Types of Points Programs
There are two types of points programs; transferable and co-branded. They both have their pros and cons, and also work together for you to achieve your travel goals.
Co-branded points programs
These are points earned directly with travel providers such as airlines, hotels, Amtrak, etc. These are earned through using credit cards that are ‘co-branded’ with that specific company. For example purposes I’ll use airlines, although this applies to hotel and other cards as well. With the Delta SkyMiles Gold American Express card you earn Delta SkyMiles with every dollar spent for use on Delta Air Lines and their partners.
Pros: In many cases, cards of this type will provide additional benefits such as free checked bags, discounted food on-board, or complimentary Wi-Fi for cardholders.
Cons: The downside to this type of card is two-fold; you can only spend earned points with that specific airline, and you only earn 1 point/mile per dollar on purchases made outside of that airline. If you don’t have enough points in your account for a free ticket those points are useless until you earn more, and doing so can take a while at 1 mile per dollar on everyday spending.
Transferable points programs
Also known as flexible points currencies, these are composed primarily of American Express Membership Rewards, Chase Ultimate Rewards, Citi ThankYou Rewards, and the Starwood Preferred Guest (SPG) program. Instead of earning Delta SkyMiles, you earn Membership Rewards points, which you can turn into SkyMiles. Cards from these issuers in their respective programs earn points that can be transferred to airline and hotel loyalty programs. For example, if you earn 5,000 AMEX Membership Rewards points, you can transfer those 5,000 points at a 1:1 ratio to your Delta Air Lines SkyMiles account. Additionally, most cards allow for a cash-back option in the form of a statement credit. Premium cards from these issuers also offer favorable redemption rates (such as 1.25 cents per point instead of the standard 1 cent per point) when booking travel through their travel booking portal instead of the airline directly or an online travel agency.
Pros: The significant benefit with these cards is that they often have spending categories where bonus points are earned. For example, the Chase Sapphire Preferred card offers double points on travel and dining purchases. The American Express Everyday Preferred card offers triple points at grocery stores and double points at gas stations. Using cards that offer bonus points in categories that you use often for daily spending allows you to rack up points quickly without changing your spending habits.
Cons: The downside to these cards is that they do not offer free checked bags or other airline-specific ancillary benefits.
Both types have their own value and can provide great value together. To continue the Delta example, if you purchase and fly Delta frequently the checked bag benefit will pay for the card’s annual fee by checking a bag four times per year. For everyday spending purchases, a transferable points card can earn multiple points per dollar in non-Delta purchases, which can supplement your Delta balance by transferring those points to your SkyMiles account. However, this strategy is only recommended if you’re flying one particular airline frequently, otherwise you’re paying an annual fee for a co-branded card but only receiving one point per dollar spent and have only one way to spend the points.
Which card should you start with? Let’s continue to Part 2!