeeming for travel, using your rewards for stuff you need or want might be a good value. And even if it's not the absolute best value, as the Frequent Flyer Guy says, there's no such thing as a bad award.

Cons: You have to do the price comparison to see if it's a good deal, and redeeming for other rewards like gift cards or travel or even selling your rewards are usually better ways to go.

A Stellar Deal If You Have Enough Points/Miles: Travel Rewards

What's the Best Way to Use My Credit Card Rewards and Travel Points?One of the best ways to use your rewards is to save?sometimes hundreds or thousands of dollars?on airfare and hotels. It is also, however, often very frustrating and complicated to try to take advantage of, thanks to eligibility restrictions, expiration dates, and limited award seats on airlines. (Some airlines, like Southwest, are easier to redeem miles on than others.)

Adding to the confusion is reward levels vary for every flight or hotel booking. So sometimes it makes more sense to hold onto your miles or points and pay for a flight or hotel, waiting for better deals on your rewards. You can calculate whether it's worth using your miles or holding onto them, e.g., with Mile Value's calculator, or search for flights with MileWise, which tells you how much they're worth in points, cash, and miles.

Still, using your rewards for travel can save you a ton of money and help you go on trips you might not normally afford. You can get a round-trip international flight with the points you get for free from credit card signup bonuses, regular shopping, and other travel hacks. The Points Guy has a great beginner's guide to earning as many miles as possible and using them with various airlines, and we've posted previously a few tips for getting more out of your frequent flyer miles.

There are also sites and services that make using your travel points easier. Previously mentioned AwardWallet and MileWise keep tabs on your rewards programs, notifying you before your miles or points expire. MileageManager does the same, but for $14.95 a year adds notifications of bonus earning opportunities, searches for hotel rooms and award seats using miles (re-checking for you daily), and integration with TripIt.

Also, if you like the idea of turning points into travel but don't care for the headache or time investment of seeking out the best value for your miles, award booking services might be worth the investment. For $100 to $150 a ticket, these services find the best award seats for you, using the least amount of miles, and can book your flight with the airline. They might be a good option if you are trying to travel during a peak season, at the last minute, or have a complicated route itinerary.

Pros: Possibly the biggest rewards, since the value of miles (or points converted to miles) can be much more than 1 cent. (Frugal Travel Guy has an in-depth series on mileage valuation, with average United miles worth nearly 3 cents.) Sometimes you might be able to get in on a special miles/points sale?a hotel room for half the points, for example, or a flight that can save you 45,000 miles.

Cons: Often difficult to redeem or make use of without investing a lot of time, having a lot of travel hacking knowledge, or paying someone to help. You'll also need to accrue a lot of points or miles to cash in on free travel or get elite status (easy to do with travel rewards credit cards, but there are a few other ways to score more frequent flier miles).

Use Your Rewards for Good: Donate or Give Away Points or Miles

What's the Best Way to Use My Credit Card Rewards and Travel Points?Finally, you can use some or all of your accumulated rewards to give to others?a charity or a friend or family member (or a Lifehacker editor whose initials are MP).

Pros: Good karma points and better than letting them go to waste.

Cons: You can not, in most cases, take a charitable deduction for donated miles.

Use Them or Lose Them

Whatever you decide to do (whether it's a combination of the above or just one reward type), make sure you use your rewards. Miles and points are an alternate form of currency, but they're worth nothing if you don't use them or they expire.

Love,
Lifehacker

Have a question or suggestion for Ask Lifehacker? Send it to tips+asklh@lifehacker.com.

Source: http://feeds.gawker.com/~r/lifehacker/full/~3/UpWifgss5Jc/whats-the-best-way-to-use-my-credit-card-rewards-and-travel-points

When Is Veterans Day 2012 brooke burke Alexa Vega Bram Stoker books Paula Broadwell Photos Veterans Day 2012 Nate Silver

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.