As the year winds down, we’re seeing a ray of hope for the upcoming year with a vaccine on the horizon. On the miles and points front, many issuers are offering welcome bonuses of 100,000 points or more. I recently wrote about how 18 card offers of 100,000 points or more are currently up for grabs. However, travel by itself is still largely reduced or closed around the world. We still don’t know when we’ll be able to travel again in the same way as we did in a pre-pandemic world. Given such a scenario, should you convert your miles and points into cold hard cash?
Should you convert points into cash?
Not all miles and points are created equal. Before you decide to convert these into cash, here are a few steps or factors you need to consider.
Your Options
If you hold a miles & points currency, can it be converted into cash? With certain airline miles, you don’t even have that option. You can only convert them into hotel points, albeit at a terrible ratio.
With transferable currencies, it’s slightly different. At best, you can get 1 cent per point when you convert your points to cash. If you have the Schwab Platinum card from American Express, then you can do a bit better by converting Membership Rewards points into cash at a 1.25 cents per point rate.
Do your points expire?
If your miles or points expire soon, you don’t always need to fly or book a hotel. You can simply buy a bag of chips with your co-branded credit card and reset the clock. If not, you can purchase a block of miles or points. Most of the major US airlines like Delta and United have recently made changes so that their miles never expire.
Making a Decision
Here’s the deal. If you really really need the cash right now, then by all means go for it. If you really want to use some cash to invest in the stock market or elsewhere and can tap into your points as a cash reserve, then go for it. Thirdly, if you’re not comfortable traveling right away once normalcy slowly returns, then go for it.
Finally, if you have over a million points and will still have enough left over to travel once things get back to normal, then you can still cash them out. However, before you cash them out, ask yourself the question? Given what has transpired, how comfortable will you be resuming your travel right away?
In most cases, we’ll see business travelers hit the road well before leisure travelers venture out.
Other Options
If you don’t need the cash right now, you still have a few options.
- If you have more than one premium credit card, then keep just one or downgrade your card. With airports operating at bare minimums and lounges shut down, it will be a few months before you could use all your premium card benefits at an airport or a hotel. Until then, you’re just paying hefty annual fees and not using any of the benefits.
- If you carry many cards that have annual fees, call your bank to ask for a statement credit or a fee waiver. Many banks are offering generous statement credits. Banks are aware that existing cardholders aren’t able to use benefits and are instead offering incentives to still keep their business. If you intend to cancel a card outright, then call the bank and explain your situation. I’ve had great success in getting lucrative retention bonuses on my American Express cards.
- You can always product change your credit card to a no annual fee or a lower annual fee credit card. For example, I recently downgraded my Chase Sapphire Reserve Card to the Chase Sapphire Preferred Card. However, before you do so, do keep in mind welcome bonus restrictions for each bank. For example, if you downgrade your Amex Gold Card to the Green Card, Amex will deny you a welcome bonus on the green card.
- Watch out for any automatic retention bonuses. For example, Amex recently offered me a $200 appreciation credit when my Business Platinum Card came up for renewal with the $595 annual fee. I didn’t even have to ask, I simply got an email. Your issuer may offer you such credits or free points. Keep a watch on your notifications for any such updates.
- Sign up for a service like AwardWallet in order to track all your frequent flyer accounts, with their balances and most importantly, expiration dates.
My Strategy
I’m focusing on going lean as we see this period off. This involves minimizing how much I pay during the year in annual fees, yet earning miles and points via card welcome bonuses and organic spend. If you’re using a card more for its benefits than for its points earning capabilities, those benefits aren’t going to be of much use in the short run. Think about benefits like lounge access, airline fee credits and Global Entry/TSA Pre-check. I’m canceling or downgrading cards that I don’t really need or have overlapping benefits. I’m instead going to focus on earning miles & points through welcome bonuses and category bonuses.
The Pundit’s Mantra
Unless you really need the cash right now, I’d suggest that going lean and waiting this out would be a better option. That way you would save quite a lot of money on annual fees. If you already have enough miles & points, this period presents a good opportunity to wait it out. Who knows, by the time things get back to normal, many of us will already be under the dreaded 5/24?
Miles & points aren’t going anywhere. I always advocate that you play a long term game. Plan how and where you want to travel and then sign up for credit cards that help you achieve that goal.
What’s been your miles and points strategy in 2020? Did you convert any of your points into cash? Tell us in the comments section.
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Disclosure: The Points Pundit receives NO compensation from credit card affiliate partnerships. Support the blog by applying for a card through my personal referral links. This article is meant for information purposes only and doesn’t constitute personal finance, health or investment advice. Please consult a licensed professional for advice pertaining to your situation.
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