reward points

What Is a Points Program?

Major banks, airlines, and hotel chains often launch a Rewards Program or Loyalty Program to increase customer stickiness, so that when consumers choose between products, they subconsciously favor services within a system they already know. These programs usually use points as the reward currency. For example, airlines may use miles, while hotels may use points. These rewards can often be redeemed for the company’s products, such as award flights or free hotel stays.

As smart consumers, if we take the initiative to understand how points are earned and redeemed, we can often get more value out of the same number of points.

Why We Care About Points Programs

First, the same number of points can deliver much better value when used strategically. For example:

  • We know that 6W ANA (All Nippon Airways) miles can be redeemed for one round-trip ticket between China and the U.S. (with an average value of about $1,200), and MR (AMEX points) can be transferred to ANA. If you transfer 6W MR points to ANA and book that ticket, each MR point is effectively worth 2c (1,200/60,000=$0.02=2 cents).
  • 1W SPG (Starwood Preferred Guest) points can be redeemed for one night at one of its hotels (with an average price of about $200), which means each SPG point is worth 2c ($200/10,000=2c).

Looking at it the other way, if points can be redeemed for strong value, then credit cards that earn those points are obviously worth applying for. For example:

  • The legendary AMEX EDP (click here for a detailed review) earns 4.5 MR per $1 spent on groceries. Using the example above for China–U.S. airfare, if each MR point is worth 2c, then every $1 spent earns you 9c in value (2c*4.5=9c), which is equivalent to a 9% return on spending (9c/$1=9%). That’s basically an automatic 10% discount on groceries—wouldn’t you want that?
  • Meanwhile, the AMEX SPG card earns 1 SPG point per $1 spent on general purchases. Using the hotel example above, that is effectively a 2% rebate on every $1 spent (2c*1=$0.02). In everyday spending, would you really choose a cash back card that only earns 1% instead?

Of course, points require some skill to redeem, unlike cash back cards that give you cash directly in a simple and straightforward way. But that’s exactly where the fun of playing the points and credit card game comes from.

What Types of Points Are There?

Major banks have their own points systems. Some are truly flexible rewards currencies that can be transferred to other programs, while others are “fake” points that can only be redeemed as cash at a 1:1 rate, so it is important to tell them apart. Hotel and airline points are usually more straightforward: points are meant to be redeemed for hotel stays and flights.

Typical points systems generally fall into the following categories:

  • Bank points
    • MR (AMEX Membership Rewards)
    • UR (Chase Ultimate Rewards)
    • TYP (Citi ThankYou Points)
  • Airline points
    • AA (American Airline)
    • UA (United Airline)
    • Ba (British Airline)
    • ANA (All Nippon Airways)
    • AC (Air Canada)
    • ……
  • Hotel points
    • Marriott
    • IHG (InterContinental Hotels Group)
    • HH (Hilton)
    • Hyatt
    • ……

For a more detailed discussion of different points currencies, click here: Brief Summary of Different Points Programs

Points Transfers

Since most airline miles and hotel points are relatively simple, their best use is usually booking flights and hotel stays, so we will not go into detail here. Some special points currencies, however, can be transferred into another program without reducing their overall value. That means you can focus on earning just one type of points, and when you need a specific airline or hotel program, you can transfer your points over at equivalent value and make the booking. This keeps your points from being scattered across too many programs while still giving you the flexibility to book what you need at any time. Flexibility is the core value of transferable points.

Some of the more common transferable points systems are listed below (just a few frequently used transfer partners):

  • MR
    • Airline transfer partners: 17 total; commonly used ones include ANA, AC, and BA (1:1)
    • Hotel transfer partners: 4 total; usually useful when you are just a little short on hotel points and need to top off.
    • Transfer time: many transfers post instantly
  • UR
    • Airline transfer partners: 5 total; commonly used ones include UA and BA (1:1)
    • Hotel transfer partners: 4 total; a commonly used one is Hyatt (1: 1)
    • Transfer time: many transfers post instantly
  • TYP
    • Airline transfer partners: 4 total; a commonly used one is Singapore Airlines
    • Hotel transfer partners: ? total; usually useful when you are just a little short on hotel points and need to top off.
  • SPG
    • Airline transfer partners: commonly used ones include AA and AC
    • Hotel transfer partners: generally not recommended; poor value~
    • Transfer time: most transfers take about a week
    • Transfer bonus: for every 2W points transferred, you get a 5000-point bonus! (amazing card)

How to Earn Points

Airline and hotel points

  • Earn points from hotel stays or flights (see each program’s official website for specific rates)
  • Earn points from spending on co-branded credit cards and from sign-up bonuses (click here: summary of points cards)
  • Use the brand’s online shopping portal (click here: shopping portal and cash back portal basics)
  • Use the brand’s dining rewards program (click here: dining rewards program basics)

Bank points

  • Earn through spending on the corresponding credit cards or through sign-up bonuses (click here: summary of points cards)
  • Use the bank’s online shopping portal (click here: shopping portal and cash back portal basics)

The world of points is huge and complex, involving many banks, hotels, and airlines, so it is not easy to understand it thoroughly. This article is only meant to give everyone a very basic introduction—think of it as a beginner’s guide.