Travel credit cards that earn “miles” for each purchase allow you to redeem those miles on airline tickets. For this article, I’ll mainly focus on the Barclaycard Arrival, Capital One Venture and any American Express card that earns Membership Rewards. What happens when you don’t have any travel plans in the future? Most travel credit cards will allow you to cash those miles in for a statement credit (aka, cold hard cash.) You should never redeem your miles for cash if you care about getting the most use out of your miles.
I use the world “miles” loosely, because credit cards such as the Barclaycard Arrival and the Capital One Venture are really just cash back cards in my eyes. You earn 2 miles for every purchase, which is basically just equivalent to 2% cash back. The reason why the banks call them miles is because they’re to be used on travel purchases.
Let’s say you spend $25,000 on your Barclaycard Arrival, that will earn you 50,000 miles. This is equivalent to a $500 airline ticket. This means that you could book a $500 airline ticket on your Arrival card and then erase the purchase from your statement with your miles. This is an excellent use of your miles!
Why cash back is a bad way to redeem miles
The banks would love if every customer opted for the cash back option. Why? Your miles are only worth 1% when you opt for a statement credit. This means if you cash in all 50,000 miles for a statement credit, you won’t receive $500, but only $250. Ouch!
What about American Express Membership Rewards?
I love American Express, but their redemption rate is actually worse. I value each point at about $0.06 – $0.07. If you opt for a statement credit, you’re going to receive less than 1% cash back per point.
I just logged into my Amex account and looked at my Platinum card. Below is a screenshot that shows how many reward points it would take to erase a few purchases.
Since the Amex Platinum card only earns 1x point for each purchase, it would take $833 in purchases to erase my $5 charge! What a horrible redemption rate. If my math is correct, that’s about $0.06 per point. Even lower than the 1% cash back option Barclaycard and Capital One offer.
How to make the most of your Amex Membership Rewards
I would transfer your Membership Rewards to a participating airline. If you have 25,000 points, you could transfer those to Delta and score a free flight (if you’re able to find a saver flight available.) Scoring a free flight is a much better redemption rate versus cashing in for a statement credit.
Other ways to use your miles
Your miles aren’t just for airfare redemption. In fact, you can use your Barclaycard Arrival and Capital One Venture to erase Uber rides, taxi rides, train tickets, etc. Anything that is classified as travel should be able to be redeemed at the full 2%.
Even if you don’t fly, a travel card can come in handy if you take a lot of Uber rides. I imagine those rides add up quickly if you’re a frequent customer! Being able to erase those charges could save you some money.
What If I’m canceling my credit card soon?
If you have an American Express credit card, you could apply for another card that uses Membership Rewards. As long as you have 1 Amex card open that uses Membership Rewards, you will not forfeit your points. If you only have 1 card open and you don’t want to apply for another Amex card, then I would transfer your points ASAP.
I have an untested theory for Barclaycard and Capital One that should work. Most airlines sell gift cards. You could purchase a gift card from your favorite airline and then erase the purchase with your remaining miles. Once the credit has posted, then close your account with a balance of 0 miles.