The Basics of Points and Miles

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After being introduced to travel hacking and making sure it's a good fit for you, let's start learning the real details of points and miles.

If you're here, chances are you:

  1. Want to go on a Disney trip,

  2. Have heard travelers talk about “points” or “miles,” and

  3. Need to understand how these points and miles work.

Maybe you even have some points, but you’re like our parents and have just converted them into piles of Barnes & Noble gift cards.

Our goal for this post is to provide a very basic introduction to points and miles. Primarily, we're concerned with what they are, how to get them, and how to use them for maximum value.

Part 1. what are “points,” and how are they different from “miles”?

Let's start with points.

Points are assets or credits given to you—a user or member—in exchange for using a product, brand, or service, sometimes as part of a loyalty program, that are redeemable for future goods or services.

Confused? Here are three basic examples outside the world of credit cards.

Stars from Starbucks Rewards are Points

If you register with Starbucks Rewards, Starbucks will give you two “Stars” for each $1 you spend at Starbucks. Once you have 125 stars, you can redeem them for a free drink or food item. “Stars” are Starbucks points. 

Expedia Gives You Expedia+ Points When You Book Travel Through Them

When you book travel through Expedia, you earn Expedia+ Points based on how much you spend and the type of expense. You can then redeem those points toward future expenses on Expedia.

MileagePlus Miles from United Are Points

Whenever you fly on United, you earn "miles" in their MileagePlus program based on how much your ticket cost (and a few other factors). When you have enough miles, you can trade them in for a free flight (with a small amount of taxes/fees).

Miles are simply points issued by airlines. Some airlines don’t use the terminology “miles.” British Airways, for example, calls their points “Avios.” We say "points and miles" a lot just because people may be more familiar with one term or the other.

Part 2. The Types of Credit card Points

Pretty much every credit card earns some sort of points these days. Usually, you spend $1 and you earn 1 point or multiple points for spending in a special category. Not all credit card points are the same, though. Here's a quick overview of the three types of points you'll get from using your credit cards.

1. Cash back

Cash back is the simplest type of credit card point and often suggested as a good place for beginners to start. With a cash back card, a point is usually just worth 1 cent, and as you accrue them you convert them either to (1) a statement credit to help you pay your credit card bill or (2) a gift card, sometimes with a bonus (so $20 cash back gets a $25 gift card). Some cash back cards allow you to spend the cash directly, avoiding requesting a statement credit—you can spend Discover cash back directly at Amazon, for example.

There are several cards that grant 2% cash back on all purchases. The Citi Double Cash card is one and the Fidelity Rewards Visa Signature card is another. We don't want to go too deep into this, but make sure you keep this in the back of your mind: at a bare minimum you should always be getting at least 2% back on your spending.

Related to cash back cards are cards like the Chase Disney Rewards Visa credit card. Technically that card earns "Disney Rewards Dollars" that come in the form of a "Disney Redemption Card." That's just a fancy way of saying it earns cash back that can only be used at Disney.

2. Co-branded Card Partner Points

Some credit card companies partner with other companies—usually airlines or hotels—to issue you points in the form of their partner’s currency. For example, when you use the Chase United MileagePlus Explorer card, you earn United MileagePlus miles. The Marriott Rewards Premier Visa card is issued by Chase but earns Marriott rewards points, redeemable for nights at Marriott hotels. Typically, these points appear directly in your loyalty program account when your statement closes.

Unlike cash back cards, these points usually don't have a fixed cash value. Airlines usually use a distance-based or region-based chart for determining the number of points required. United charges 45,000 points one way from the continental U.S. to Hawaii or 22,500 points when you can find "saver" rates. We recently used 22,500 points to book a $1,200 nonstop flight to Hawaii from Chicago, we would have needed the same number of points for one-stop flights that cost around $500.

There are exceptions, sort of. Southwest Airlines, for example, ties the number of points required in part to the cost of the flight. They aren't perfectly correlated, but more expensive flights on Southwest usually require more points.

3. Flexible / Transferrable Points

These are the best kind of points. There are four main groups of credit cards that earn points in this category:

(*Starwood cards technically earn hotel points, they're just transferrable at great rates to many partners, so they are typically discussed with these other cards.)

When you earn points by using these cards, you have a variety of ways to use them. Usually your options include the following:

  1. Cash back or statement credit. Not all the cards offer this, but it will never be the best use of your points anyways.

  2. Booking travel. You can usually use your points directly to pay for travel. This is occasionally the best use of your points.

  3. Transferring to partners. For all four of these programs, you can transfer the points to partners and then use them for award travel, this is where most value is to be found.

Part 3. Credit Card Points and Partner Transfers

We're not going to dive into the full process for every card, but we wanted to give you an outline so you know briefly what to expect down the road. Part 5 of this post, covering how to use points, contains a specific example for how transfers give you the most value from your points.

Point Transfers Are Not Always 1-to-1

Even if a hotel room costs 9,000 points and you have 9,000 points sitting with a transfer partner, you might not have enough points. Sometimes points transfer to partners at a ratio that isn't 1:1. So you might need 27,000 points to get 9,000 at the partner. Or you might only need 3,000! It just depends on the programs involved.

Point Transfers Can Take Time

While some transfers are "instant," taking only a few minutes, some take up to 24 hours or even 3 to 5 business days. You initiate these transfers through the credit card's website, and then wait for them to make it into your partner account.

Different Credit Card Programs Have Different Partners

You can transfer Chase Ultimate Rewards points to United MileagePlus, but you can't transfer Citi ThankYou points to United, and you can't transfer either to American Airlines. Some airlines/hotels are transfer partners of only one major program, others are partners of all four.

Point Transfers Are a One-Way Street

There are limited exceptions to this, but you generally can't transfer points into the four flexible programs. For example, United MileagePlus is a transfer partner of Chase Ultimate Rewards. You can transfer points from Chase to United, but not from United to Chase. You can't even "undo" transfers. Once you send the points, they're with that partner.

You Need To Find "Award Availability"

Just because domestic round-trip flights on United usually cost 25,000 miles does not mean you will be able to book any flight with 25,000 miles. United has to have availability for the flight you're looking at. Since availability can come and go, you can see how the time to transfer can be a real nuisance.

You'll Prefer "Saver Availability"

Most airline loyalty programs have two rates for a given seat: regular and saver. Saver is typically about 50% the cost of the regular booking. The actual name of this discount level varies (United Saver, AAdvantage MileSAAver, Etihad Guest), as does the amount of the discount. So on United, Saver level is usually 50% of the regular level. On Etihad, it's more like 10%:

Etihad Guest First (saver) seats cost 272,466 miles on this booking for two people, while their standard "OpenSeat" space costs 2,161,076 miles!

Etihad Guest First (saver) seats cost 272,466 miles on this booking for two people, while their standard "OpenSeat" space costs 2,161,076 miles!

You Don't Always Transfer to Airline X to Fly Airline X

Most airlines have partners or are part of an "alliance" that allows them to sort of share flights. You'll see this when you book a flight on United Airlines but you see an Air Canada plane when you get to the airport. In the world of points and miles, this matters because you can sometimes book flights on Airline X using miles from partner Airline Y. This is usually useful if it's easier to get miles for Airline Y or if Airline Y charges fewer points for the flight.

Remember that example booking from Etihad above that required at least 272,466 miles for two people? It would cost only 200,000 miles if we booked through American Airlines's AAdvantage program.

Keep In Mind Taxes/Fees/Surcharges

Award bookings are never (or at least almost never) free. They usually come with at least a small amount of taxes or other fees. On a recent United booking for nonstop to Hawaii, we paid 22,500 + $5.60 per person. On some international business class flights, we paid about $200 per person. But these charges can go into the thousands of dollars.

Besides knowing which airlines and routes have high surcharges, there's no good way to avoid them. One rule is to avoid flights from or passing through London, which has high surcharges. Besides that, you'll just want to compare your different options and see what comes up.

Given all that, Is This Really Worth It?

Yes! Especially for Disney travelers. By already having an achievable goal in mind, you've set yourself up for success. There are plenty of options for visiting Disney on points, and availability is rarely a problem for many of them. By the way, if you're at all considering an international Disney trip (which you should), planning to use points is especially, especially worth it.

Part 4. How Do I Earn The Most Points?

We've touched on this briefly above: you get points by using a product (like Expedia, Starbucks, or United) or by spending money on your credit cards. But there are three big things we haven't shared with you yet.

The Best Way to Earn Points Is With Signup Bonuses

We talk more about signup bonuses in our next starter post, but here's a quick rundown of how they work.

  1. A bank offers, for example, 50,000 bonus points for spending $4,000 in your first three months of getting the card

  2. You apply and get approved for the card

  3. You spend $4,000 in your first three months

  4. You get 4,000 points (at least) for spending and 50,000 points for the bonus, leaving you with 54,000 points

Obviously, signup bonuses are HUGE for traveling on points. Instead of earning 4,000 points for spending $4,000, you're earning 54,000 points!

You Can Usually Earn More Than 1 Point Per Dollar

Many cards have a 1-point-per-dollar-spent baseline with special categories that earn more than 1 point per dollar. These can be 2X, 3X, or even 5X points per dollar spent in special categories. For example, the Chase Sapphire Reserve earns 3X Ultimate Rewards points per dollar spent on travel or dining. The Chase Freedom has categories that change every three months where you can earn 5X Ultimate Rewards per dollar spent.

You Can Earn Multiple Points On The Same Transaction

Credit cards allow you the opportunity to “double-dip" or “triple-dip” to earn points. For example, if you buy an American Airlines flight on on Expedia with your Chase Sapphire Reserve, you’ll earn:

  1. AAdvantage miles from American for flying on their airline

  2. Expedia+ points for purchasing through Expedia

  3. Chase Ultimate Rewards Points for using your Chase Sapphire Reserve

Experts can take this really far. Some crazy examples of this can be found on this 2014 post from the Frequent Miler.

Part 5. How Do I Use These Points?

Here are some examples of how to use some Chase Ultimate Rewards points. For our example, we're going to consider a traveler who has 50,000 Chase Ultimate Rewards points from using her Chase Sapphire Reserve card.

Bad Option: Get $500 as a statement Credit

Chase will let you cash out those 50,000 points as a statement credit. This is an awful option, but it's an easy one. Our traveler would get 1 cent per point using this option.

Okay Option: Save $750 On Travel Expenses

When you book travel through the Chase Ultimate Rewards travel portal, those 50,000 points are worth $750 for a Chase Sapphire Reserve cardholder. You can spend that $750 on most flights, hotels, and cruises. You can spend it all at once or bit by bit. For anyone who ever travels, this is obviously a better value than the $500 statement credit. Our traveler would get 1.5 cents per point using this option.

Best Option: Fly Roundtrip-First Class to Hawaii

By transferring 45,000 points to Chase Ultimate Rewards partner Korean Air Skypass, our traveler can book a round-trip, first class ticket on Korean's partner, Delta, from anywhere in the United States to Hawaii. That ticket usually costs about $2,000, so our traveler gets 4 cents per point using this option.

But What Is really The Best Option For You?

The most value we've gotten out of points was 9 cents per point, with most of our premium, international redemptions coming in at around 5 to 7 cents per point. Generally, the way to get the most value out of points is to fly long-haul, international, first class flights. But this doesn't make sense for all travelers. The value of a given redemption is inherently subjective.

Let's say you had 115,000 Chase Ultimate Rewards points. Those are enough for a saver-level flight in the Singapore Airlines First Class Suites. That flight costs over $7,000, so you're getting roughly 7 cents per point.

Booking travel through the Chase travel portal as a Chase Sapphire Reserve cardholder, those points are worth $1,725. With low-cost airlines like Spirit and Frontier regularly offering sub-$100 roundtrip flights between Chicago and Orlando, we could book 17 round-trip flights to Disney World using those points. In that case, we'd only be getting 1.5 cents per point.

But is the one-way flight in the Singapore Suites really worth more than 17 round-trip flights to Disney World to you? If not, then you should use the points at an "okay" redemption of 1.5 cents per point! (But in thinking about all of this, don't forget that you'd need to pay for 17 trips to Disney World along the way.)

What's Next?

We mentioned in Part 4 that the best way to earn points is through signup bonuses. Now that you've got a basic understanding of points and miles, let's dive deeper into earning big points with signup bonuses.