I talk a lot about redeeming credit card points for maximum value and flying first class for
free but today I want to actually show you exactly how to do that step-by-step with real
world examples using one of my favorite travel points systems American Express.
Alright let’s jump right into it.
What is going on everyone I hope you are all having a fantastic day.
So if you are just getting into the world of travel credit cards and travel hacking
then chances are you’ve gotten incredibly frustrated at some point in the process.
There are so many small nuances and endless articles and suggestions of people saying
you can book this $15,000 first class flight for free and all you have to do is jump through
27 hoops transfer your points 90 different times and there you go you can fly first class
for free.
Honestly I’ve kind of been guilty of that myself so let’s not waste anymore time the
first thing you have to do is obviously acquire American Express points.
Now my two favorite cards to do this are the American Express platinum card and the American
Express Gold card both of which have a fantastic sign up offers and point multipliers as well.
We’re not gonna talk about these products in today’s video but I will leave links
for four reviews down in the description.
Whether we’re talking about those credit cards or any other credit card the most important
thing right out of the gate is that you are getting that sign up bonus by using your regular
every day spending.
I say that because many times those cards will have a spending requirement in the first
few months of several thousand dollars in order to get that bonus and if you go out
and buy random crap that you don’t need just hit a spending requirements and get a
sign up bonus then that defeats the whole purpose of all of this.
I comes to credit cards in general you have to constantly check yourself and make sure
that you are not spending money just to get credit card points or meet some spending requirement
because trust me once you figure this process out, you will get addicted to finding free
flights it’s weird that sounds and you may start to fall into the trap of justifying
certain purchases because you’re excited about getting the points so I again say please
don’t do that it defeats the purpose of all of this.
Now once you’ve aquired a good amount of points, your redemption options are extensive
and this is where people make some big mistakes, get confused and frustrated, and end up redeeming
the points for a horrible redemption value.
Remember that there are credit cards on the market that offer 2% flat cashback across-the-board
without having to jump through any of these hoops so in order to just break even with
a travel credit card you really need to be getting at least one cent of value per point
which I’ll explain more in a second but that one cent of value is super important
to keep in mind because anything lower than that and you are just wasting your points
and would’ve ultimately been better off just getting a flat cash back credit card
most likely.
Like I said it is really easy to get overwhelmed at this stage and suffer from analysis paralysis
because you can redeem points directly towards your statement balance you can apply them
towards purchases on sites like Amazon for example you can even use them to shop on the
American Express website and literally buy things with your points.
Those are just some of the endless options that you have and I get that it can be overwhelming
but let me simplify for you, the only way to get more than one cent per point of value
is by transferring points to one of the American Express transfer partners.
Obviously there are exceptions to that rule but they are few and far between and you will
spin your wheels for hours trying to figure out how you can cover this purchase with points
and buy this thing on Amazon with points but just throw all of that out of the window because
99% of the time you’re not gonna get one cent per point not even close.
The easy way to figure it out is just take the price of the item that you were looking
at purchasing divided by the number of points that it will cost you.
So just as a super basic example let’s say I want to buy this SD card on Amazon which
currently cost $122.44.
We can see that if I select my American Express Gold card it gives me the option to cover
the entire purchase with 17,491 points.
So if we take our $123.44 and divided by 17,491, that means that we will be getting a redemption
value of just 0.7 cents per point which as we already discussed is not good enough.
In my experience this applies whether you are covering purchases on Amazon, redeeming
Point towards a purchase that you already made, or really any of the confusing redemption
options that American Express offers.
All of them are going to hover in that 0.6 to 0.9 cent per point range meaning they all
stink and you should just ignore them and save yourself the headache.
Okay so now that we’ve removed about 80% of the confusing redemption options from the
equation the only two that remain I really booking travel directly through the American
Express travel site and of course transferring points to one of the many American Express
transfer partners.
Both of these can be good and I don’t want to completely right off booking travel through
the American Express travel site however you’ve got to be smart about it and again ensure
that you’re getting a good redemption value and that’s coming from someone who lost
over 150,000 American Express points at a horrible redemption value because I didn’t
know what I was doing and was just excited to use my points.
Thankfully that was years ago and I have definitely learned my lesson since then but lets hop
into the American Express travel portal to show you how this works.
So we’re gonna log into my American Express account, hover over the travel tab and then
select book travel online.
Again at the top of the screen here you’re going to be bombarded with redemption options
which are flights, hotels, flight and hotel bundles, rental cars, and even cruises.
Again there are exceptions to what I’m about to say but 99% of the time flights are really
the only way to get a decent redemption value with your points.
just to prove my point, let’s say we want to stay in New York City for one night.
Well just scrolling through here quickly the easiest thing to do is look at the price and
tack on two zeros to convert it to one cent per point so in this case $565 per night would
become roughly 56,500 points at a one cent redemption value and is our baseline.
So in this case it’s going to cost us 80,000 points which is way higher than the 56,500
max that we can afford to pay.
And by using that strategy you can quickly scroll through an entire page and tell whether
or not you’re getting that one cent redemption value.
But if we do the full breakdown of one of these, $565 divided by 80,743 points works
out to just under seven cents per point which just isn’t going to cut it.
There are exceptions but it’s just not worth the effort and you’re way better off going
with our final redemption options which again is redeeming points for flight through American
Express travel or redeeming them for flights by transferring your points to a transfer
partner.
As I and many others have said before, your best bet to maximize the value that you’re
getting is to transfer points for business class and first class international flights
and while that is largely true, the whole point here is either to cover a purchase that
you would’ve otherwise had to pay out of pocket or give you the ability to have an
experience that may otherwise be out of your reach financially.
But before we get to those crazy examples give a very realistic domestic example.
Here’s a flight from JFK in New York to LAX in Los Angeles that is 39,516 points round-trip
according to American Express that flight usually cost $432 and again if we use our
quick rule and tack on two zeros to 432 that means the most we can afford to pay to get
one cent per point would be 3200 points in this case the points are less than that which
means we’re actually getting more than one cent per point.
So if we take 432 and divide that by the 39,516 points that this flight costs, you can see
that sure enough we are getting a redemption value of nearly 1.1 cents per point which
is a far cry from the insane redemption value that you can get with international first
class flights but again in this case we are replacing a realistic flight that you would
probably pay out of pocket for me anyways and I have that’s where the real benefit
is.
But what about the transfer partners?
Well this is where things can get really confusing but let’s just keep it simple.
If we went over to American Airlines and search for that exact same flight that we just looked
at which is JFK to LAX leaving at 6 AM you can see that exact same flight available for
just 30,000 points.
For those of you that are really observant I know that you cannot directly transfer American
Express points to American Airlines but American Airlines is part of the OneWorld alliance
so you can book their flight through several other transfer partners.
If that made no sense to you at all don’t worry about it.
But my point is if you booked this flight through American Express it’s almost 40,000
points but if you book it directly through American Airlines it’s just 30,000 points
which if we do the same math from earlier, that’s now a redemption value of over 1.4
cents per point and again that is just scratching the surface when it comes to transfer partners.
Now international flights is where things can get very confusing because there are surcharges
and gas fees in specific countries, certain airlines have a hub at specific airports,
some airlines might operate a flight under a different brand or operate a plane for a
completely different airline and in general it can really make your head spin.
But if you’re willing to cut through the weeds and do the research, it is absolutely
true that you can find first class flights that would otherwise cost thousands and thousands
of dollars for completely free.
In fact I’m literally recording this video from Europe right now and I flew here in Delta
One first class for completely free using just 50,000 points and only paid like seven
dollars in taxes.
But it took me several hours of mind numbing research through Delta and several other airlines
in order to find that flight and I largely had to be flexible with my dates in order
to get the best redemption value possible.
But it is well worth it in my opinion because the round-trip ticket that brought me to Europe
and will take me home first class would usually cost $7000 but only cost me 100,000 points
round-trip.
So if we take $7000 divided by 100,000 points that means that I earned a redemption value
of seven cents per point.
Plus if you account for the fact that most the points I earn are from four points per
dollar on dining with my American Express gold card, the math actually start to get
pretty ridiculous.
Since I’m earning four points per dollar spent on that category and I redeemed those
points for seven cents per points, that means that I’m getting the equivalent of $.28
per dollar spent which essentially means 28% cashback.
I realize that that isn’t exactly a fair comparison because again if I would’ve just
receive that much in cash back I would not go and spend that on a $7000 first class plane
ticket.
But it did allow me and my wife to have an experience that we would’ve otherwise not
been able to afford.
Now we could spend hours and hours going through all of the little nuances that come with transferring
points for international flights but let me just warn you in general that this sort of
thing is going to take time and patience.
A lot of patience.
Even if you just use what you learned in this video to book domestic flights and cover plane
tickets that you would’ve otherwise had to pay out of pocket, you’re still coming
out ahead because even at once and we’re points, if you’re getting four points per
dollar on dining with a gold card like I just explained, it’s still equivalent of 4% cashback
which is really great plus as weird as it sounds, it’s just exciting for me personally
to search for those flights and find a great deal and again I have an experience that I
would’ve otherwise never been able to afford.
I know it’s a lot and I know it can be overwhelming but I promise it is not nearly as complicated
as it may seem and when it comes down to it, you earn points with your every day spending,
you transfer those points to a transfer partner, and you book high value flights with those
points to maximize their value and that’s pretty much it.
I’d love to know what you think of this topic down in the comment section below and
let us all know what flights you’ve been able to book with points as well.
Be sure to check out some of my favorite financial tools using the links down below the like
button and of course thank you so much for your time I really do appreciate it so much
take it easy and I’ll see you the next one!