A decent strategy for the Chase IHG Rewards credit cards

I’ve played around with the IHG Rewards program over the years, for example when I dutifully filled out my 94 index cards (and won a Bose home stereo system), but the program isn’t of much interest to me, given that I earn enough Hilton Honors and Ultimate Rewards points to cover the majority of my travel. Earning IHG Rewards points on an ongoing basis just doesn’t make much sense for me.

That being said, everyone’s situation is different, and you might find IHG Rewards to be the best program for your own needs, whether because your company uses them as a preferred travel provider, because you’ve been shut down by American Express, or simply because IHG has the properties you want to stay at in the destinations you want to visit!

If that’s the case, you may want to take a look at the Chase IHG Rewards Premier card.

Reminder: (almost) never buy or transfer IHG Rewards points directly

In addition to being a 1:1 transfer partner of flexible Ultimate Rewards points, you can also buy points with cash for 1 cent each, or slightly less if you click through to Points.com from a cashback portal like TopCashBack, which is currently offering 2% cash back, lowering the cost per point to 0.98 cents.

If you transfer flexible Ultimate Rewards points, of course, you’re paying the equivalent of at least 1.25 cents per point, since that’s the cash value each Ultimate Rewards point could be redeemed for through the travel portal.

Meanwhile, IHG Rewards sells an unlimited number of points year-round for around 0.6 cents each, using the “Points + Cash” workaround. At the first property I checked (Kimpton : RiverPlace Hotel in Portland, OR), IHG was willing to sell me 20,000 points for $115, or 0.58 cents each.

The only time you’re better off buying points outright is during 100% bonus sales, when the price mechanically falls from 1 cent to 0.5 cents per point. Such sales do come along periodically (there was one in December, 2019), but I abhor buying points at all speculatively, so would never recommend buying points you don’t have an immediate plan to redeem.

A good IHG Rewards Premier signup bonus

You can currently sign up for the IHG Rewards Premier card and receive 140,000 points after spending $3,000 within 3 months. From the above, we know that this bonus would otherwise cost between $700 and $812, depending on whether the points would otherwise be bought at 0.5 or 0.58 cents each. Back out the $89 annual fee (not waived the first year) and you get a final value of the signup bonus of $611-$723.

This isn’t the highest signup bonus offered by Chase, but if you have already received, or are otherwise ineligible for, Chase’s more valuable Ultimate Rewards signup bonuses, this is a perfectly respectable value for a signup bonus.

The fourth-night-free benefit may supercharge the value of the signup bonus

Both the IHG Rewards Premier and Traveler (no-annual-fee) cards allow you to receive each 4th night free on an unlimited number of points-only award stays (i.e., excluding stays booked with free night certificates).

It’s worth taking a moment to consider how much more valuable a 4th-night-free benefit is than the 5th-night-free benefit offered by Marriott and Hilton to elite members. First of all, every 5-night award stay still includes a free night, which is to say, the IHG Rewards benefit includes the maximum benefit offered by the Marriott and Hilton programs. Then, in addition, every 4-night award stay also includes a free night. Finally, 4-night stays are substantially more common and more flexible than 5-night stays. At the most basic level, it’s the difference between getting 4 free nights or 5 free nights out of every 20 you stay.

If, and only if, you plan to redeem your signup bonus for stays in 4-night increments, then the value of the bonus therefore rises from 140,000 to 186,667 IHG Rewards points, or $933-$1083 (less the $89 annual fee).

Flipping the numerator and denominator shows that with the card, your breakeven year-round imputed redemption value on 4-night stays falls to 0.44 cents per point (or 0.38 cents per point if purchased during 100% bonus periods).

Product change after the first year

After the first year, the IHG Rewards Premier card doesn’t offer any benefits except an annual free night certificate that can be used at properties costing up to 40,000 points. Since the certificate can’t be used as part of a 4th-night-free points stay, it has a maximum value of $232, if and only if you plan on a one-night stay at a 40,000-point property (and are able to find award availability there). I’ve heard and seen too many horror stories about people scrambling at the last minute to find something — anything! — to do with single-night award certificates to ever recommend paying an annual fee for one.

However, the no-annual-fee IHG Rewards Traveler credit card also offers a 4th-night-free on points stays. Therefore, the ideal strategy would be not to cancel the Premier card, but to request a product change to the free Traveler card, permanently raising the value of your IHG Rewards points by up to 33%.

So, what are IHG Rewards points worth?

I’ve been focused so far on the cost of IHG Rewards points. But of course, it’s possible to pay more for something than it’s worth. The final question when deciding whether to proceed is by far the most important one: what are IHG Rewards points worth (and even more important, what are they worth to you)?

With so many properties closed or offering fire-sale prices on rooms, it’s hard to run even a half-assed scientific test of the redemption value of IHG Rewards points, except to say that they seem to fall in a pretty narrow band between 0.45 and 0.7 cents. Using the values we calculated above, that gives a redemption value of the signup bonus of up to roughly $1300 (if the entire 140,000 point signup bonus is used on 4th-night-free stays at a redemption value of 0.7 cents), or as little as $630 (if the signup bonus is redeemed on stays of 3 or fewer nights at the lower bound of redemption value).

Meanwhile, if you’re able to consistently redeem IHG Rewards points for 0.7 cents or more, consistently buy them for 0.5 cents, and consistently redeem them on four-night point stays, then with the no-annual-fee Traveler card you’ll receive an ongoing discount of about 46% off the relevant stays.

Not great, but not bad for points that you can buy and redeem from the comfort of your own home. If you have more money than time, or if you really hate manufacturing spend, then there are certainly folks out there for whom this deal makes sense.