Are your unredeemed points killing your game?

I haven't written about this lately, so hopefully my long-time readers will indulge me as I dive back into what I find is one of the most under-appreciated risks of travel hacking: the risk of unredeemed points.

Plenty of attention is paid to devaluation risk, which is what you encounter when it takes you too long to earn the points you need for the trip you want to take, and the amount you earn in anticipation of a redemption ends up not being sufficient. This risk does not concern me in the least. Earning more points is the natural condition of the travel hacker, so who cares if every few years you need to pack on a few tens of thousands of points in order to secure the redemption of your dreams?

No, the real risk faced by travel hackers every day isn't earning too few points — it's earning too many points, and finding them unredeemable or redeemable only at much lower value than the redemption they were earned in anticipation of.

It turns out flying to Munich is very cheap

The occasion for me thinking about this subject is my partner's planned intercontinental family reunion in Germany this year, which I figured was the perfect opportunity to prove the value of all those trips to Walmart: with all the transatlantic Star Alliance traffic, it should be a piece of cake to find some premium cabin award space so we can travel there in style and comfort. Since I've got way more Ultimate Rewards points than I'm comfortable with, a quick transfer to United would yield a high-value redemption and take a weight off my mind.

Unfortunately, flying to Munich is very cheap. We can fly there and back, nonstop, on the day of our choosing for $775. That's handily under the $800 US Bank Flexperks redemption threshold, so I can book a nonstop ticket for $400 in Flexpoints.

Meanwhile, two roundtrip award tickets in Lufthansa's business class would cost 280,000 Mileage Plus miles and $212 in taxes and fees, or $1,506 per ticket valuing Ultimate Rewards points at their cash value of 1 cent each.

$1,106 is a lot of money, and $2,212 is even more money, so I'm not going to pay that much to upgrade us to business class on a couple of 8-10 hour flights.

What do you do when this happens over and over again?

There are two potentially competing forces at work here: the drive to earn the most valuable points possible and the drive to redeem the right points for each individual redemption. I say "potentially" competing because in many — hopefully most — cases you'll find they are not: if you primarily travel to cities with Hyatt locations that meet your needs, you'll almost invariably find that cheaply-earned Ultimate Rewards points transferred to Hyatt are one of the best values available.

For example (just because I like examples), in Seattle a night at the Hyatt at Olive 8 costs 15,000 World of Hyatt points ($3,000 in office supply store spend with a Chase Ink Plus) while the Hilton Seattle may cost 70,000 Honors points ($11,667 in bonused spend on a Surpass American Express).

But what happens when "high-value" redemptions like the Lufthansa business award I described above are ruled out over and over again by far cheaper paid tickets booked using fixed-value currencies like Flexpoints?

I stay at a lot of Hyatt properties, and I book them for friends and family every chance I get, and I still have enough World of Hyatt and Ultimate Rewards points for 10 nights at a Category 7 property, or 64(!) nights at a Category 1 property. Having too many points to redeem doesn't feel as acutely painful as having too few points to redeem, but both situations send the same signal: that my system is out of of balance.

I think you should redeem your points for cash, but you won't (and neither will I)

The funniest thing I see on Twitter and in the miles and points blogosphere is people bragging about their points balances, as if having a high balance was a point of pride, rather than an admission of failure.

To state what should be obvious, the best number of miles and points to have in all your accounts is zero: the perfect calibration of your earning and burning activity would leave all of your accounts empty virtually all the time, with all of your earning activity purposefully directed towards particular planned redemptions.

That's impossible, both because the world isn't so tidy and because humans are blessed with foresight: odd numbers of points accumulate here and there as various promotions are triggered, and points are earned in small amounts in anticipation of large future redemptions. Such is life.

But the necessity of living in the world as it actually confronts us is sometimes converted into the false belief that high balances are good in their own right, because they give you "flexibility" for future redemptions or "insurance" against a particular deal or earning opportunity dying.

Conclusion

I understand that one subset of travel hackers is wealthy people who use miles and points as a kind of stunt to save money on the kinds of luxury vacations they'd still take if the game didn't exist.

Above I compared a business class award flight on Lufthansa to a paid economy class flight on United. However, if your alternative to each redemption were payment in cash, the comparison would look very different: the $775 United flight gets you about two cents per point on a Flexperks redemption, while the $1,506 Lufthansa flight gets you over 4 cents per point (for a ticket that would otherwise cost $6,143). There you'd be comparing a "good," or even "great," Ultimate Rewards redemption against a "standard" Flexperks redemption, and you wouldn't be wasting $1,106, but rather saving $4,637 per ticket!

That is, needless to say, not my perspective.

Foreign airline co-branded credit cards, #8: Conclusions

Reviewing the 7 foreign airline co-branded credit cards issued by US banks that I covered in this series, the cards can be handily arranged into 3 groups:

• Cards worth getting and keeping for manufactured spend;
• Cards worth getting for the signup bonus and cancelling;
• Cards that are probably not worth getting.

Manufactured spend powerhouses

When looking at a card's value for manufacturing spend, it's essential to look at both the earning and redemption rates the card offers. For example, a Marriott Rewards point is more valuable than a Hilton Honors point, but not 6 times more valuable — that makes a dollar spent in a bonus category with the Hilton Honors Surpass American Express more valuable than the same dollar spent with a Marriott Rewards credit card that earns just 1 point per dollar.

Similarly, the two co-branded credit cards in this series that are valuable for ongoing spend are the US Bank AeroMexico Visa cards and the Barclaycard Asiana Visa Signature card. The former earns 3.2 AeroMexico kilometers per dollar spent at gas stations and grocery stores, which can be redeemed on SkyTeam carriers (with fuel surcharges) and the latter earns 2 Asiana miles per dollar spent in the same categories, which can be redeemed on Star Alliance carriers and their non-alliance partners.

It's especially worth noting that the recent increases in Delta redemption rates on SkyTeam partners make it even more likely that redeeming other SkyTeam partner miles, even ones that pass along fuel surcharges, will be more valuable than earning and redeeming Delta SkyMiles.

Valuable signup bonuses

Three of the cards I covered in this series have signup bonuses you might find valuable, depending on your situation:

• The British Airways Visa Signature card earns 100,000 total bonus Avios after spending $20,000 on the card within one year. Those Avios can be extremely valuable if redeemed on US flights without fuel surcharges or on certain off-peak sweet spots.
• The Miles & More World Elite MasterCard offers 50,000 bonus miles after spending $5,000 within 90 days, which can be extremely valuable for domestic first class redemptions, including to Hawaii.
• The "Black" Virgin Atlantic World Elite MasterCard offers 75,000 Flying Club miles after spending $12,000 within 6 months and adding two authorized users. If nothing else, those miles can be moved to Hilton Honors points at a 1:1.5 ratio, earning you 9.4 Honors points per dollar on unbonused spend.

Cards that are worthless, or at least worth less

Finally, the LANPASS Visa Signature Card and SKYPASS Visa Signature Card, both from US Bank, offer minimal signup bonuses and weak earning rates, so even in the case of SKYPASS, where points can be valuable on certain routes, their co-branded credit card is unlikely to be the most efficient way to earn them. However, it's worth being aware of the cards and their potential redemption opportunities in case the signup bonuses on either card are temporarily or permanently increased.

Foreign airline co-branded credit cards issued by American banks, #5: Lufthansa Miles & More by Barclaycard

The Barclaycard Miles & More World Elite MasterCard is today's entry in my analysis of foreign airline co-branded credit cards issued by US banks.

Lufthansa Miles & More by Barclaycard

Barclaycard issues one co-branded credit card that earns Lufthansa Miles & More miles:

• the Miles & More World Elite MasterCard has an $89 annual fee (not waived the first year) and a signup bonus of 20,000 Miles & More miles after your first purchase and 30,000 additional miles after spending $5,000 within 90 days of account opening. It earns one mile per dollar spent everywhere and 2 miles per dollar spent at "integrated airline partners:" Adria Airways, AirDolomiti, Austrian Airlines Group, Brussels Airlines, Croatia Airlines, LOT Polish Airlines, Lufthansa, Lufthansa Regional, Lufthansa Private Jet, Luxair and SWISS. The card also earns an annual Economy Class Companion Ticket, including one after your first purchase with the card, and gives you the option of converting 25,000 award miles into 5,000 status miles each calendar year.

Economy Class Companion Ticket

Unfortunately, unless you're booking at the last minute and have no choice but to fly on Lufthansa, the Economy Class Companion Ticket is unlikely to be of any value at all. That's for two reasons: it can only be redeemed for tickets in Lufthansa's most expensive economy fare classes (H, M, Y, and B), and it requires you to pay all the taxes and fees associated with a paid ticket.

Under most circumstances, the additional cost of booking into a higher fare class will exceed the fare savings provided by the Companion Ticket. However, on last-minute bookings where only H, M, Y, and B fare classes are available, and when Lufthansa is your only option, it's certainly possible that the Companion Ticket could provide quite substantial savings.

Status Miles Conversion

Another benefit of holding the Barclaycard credit card is the ability to convert up to 25,000 award miles into elite-qualifying miles at a 5:1 ratio. There do not seem to me to be any clear advantages to doing so, since the opportunity isn't scalable in order to actually achieve Miles & More elite status, which requires 35,000 elite-qualifying miles. Converted status miles also don't count towards Lufthansa's top-tier HON Circle status.

Earning Miles & More Miles

Besides integrated airline partners the Barclaycard credit card doesn't earn bonus miles for any categories of spend, so unless you're topping up a Miles & More account towards a redemption it's unlikely to be worth putting any purchases on the card after you've triggered the signup bonus.

If you need to top up your account, you'll get a better earning ratio transferring Starpoints in 20,000-Starpoint increments and earning 5,000 bonus Miles & More miles than you will putting additional unbonused spend on their Barclaycard credit card.

Redeeming Miles & More Miles

Lufthansa belongs to the Star Alliance and offers a few popular redemption opportunities:

• domestic first class awards within any one country, including the United States, cost 17,000 miles one-way. If you can find award availability (good luck!) you can redeem the same 17,000 Miles & More miles for United's transcontinental premium service;
• Lufthansa first class awards from Europe for 85,000 miles. Miles & More passes along fuel surcharges on award tickets, but those surcharges are significantly lower on flights from Europe to the United States than in the opposite direction. For flights from Frankfurt to San Francisco, fuel surcharges run about $224, while in the opposite direction they're about $478. The key advantage of booking such flights with Miles & More miles is expanded award available compared to booking with partner miles.

Germany is a rich, populous country and Lufthansa is a big global airline, so as you'd expect there's a fair amount of material out there if you want to research additional routes that offer particularly good values. Drew at Travel is Free has documented some great routes without fuel surcharges, and this apparently-abandoned English-language German blog has some additional and some overlapping suggestions.

Is it worth it?

The current 50,000-mile signup bonus is the highest I've see it go, and after spending $5,000 on the card the resulting 55,000 miles would be enough for 3 one-way domestic first class flights. Another 30,000 miles (25,000 transferred Starpoints) would get you a one-way flight from Europe in Lufthansa first class, with increased access to award seats compared to redemptions of partner award miles.

On the other hand, since Miles & More passes along fuel surcharges, it's a relatively poor currency to accumulate speculatively. Before signing up for this card take a look at some of the best Miles & More redemptions linked to above and see if any of them fit into your near-term travel plans. If not, this is unlikely to be the right card for you.

Perfect storm of signup bonuses

I was writing this post yesterday but my blogging software wasn't behaving, and Mommy Points beat me to the punch! Go read that post, but here's the quick and dirty: there are a number of too-good-to-miss signup bonuses available right now, so if you've been waiting for the right moment for a credit card application cycle, this is the right moment. Here are the cards I would apply for today (no affiliate links here, obviously):

• Bank of America Alaska Airlines Visa Signature, 50,000 miles after $1,000 in spending. Arguably the most valuable traditional airline miles, and inarguably the highest offer ever made for this credit card. This is the time to get it.
• Barclaycard Lufthansa Miles & More World MasterCard, 50,000 miles after $5,000 in spending.
• Chase British Airways Visa Signature, 100,000 miles after $20,000 in spending within the first year. A high spending requirement, but also the highest this offer has ever been. After spending $20,000 on the card, you'll have earned 125,000 Avios, or 6.25 Avios per dollar (the card earns 1.25 Avios per dollar on non-bonused spending).
• Citi Platinum Select / (American Airlines) AAdvantage World MasterCard, 50,000 miles after $3,000 in spending.

These are all best-in-class offers, and it's vanishingly unlikely that they'll all be simultaneously available again in the near future. If you wanted to add an American Express card into the mix I'd probably go for a Starwood Preferred Guest personal or business card, unless you're in the hunt for Delta Platinum or Diamond status, in which case you could apply for a personal or business Delta Platinum American Express. I'm not thrilled with any of the Membership Rewards signup bonuses currently available, unless one of my readers can point to something better than the 25,000 point signup bonus for the Premier Rewards Gold card.