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As Covid19 continues to wreck the global economy, we’ve seen the conversation around credit cards shift pretty quickly. Not too long ago, we were all fawning over some of the best premium credit cards in the market. Banks were almost in an arms race to launch the next big premium travel credit card. In a matter of weeks, the conversation has shifted to a totally different question altogether. Should you convert your miles and points into cold hard cash?
Miles & Points Valuations
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.
Conversion 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 to 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.
Do your miles 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.
Decision Making
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 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 miles 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. 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.
The Pundit’s Mantra
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. 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.
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 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.
Are you planning on converting any of your miles & points into cash? Let us know in the comments section.
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This card is currently offering a 30,000 points bonus and a 0% Intro APR for the first 12 months. (Open in private/incognito browsing if the offer doesn’t show up immediately.)
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