As a cheapskate, I live for the bargain find. But sometimes the real deal-seeking comes after you've made your purchase. As I've learned, a smart shopper is also a smart rewards "optimizer."
That's a jargon-y term that retail pros use. But it speaks to a simple reality: Most of us earn lots and lots of miles and points in loyalty programs connected to our preferred airlines, hotels, credit cards and the like. But only a few of us think long and hard about how to get the most bang for our buck with what we accumulate. If anything, a fair number of Americans are inclined to forget about their miles and points altogether -- to the tune of $16 billion's worth of unclaimed rewards annually.
Needless to say, I'm not the forgetful type when it comes to my money -- or my miles. But with some programs, the reward choices are almost overwhelming: Do I get that fancy-schmancy flat-screen television to watch the big game? Or do I get a gift card for an electronics retailer, so I can shop for the same television in the store? Or do I just get a travel package to attend the game in person -- flight, car rental, ticket and all (it's certainly possible -- consider Citibank's ThankYou Rewards "My Wish Fulfilled" option).
"It's about variety," says Bryan Pearson, the chief executive of LoyaltyOne, a consulting firm that advises companies on rewards strategies.
But with more choices comes that quest to optimize. For years, I've used the penny-a-point benchmark when cashing in miles or points -- meaning I've tried to turn 10,000 points into a $100 gift card. But that's not always been easy: When I started accumulating points through American Express for its Membership Rewards program -- I signed up for a card because of a points bonus, in fact -- I realized that I had my work cut out for me.
I knew I didn't want cash (or the near equivalent -- an AmEx gift card), since that's usually among the worst deals with rewards: In this case, 10,000 points would be equivalent to $50 in an AmEx gift card (a half penny-a-point ratio). But I didn't want the store gift cards, either -- the ratio on most of them was still slightly below that desired penny-a-point benchmark. I was just about to give up when I noticed that there was a special offer for Lands' End gift cards -- 8,500 points scored a $100 gift card, a ratio equivalent to slightly more than a penny per point. Now we're talking.
There was just one problem: I don't really shop at Lands' End -- certainly not enough to justify exchanging 59,500 points (yes, I had that many) for $700 in gift cards. So I tweaked the strategy slightly: I ordered the gift cards, then sold them through one of the popular card-exchange companies (I usually find such companies through Gift Card Granny, a site whose mission is to lead shoppers "through the world of discount gift cards.") Granted, the companies never give you the full face value of the card (and they also make you deal with shipping). But remember: I got my cards at a discount, so it all evened out -- my 59,500 points eventually resulted in about a $600 payday, or twice what I would have gotten if I had gone with the AmEx gift card option in the first place. (An AmEx spokesperson conceded that while the AmEx cards may not be the best "value," they are an option for consumers seeking more flexibility than a store-branded gift card offers.)
But as smug as I was about my optimizing success, I soon learned the hard truth: There's always someone out-optimizing you. The cult of miles and points junkies -- the sort of folks you find at FlyerTalk.com and NerdWallet.com -- is such that the obvious or even semi-obvious deals are just the beginning. Get creative and you can be converting at a ratio of 2 pennies a point. Or 3 pennies. Or well, you get the point.
I asked one such guru of optimizing, Brian Kelly of ThePointsGuy.com, what he'd have done in my situation. He responded in an instant: He'd have converted the points to an airline miles program for which AmEx offers the occasional add-on bonus (meaning 10,000 points might equal 12,000 miles). And he'd have made sure it was an airline that offers some good mile-redemption deals as well. Kelly pointed out that a short-hop ticket -- say, from New York to Toronto -- can be garnered through some carriers for as little as 9,000 miles. Given that such a ticket can easily run $225, that meant my points could have yielded $1,350-plus payday (provided I'd be doing that much flying between New York and Toronto).
Mr. Points Guy's best-ever redemption? It turned out to be a first-class ticket from New York to London -- worth at least $5,000 -- that he scored for the equivalent of 75,000 points. That's a ratio of more than 6 cents a point. Oh, and to top it off: He was sitting behind Madonna on his outbound flight. Kinda hard to out-optimize that.
The real lesson, however, is not about scoring plane seats next to Madge. It's about not taking those miles and points for granted. Every reward-seeker has to weigh how much time they want to put into the effort. As a true cheapskate -- or, ahem, "optimizer" -- I can't wait for my next redemption challenge.
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