Signing-up for credit cards through partner links earns us a commission. Here’s our full Advertising Policy.
Update: One or more card offers in this post are no longer available. Check our Hot Deals for the latest offers.
Thanks to everyone who commented on Anonymous Reader’s (AR) dilemma on where to transfer 2 million American Express Membership Reward (MR) points. As usual the responses were extremely thoughtful and insightful, so thanks for helping AR!
The good news is that AR has 2 million MR points which can be cashed out for $20,000 in gift cards through American Express. This would be a terrible use of 2 million MR points and since AR reads Million Mile Secrets, I’m sure he or she agrees!
But $20,000 establishes the bare minimum worth of 2 million Membership Reward points.
The bad news is that, unless AR uses 2 million MR points in the next 2 to 3 years, the MR points will devalue as hotel and air partners increase the redemption rates on their hotels and flights.
Here are my thoughts on AR’s questions:
What is the best way to transfer Membership Reward points into American Airlines miles?
Unfortunately, there is no best way to transfer Membership Reward points into American Airlines (AA).
That’s because American Airlines is not a partner airline for MR transfers, so we have to transfer MR points to another partner and then transfer miles or points from that partner to AA.
The best way to get AA miles is to transfer MR points to Starwood Preferred Guest (SPG) points at a very unfavorable rate of 3: 1, and then from SPG to AA at 1:1 ratio
Using this method, 60 MR points would transfer to 25 AA miles (including the 25% SPG transfer bonus for transfers in multiples of 20,000 points), or 2 million MR points would transfer to 831,667 AA miles.
AR could also transfer MR points to Hilton HHonors and from Hilton to AA, but the transfer rate is not as good as the transfer to SPG.
What is the best transfer option if AR wants to get lifetime elite status on an airline?
Currently, AA is the best choice to get lifetime elite status, because ALL miles count towards lifetime gold or silver elite status on airlines.
Also, AR is a lifetime gold elite member on AA, and is therefore closer to getting mid-tier lifetime platinum status with AA than with any other airline.
Does it make sense to transfer AR’s Membership Reward points to American Airlines (converting the points first to Starwood points at a 67% discount and then to American Airlines) if it will give AR lifetime Platinum status with American Airlines?
Let’s look at the benefits and see what is best for AR.
VALUE OF AA LIFETIME PLATINUM STATUS
Let’s assume that AR and AR’s partner will fly a total of 50,000 miles a year on paid coach tickets for 20 years and the platinum bonus is 100% miles.
I assumed that AR and AR’s partner would take 1 flight to Asia (~15,000 miles), 1 flight to Europe (~8,000 miles) and 1 domestic US flight (~2,000 miles).
These calculations are not intended to be used as definitive values, but as a starting point for calculations, which will vary from person to person.
1. Value of 100% Flight Bonus
Since AR is already getting a 25% flight bonus as a lifetime gold elite, AR will earn an extra 75% flight bonus as a lifetime platinum (100% lifetime platinum bonus less AR’s existing 25% lifetime gold bonus) on most paid tickets with the oneworld alliance.
So together, AR and AR’s partner will earn 37,500 extra miles (50,000 X 75%) a year by having lifetime platinum status. This is worth $375 per year, if AR values AA miles at 1 cent per mile.
Over 20 years (assuming no change in AR’s travel habits or the platinum flight bonus, and ignoring the time value of money or redemption chart inflation), AR will have got $375 X 20 or $7,500 worth of value from the platinum 100% flight bonus on paid flights.
Now of course, over the next 20 years, AR’s travel habits, platinum bonus, and the value of the flight bonus will change, so feel free to make adjustments in the value as needed.
2. Four System Wide Upgrades (SWUs)
AR will also get 4 SWUs on crossing the 2 million mile mark. If we value each SWU at $500 each ($500 is my value, but you can value them differently), 4 SWUs would be worth $2,000.
3. Free bags, lounge access, and other perks
As NYBanker pointed out in the comments, lifetime platinum on AA would give AR oneworld sapphire status, which would give AR access to oneworld lounges, even when flying in coach.
AR will also be able to check bags for free and get a few other perks.
If AR conservatively values these perks at $150 per year, then the value over 20 years would be $150 X 20 or $3,000 (ignoring the time value of money and possible changes to perks)
Total Value of Lifetime Platinum
The total value of lifetime platinum status is $12,500 ($7,500 for the 100% flight bonus + $2,000 for the 4 SWUs + $3,000 for the other perks).
Let’s round this down to $10,000 since we didn’t take into account the time value of money, increases in airline redemption rates, and dilution of perks (totally arbitary, I know!)
What to Do?
We established earlier that the lowest possible value of MR points is 1 cent per point, when redeemed for gift cards.
If AR values lifetime platinum status at $10,000 over the next 20 years, and each MR point is worth – at the very least – 1 cent per point, AR should be willing to part with no more than 1 million (1,000,000 X 0.01 = 10,000) MR points to get AA lifetime status.
This is how I would begin to evaluate the value of lifetime platinum status and remind everyone reading that the value for YOU will be MUCH different since you will place a different value on MR points, AA miles, and the value of lifetime platinum status.
Update: Reader BO points out that I have not considered the value of AA miles in the transfer. I did not consider the value of AA miles, but as I mention above, every one will have a different value off AA miles, so be sure to consider the value of the AA miles as well.
On the other hand, if AR values MR points at 2 cents per point, then lifetime platinum status would be worth no more than 500,000 MR points (500,000 X 0.2 = 10,000).
However, if AR wants to use MR points for award travel and reduce the cash outlay of retirement travel, he/she should consider not transferring to AA, but to AMEX MR airline partners instead and redeeming for coach or business class flights.
Where should AR transfer his/her Membership Reward points to get the most value?
Jiomgotkp writes that AR should transfer points to Continental (CO) since British Airways charges high surcharges and taxes and Delta (part of Skyteam alliance) has a poor selection of airlines.
Megan says that Delta partners KLM and Kenya Airways fly to Africa so Delta miles is a good option.
FPJ says to take advantage of the transfer bonus
And NYBanker says that AR should transfer to both Delta and BA and take advantage of the 50% transfer bonus which ends on July 31, 2011.
I agree with them all!
Personally, I would never want all my miles to be concentrated in just one frequent flyer program.
That’s because I value the flexibility of being able to redeem across multiple alliances since it is easier to piece together award tickets when you can fly on different alliances.
For example, I could fly to London using Continental miles, and fly back by redeeming British Airways miles.
And by diversifying your miles, you are protected from a drastic devaluation in your program’s redemption rates.
For example, if Delta SkyPesos became Delta SkyZimbabweDollars, AR would be lucky to get 1 domestic flight for 2 million miles.
But AR would have other options, if AR had stashed miles in other airline programs as well.
My suggestion, if AR is looking at saving the cash outlay of retirement travel, would be to transfer MR points to Continental (CO), British Airways (BA) , Delta (DL), and to All Nippon Airways (ANA).
Transferring MR points to CO is as good as transferring your miles to United, since United and Continental are merging.
United’s award chart is very reasonable, and since the redemption rates were tweaked in June, there is a lower chance of a drastic change in the redemption rates for award travel in the next few years.
The new United will also have a hub in Newark, so AR may be able to use United miles for domestic travel as well as for international travel.
In addition, Star Alliance has great availability to Asia and Europe via their partner airlines Lufthansa, Swiss, Thai, ANA, Asiana and of course United, US Air, and Continental.
CO/UA also doesn’t charge fuel surcharges and makes booking award tickets relatively easy.
AR may want to transfer MR points to BA and redeem them on AA for domestic US travel or for travel to South America or Europe.
AR could also redeem BA miles on LAN (a Chile based airline) to South America or redeem BA miles for Cathay Pacific flights to East Asia where BA does not charge high surcharges.
LAN and Cathay Pacific both have flights from JFK, so AR may not have to worry about positioning flights.
Redeeming BA miles for BA flights to Europe is a also good value in business class for 100K miles, but the fuel surcharges are expensive.
AR should not redeem BA miles for coach travel on BA because the high surcharges will reduce the value of the award.
BA miles are terrible for travel to India, Africa, and Australia because of the high redemption rates and killer surcharges.
But the current 50% bonus may make it attractive for AR to transfer a few MR points to BA.
I would not transfer all my MR points to BA, because I suspect that the BA award redemption rates will go up soon because of all the miles Chase has brought into circulation. But a 50% bonus would insulate AR somewhat against a devaluation.
BA doesn’t make award booking easy, but at least using BA miles is nowhere as cumbersome as using DL miles.
I’m not usually a fan of Delta, but since AR is based in JFK , AR will have access to partner airline Air France for trips to Europe.
Delta is also great for 2 of the toughest awards to get – Australia and French Polynesia. Gary just wrote about how the Los Angeles to Brisbane, Australia route has great availability and there is also fairly decent Air France availability to French Polynesia if booked in advance.
Delta miles could also take AR to Africa, but AR should remember that it takes a lot of time and frustration to book a DL award. However, the current 50% transfer bonus may make this a more palatable option.
ANA is a Japanese Star Aliance member airline, and has a distance based chart. You can also make most award bookings online.
Sure you have to pay fuel surcharges on some flights, but is a good value for, say, flights up to 9,000 miles (or from the East Coast or Midwest to Europe) which cost 68,000 miles in business class and 100,000 miles in first class.
They also partner with Jet Airways, Virgin Atlantic, and Malaysia airlines.
As always, there is no “right” answer.
It depends on how much AR values lifetime platinum status and AR’s future travel plans and habits.
If AR will be paying cash for flights solely on American Airlines or oneworld airlines, then AR should estimate the value of lifetime platinum status on American Airlines and determine if it makes sense to transfer MR points to AA miles.
However, if AR wants to use 2 million MR points for award travel and save cash on air tickets, AR should consider transferring them to a few different airline partners. AR should keep in mind that unless spent in the next 2 or 3 years, the 2 million miles will devalue as airlines increase their redemption rates.
Having miles across all airline alliances will give AR much more flexibility in booking future award travel and ensure that AR’s retirement is filled with Big Travel with Small Money.
- Use Points For An Overwater Bungalow At The InterContinental Thalasso In Bora Bora.
- Warren Buffett Helps Explain Large Credit Card Sign-Up Bonuses
- 40+ Powerful Ways To Complete Your Credit Card Minimum Spending Requirements