Chase Earning Strategies Thoughts

How much would I pay for an Ultimate Reward point?

Free-quent Flyer kicked off an interesting discussion on Twitter the other day:


It’s something that we brought up on Episode 23 of the Saverocity Observation Deck last week. As Matt explained on the podcast, his answer wasn’t to troll (well, mostly); he was saying that if you need a certain amount to complete a redemption then the amount you are willing to pay goes way up. I agree with Matt, but I’ve been thinking about something else he said on the podcast all week.

I said that I would probably speculatively buy UR points at anything less than 1 cent per point as long as it didn’t require me changing out of my pajamas. Matt countered with this point (paraphrased) – “if you’re getting enough value out of it, shouldn’t you be willing to pay more than one cent per point? One cent is just the absolute minimum you can get in return.”

His reason for this is what he calls the “double pivot” – aka the two places where you can use miles and points to save money on travel. The first pivot is in the acquisition of miles and points, which I admittedly am not that great at. The second pivot is maximizing the value out of the miles and points you earn, which I have a much better eye for.

So I’ve been spending the last week mulling over how much would I pay for an Ultimate Reward point? This is especially apropos considering the news that Chase is going all DEFCON 2 about credit card stuff – if I’m not gonna be able to bank Hyatt free nights or United miles via credit card bonuses, how much am I willing to pay for them?

Here are the things I have been thinking about – written both so I can clarify my own thinking and also to hopefully spur others to come up with their own evaluations as well!

Factor 1 – What are my travel goals?

I’m on record saying that my goal isn’t to “fly for free.” My family would set aside money to travel every year even if we were paying cash. For me, the goal is to use miles and points to either

a) save money

b) make travel more comfortable

c) both

I am not against spending money. But if I can save a little money or use the same amount of money to fly in business class, I’m all for it. This affects how much I am willing to pay per point because I can think of the money I pay for UR points as paid upgrades on economy tickets if I’d like (in the case of airlines) or think of it as subsidizing more expensive hotel rooms (Hyatt).

Factor 2 – What am I really going to use the points for?

All of the valuations out there take into account all of the transfer partners, but my personal reality is that I only really use two of them regularly: United and Hyatt. So when figuring out how much I’d be willing to pay for these points all that matters is how much value I can get at United and Hyatt.

Would I redeem for Korean or Singapore? I wish, but with a family of four I’m probably not gonna get four first class tickets on either of those airlines (well, maybe Korean). Though if that were my goal (and I was confident in the availability), that would skyrocket the price I’d be willing to pay…to a certain extent.

Factor 3 – How much would I be willing to pay for travel out of pocket in the first place?

Dia recently wrote a post about how she’s stalking Gwen Stefani or something like that. She makes a great point which is she would never pay $2500/night for a room in the first place. (I think later on Twitter she confirmed that her price point would be $300/night max or something? Don’t quote me on that).

When I first got into this game, I used to be suckered into that kind of thinking – “aw snap I got a $10K first class Lufthansa ticket for free baybee!” But that’s not really the case, and it’s even less the case when you are looking to spend money for points outside of credit card bonuses (which, again, bye bye Chase). So the question is, how much would I really be willing to spend?

For a hotel room for 4, maybe $300/night now max? For roundtrip tickets to Europe in the summer during school vacation, $1200? For roundtrip tickets to Asia over Christmas, $1800? Those are obviously moving targets, but those are targets that matter when I’m thinking about how much I’ll spend on points, because that brings up:

Factor 4 – How much value can I redeem the points for?

My valuations of how much UR points are worth are variable to my own tastes, needs, and current opinions. So the question for me is how much can I personally redeem the points for at this particular point in time.

As Matt says, if you’re good at finding saver award space, you might be able to redeem for a much better value. But that value for me has to be in line with how much I’m willing to pay for the travel in cash.

As an example, we’re going to Aruba where the going rate for the Hyatt is $500/night when we are there. That’s a bit steep for us, but using cash and points, we are paying $150 out of pocket and 12,500 Ultimate Rewards points. (As an aside, when booking hotels, you might want to check FQF’s imputed redemption values first but that’s a whole other ball of wax). Ignoring points we would have earned paying $500 cash for simplicity (though we would not have stayed at that hotel at that rate), I’m getting a value of about 2.8 cents per point. So if I got those points for anything less than that I’m winning, right?

It’s easy to think that, but in my personal case, that would be wrong. Remember, I said that I only wanted to pay $300 for a hotel room. Since I confirmed a Diamond Suite upgrade, let’s bump that up to $350 (if they offered me a suite twice the size for $50/night I’d probably take it). If I paid, say, 2 cents per Ultimate Reward point, I’m a loser in this scenario. 12,500 points would have cost me $250 putting my total cost for the room at $400 – above the threshold I’d be willing to pay in cash.

While that might seem simple to some, it’s something I find it’s easy for me to forget in the “excitement” of a deal.

Factor 5 – What are the odds I’ll be able to redeem these points at a price I’m happy with?

Having points is great, having points that you are having trouble redeeming is not. For hotels, while cash and points is preferred, you can always book a room completely on points at the Hyatt if there is a room available (hence the necessity of the imputed redemption value table). For airlines, saver award space isn’t necessarily easy to find. While I’m generally confident in my ability to find some, the reality is it’s not totally in my control.

So even if I think points are worth buying at, say, 1.5 cents per point, I think if there is difficulty to redeem them that has to take some of the shine off. Even Hyatt takes away some value just because the hotel doesn’t have as large of a footprint around the globe.

Putting it all together

Bringing it back to the beginning – I think I’m still only comfortable buying at around 1 cent per point. Then if I’m “buying” a business class ticket to Asia it’s costing me $1600, which is what I’m okay with but not thrilled about. If I’m redeeming for Hyatt, I’m usually winning, and if I’m redeeming for coach I’m probably winning again. But the lack of a large Hyatt footprint and the difficulty in finding four saver awards severely diminishes that. If I’m booking standard awards in the future then I probably need to get my Ultimate Rewards points at less than 1 cent per point.

Gun to my head, I probably am comfortable paying a little more than 1 cent per point, but the 1 cent value is easy because I can do all of the math in my head. So while I was convinced sticking to 1 cent per point was wrong on the podcast, I think a week of reflection has made me come back to that price point. I’m sure Matt will point out why I’m mistaken about that soon enough. 🙂

Final Thoughts

I’m sure a lot of you out there have factored in all these things when evaluating the price point you are willing to manufacture points at. Like I said, manufacturing isn’t my forte. Still, I found this a useful exercise, and one that I can revisit regularly (with all currencies) to make sure I’m not fooling myself. I’d love to hear how everyone else thinks about/calculates these things, so tell me why I’m dumb!

Just an average joe trying to fly his family for less

6 thoughts on “How much would I pay for an Ultimate Reward point?

  1. I went through a similar logical exercise a while ago and came up with largely the same list of factors. If we limit the discussion to speculative purchasing, I think there are a couple of other factors that are worth mentioning. It may be tied up in your Factor #5, but the risk of devaluation to either UR or the desired transfer program. If you need the points for Hyatt stays and then Hyatt removes C&P awards, you would obviously be worse off. If there are only 2 transfer partners driving your valuation, you should at least consider how likely they are to be worth less by the time you get around to using them and discount appropriately.

    The other factor that I didn’t see mentioned was the ease or price at which you would be able to get competing currencies. As an example, Membership Reward points may have different partners which could meet your travel needs. You might prefer United to FlyingBlue, but both can get your family across the pond. Assuming similar award charts and products, if you could buy AmEx points at $0.008, would you pay $0.012 for an UR point?

    IMO, these factors would lead to a lower willingness to pay. However, because URs can be cashed out, there is a floor on their value. Any additional benefits can be thought of as an included call option for which you might pay a small premium. All of which is to say, I agree with your general assessment of some amount slightly more than $.01.

    1. Great points, especially the devaluation. In terms of other currencies, that gets really complicated because you’re not necessarily comparing apples to oranges (because with Flying Blue you need to consider fuel surcharges and all that). Post was already 1500 words as is 🙂 I also find UR easier to “buy” but I definitely feel you on that general point

  2. You got it right: $300 incl. tax, and it better be amazeballs.
    I’m firmly in a the penny a point camp, as much for simplicity as anything else. I think unless you’re targeting a very specific and short term trip hoarding at above a penny makes no sense.

    1. Yeah one thing I’m always struggling with is timeframe. Like am I confident enough to “buy” at a higher price for three months if that’s how long it takes to get the number of points I need? When it was two of us we could bang it out no problem but three is problematic and four is even riskier.

  3. I’m glad you did this post. I listened to this podcast (really great podcast btw) today and thought you should have pushed back more against Matt’s argument.

    I do miles and points because If I had to pay cash for the trips I take, I would not be able to take them. I would never pay 2 cents per point. The example that Matt gave of spending 150k points for 3 business class tickets. If he bought points at 2 cents per point that’s $3000. Now I get his point that that those seats would cost several times that in cash, but most of us I think would NEVER pay the cash price for those business class seats. I personally would never pay $3000 for those seats either.

    The value of miles and points to me is that I can take these trips for next to nothing. I am cash poor (or cheap) and have retirement and kids college to save for. So the point of this hobby for me is to be able to travel, where I would not have before. The point for me is Not to pay $3000 for $15000 seats. Neither price is doable for me.

    I also will redeem miles for 1 cent each if it means I will save myself cash or will take my family on a trip to Disney that we would not afford with cash. I cant spend $1000 on Disney tickets + $400 in Disney park food. but I can afford 140k in various points currencies redeemed for gift cards that enable such a trip.

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