In the realm of miles and points, there’s a certain obsession with maximizing value, and the thought of redeeming points for mere cents often gets a dismissive reaction. Typically, this is all about travel rewards, especially when it comes to transferring points to partner airlines for premium travel experiences.
However, it seems we sometimes overlook the fact that we’re not exactly the average consumer…
Amex reveals how members can redeem points
A reader named Jack recently sent an email sharing insights from a “Points Pulse: year in review” email from Amex.
Jack mentioned, “I found this part interesting. While those who optimize points are definitely the minority, is it surprising that point transfers don’t even make the top three? I find it hard to believe they’re misleading us, especially with those detailed footnotes. It’s quite shocking that gift cards are number one, but maybe it’s a strategic move to guide people in that direction. It’s impressive that the top three options yield less than 1 cent per point. It also makes me think of Bild, which appeals to customers who are more inclined to transfer their points, often with substantial bonuses.”
Personally, I have a value of around 1.7 cents for Amex Membership Rewards points. This comes from the potential to get significant value when transferring to travel partners and using them for first class or business class experiences.
All three popular redemption options—gift cards, paying with points at checkout, and statement credits—offer a fixed value ranging from 0.6 to 0.7 cents per point.
This is the beauty of credit card economics.
Credit card companies generate revenue in various ways, including interchange fees, annual fees, and financing fees.
Interestingly, transferring Amex points to partner airlines or hotels can actually incur quite a cost. There’s no universal pricing, but it seems card issuers might pay approximately 1.5 cents per point for certain currencies.
This adds an intriguing layer to credit card economics. While major banks are undoubtedly profitable, not every customer generates the same amount of revenue, and many “maximizers” might not be as financially advantageous as they think, given their point redemption choices.
Ultimately, card issuers would naturally prefer redemptions that provide a value of 0.6 cents over options that could potentially cost more than twice that. It’s fascinating—and a bit absurd—that some individuals appear to recover their entire interchange fees (or even more) through rewards, whereas others seem to earn significantly less, maybe even below a third of typical fees.
This showcases how many consumers aren’t utilizing their credit cards to their fullest potential and often choose issuers based on brand reputation. If cash back is your primary goal—something that aligns with these popular redemption methods—there are certainly more profitable cash back cards available that could offer at least a 2% return.
Conclusion
Amex has highlighted the main ways members can use points, which include gift cards, points at checkout, and statement credits. These options provide an average value of 0.6 to 0.7 cents per point, far below what many of us aim for with AmEx points, and a stark contrast to the value of Amex travel rewards.
This serves as a reminder of just how few individuals are optimizing their points, illustrating that most aren’t necessarily savvy about their card selections. If cash back is the goal, there are definitely better options than the 0.6-0.7% return rate.
Were you surprised by the details about Amex points benefits?
