USA Today published an article today entitled “Travel rewards credit cards. Which pay best?” The article uses analysis by nextadvisor.com to rank travel credit cards. The rankings are based on how much flight or hotel “value” you can get out of $100 worth of credit card spend. They based it on the following:
To cut through the fog of miles and points, as well as flight and hotel room availability, NextAdvisor sought to use the cards to book airline tickets and hotel stays on the same dates in the summer and fall for its analysis.
It would be nice if they expanded on what kind of a search they did, because it might give a bit of context. I think it goes without saying, though, that searching a couple of dates across summer and fall without considering the most efficient way to redeem those points isn’t an accurate basis on which to judge the value of points. But my bigger issue is that they seem to be comparing apples and oranges. For some cards they’re using the pay with points option, whereby you can redeem your points towards the revenue cost of a ticket, while for other cards they’re actually redeeming the points for award stays/flights (at least that’s the only way I can rationalize their numbers).
The other issue I have is that they’re judging how much travel value you can get out of $100 worth of credit card spend without considering in which categories that spend occurs. This is why I’d rather compare the value of points across programs on a 1:1 basis, as opposed to comparing them based on how much you spend. When you set a value to each point you can work the math for yourself and figure out what kind of a “return” you’d get based on the categories you spend the most in (then again, I can see that might be a bit detailed for such a piece).
Their top pick is the Capital One Venture Card, which earns two points per dollar spent. Those are points that can be redeemed for one cent each towards travel. However, the Chase Sapphire Preferred card offers double points on dining and travel plus a 7% annual points dividend, while the American Express Premier Rewards Gold card offers triple points on airfare and double points on gas and groceries. This analysis suggests you’re never spending money in a category which earns a bonus.
So when we look at their valuation, the Capital One Venture Card is at the top of the list with $2 of value per $100 spent, while the Chase Sapphire Preferred card is close to the bottom with only $1.05 of value per $100 spent. How they arrive at $1.05 is beyond me, since each Ultimate Rewards point can be redeemed for 1.25 cents towards travel (meaning a minimum of $1.25 per $100 spent). So at the very least that’s $1.34 per point towards travel (with the annual points dividend), and that doesn’t factor in double points for dining and travel. It also doesn’t factor in that using Ultimate Rewards points as cash towards travel is far from the best use of them, given their excellent transfer partners.
The funniest thing has to be that the United Explorer card is near the top of the list, with $1.94 of travel value for every $100 spent. Aren’t we forgetting that Ultimate Rewards points can be transferred 1:1 to United, not to mention that the card accrues more points per dollar spent than the United Explorer card?
Lastly (because I could go on and on), why aren’t any Membership Rewards branded credit cards on the list, in particular the Premier Rewards Gold card, which is probably the single most rewarding travel card if you spend in their bonus categories.
Anyway, as usual the lesson to be learned is that points valuations are subjective. The amount of “value” you get per point varies not only based on what you redeem points for, but how much you value those redemptions at. For example, when redeeming 120,000 miles for a first class ticket that would sell for $18,000, are you really getting a value of 15 cents per mile? Some would argue yes, while I’d argue the value is only equal to what you’d be willing to pay for the product. I’d realistically pay maybe $2,400 for first class, so I’d say two cents per mile is a much more realistic valuation for such a redemption.
If you do want to learn about what are no doubt the three best travel credit cards, see here (and in the interest of full disclosure I do get a referral bonus if you apply through one of the links below, which I’m of course very appreciative of):
- Starwood Preferred Guest American Express Card Application / Starwood Preferred Guest American Express Card Benefits
- American Express Premier Rewards Gold Card Application / American Express Premier Rewards Gold Card Benefits