Having a good credit score and not taking out a credit card that offers great rewards is a huge waste. Believe it or not, it’s possible to take advantage of a good credit score to milk free vacations, first class flights, and free nights at all-inclusive resorts. This is called credit card churning.
Some credit cards offer points, whereas others offer miles. Before you start applying for new credit cards to earn travel rewards, it’s important to know the difference. Which one gets you the most bang for your buck?
Figuring this out will help you develop a credit card churning strategy. As with most things related to personal finance, it depends. There is no hard and fast rule, but here’s some information to help you decide whether points or miles would work best for you.
Airline Specific Miles
These are miles you accrue with credit cards that are tied to a specific airline. The miles you earn can only be used on that airline and their partner airlines. Some airlines, such as JetBlue and Southwest, use a points system rather than miles, but it works the same. This is also the case with hotel specific points and even gas station rewards programs.
It’s important to note that having 25,000 miles saved up does not mean you get to fly 25,000 miles for free. It, in theory, means that you have flown 25,000 miles. However, due to bonuses and credit card rewards, you can easy accrue 25,000 miles without flying that much.
Airline specific miles are valued differently by each airline, but almost all airline miles are valued at at least 1 cent. Many airlines have miles that are worth closer to 1.5 or even 2 cents.
To see how much an airline’s miles are worth, you’ll need to look up their awards chart. That will explain how many miles you need for a given flight, helping you figure out whether or not the airline’s miles are a good deal.
As of right now, some of the most valuable airline miles include Alaska, Amtrak, Virgin America, and Avianca.
Pros: Airline specific miles can be useful to accumulate if you consistently fly on the same airline. Focusing on one airline will help you pool your rewards toward that airline and you’ll also get extra perks like free checked bags and upgrades.
Cons: Airlines are consistently devaluing their miles each year, with many airlines offering miles that are barely valued 1 cent each. This is especially true of major airlines. Airline specific miles are also less flexible and require you to book rewards with one specific airline and sometimes their partners.
Bank Specific Points
Many banks issue credit cards that offer travel rewards in the form of points that can be applied to hotel stays or airline tickets. They don’t necessarily have to be spent on a specific airline, but many of these banks have specific travel portals where you book your stay.
Bank specific points, in this case, have a fixed value that can be applied to any airline. Take the popular Capital One Venture card for example. Their points are fixed at a valuation of one cent each, so if you go to use their booking portal and you have 30,000 points, you can use them to purchase a $300 flight.
In this example, bank specific points aren’t quite as valuable as airline specific miles. If you have 30,000 miles, you can purchase a round trip domestic flight on most airlines (and have money leftover). But if you have 30,000 Capital One points, you’re going to have trouble finding a $300 round trip flight that’ll take you across the country.
However, points are more flexible because they can be redeemed for other methods of travel. Award travel is also often not available, and with points, you don’t have to rely on the availability of a specific airline’s award calendar.
Pros: You have more flexibility because you can book different modes of travel with bank specific points (rental car, cruise), and you don’t have to rely on award availability. Also, if you book a flight with bank specific points, you’ll get airline miles for that flight.
Cons: Bank specific points are often not valued as highly as airline miles. They are also tied to your credit card account, so many banks will not let you keep the points if you close your card.
Convertible Points
Convertible points are not affiliated with a specific airline, hotel, or booking portal, and instead come from the bank and can be transferred across a range of programs. You can convert your points into Delta SkyMiles or Hilton Points depending on your needs, for example.
Many of the most coveted rewards programs in the churning world use convertible points, including the Chase Ultimate Rewards, the Starwood Preferred Guest points, Citi Thank You points, and AmEx membership awards. All of these programs have points that are worth near or even more than 2 cents each.
While convertible points may be the most flexible, they can’t always be transferred everywhere. Some of these rewards programs only allow you to transfer points to certain airlines and hotel chains. You have to work with the partners of the rewards program you’re using.
Pros: Convertible points, in general, are the most flexible rewards system. They can be transferred to a large list of partners without losing any value. Also, many of the most high value rewards systems use convertible points programs.
Cons: They can’t be transferred everywhere. If you have a specific hotel chain or airline you travel with, make sure that the rewards program you’re interested in partners with them. Because these points are also tied to a credit card account, you will likely lose them if you close your credit card.
Ultimately, every rewards program is different. Points and miles have their benefits and disadvantages. Choosing one depends on both your spending and travel habits. It’s often a good idea to focus on accruing a balance of different points and miles, giving you more flexibility when it comes to booking award travel.
