Blending earning and redemption rates

When an affiliate blogger is trying to sell you a credit card that allows you to redeem bank points against a travel purchase, they sometimes pull this fairly ingenious, if transparent, sleight of hand:

• When you earn airline miles for a purchase, then redeem those miles for travel, the value you get per dollar spent depends on the value you get per airline mile.
• When you earn bank points and redeem them against a paid flight purchase, you don't just get the value of your bank points, you also get the value of any airline miles earned for your paid flight.
• Therefore you should value a dollar spent with, for example, a BankAmericard Travel Rewards card not as the 1.5 cents in travel you get, but as 1.5 cents plus the airline miles those 1.5 cents in airfare will earn.

Did you catch the switch? All the work here is being done by the value of a dollar, a value which the blogger then assigns to whichever credit card has the highest signup bonus this week.

I thought of this yesterday because I'm in the process of booking a couple of spring and summer trips, and found myself in a somewhat related situation.

A Southwest Business Select fare buys a lot of Wanna Get Away fare

When I was booking my Southwest ticket to Montego Bay using US Bank Flexpoints, I booked a Business Select fare since Wanna Get Away fares weren't available and the difference in cost between Business Select and Anytime didn't move my fare into a higher Flexperks redemption band.

This creates the somewhat interesting situation wherein I redeemed 50,000 Flexpoints, worth $500 in cash, for a ticket worth $953.61, and earned 9,336 Rapid Rewards points, worth roughly $93 in Ultimate Rewards points I wouldn't have to transfer to Southwest in the future.

That future turned out to be yesterday, when I booked a ticket to Las Vegas for dates when Wanna Get Away fares are available. Since my ticket cost about 16,000 Rapid Rewards points, I only had to transfer 7,000 Ultimate Rewards points, worth $70, to Southwest to buy my ticket.

Now, it's worth saying that actual Southwest Airlines enthusiasts don't run into this situation: they book Wanna Get Away fares on every flight they're even remotely considering taking as soon as the schedule opens up, knowing they can cancel all their unwanted flights up to 10 minutes before departure.

But since I'm not a Southwest enthusiast, I was pleasantly surprised to see my best, cheapest choice for one flight earn over half the cost of my next flight on Southwest, which was also my best, cheapest option.

My first Delta Pay with Miles redemption

As long-time readers know, I earn 1.4 miles per dollar spent on my Platinum Delta SkyMiles American Express card by spending $50,000 each calendar year (or sometimes slightly more for technical reasons).

In order to break even against a 2.105% cash back credit card, my overall objective is to get about 1.5 cents per SkyMile on my award redemptions. If I can break even on my spend in that way, then I'll end up paying a $195 annual fee for 20,000 Medallion Qualification Miles and a domestic economy companion ticket.

Meanwhile, Delta-operated flights have a kind of "floor" on redemptions of 1 cent per SkyMile, since you can use Delta's Pay with Miles feature to reduce the price of revenue tickets by that amount: 10,000 SkyMiles reduces the cost of your ticket by $100, for example.

With all that said, today I made two Delta SkyMiles redemptions, both below my target threshold of 1.5 cents each!

I needed to book two one-way tickets, with a retail price of $362.80 and a SkyMiles award ticket price of 32,500 SkyMiles and $5.60 in fees. That produces a redemption rate of 1.1 cents per SkyMile for an award ticket, or just 1.54% cash back for purchases with my American Express card. Since I had the SkyMiles in my account, and I know my miles are worth nothing until they're redeemed, I booked my partner's ticket that way.

For my own ticket, I used the Pay with Miles option to redeem 35,000 SkyMiles against $350 of the fare, and pay $12.80 in cash for the remainder, getting exactly 1 cent per SkyMile in value. However, since Pay with Miles tickets now earn Medallion Qualification Miles, I'll also earn 2,663 Medallion Qualification Miles for the ticket. Compared to the award ticket redemption I booked for my partner, I'm paying 2,500 SkyMiles and $7.20 for 2,663 Medallion Qualification Miles.

From a pure imputed redemption value perspective, these two redemptions together leave me with a shortfall of $305.30, getting just $707.20 in cash value compared to the $1,012.50 I needed to break even on the prorated amount of spend (67,500 out of 70,000 SkyMiles).

What do these redemptions have in common?

I connected these redemptions in my mind because I happened to be making both of them on the same day. But they also both illustrate that, for me, there's no such thing as the perfect redemption: there's only the perfect redemption for the moment.

Instead of refusing to fly Southwest unless there were Wanna Get Away fares available, I redeemed fixed value points for the flights I actually wanted to take, and earned a boatload of Rapid Rewards points towards a future redemption. On the other hand, instead of redeeming SkyMiles at a low valuation, I redeemed them at an even lower valuation in order to accumulate a few thousand more Medallion Qualification Miles.

Finally, what all these redemptions have in common is that they let me pay as little as possible for the trips I want to take. And that, for me, is what travel hacking will always be about.

Conclusion

While the affiliate blogger version of this phenomenon is a barely-concealed attempt to sell credit cards, there's another element that rings perfectly true: earning a combination of fixed-value points, flexible points, and brand-specific currencies may give you the opportunity to leverage currencies against each other.

On the other hand, such a combination may cause you to orphan points in multiple programs without every getting sufficient value from any of them.