Imperfection Point(s)

Chase points (Ultimate Rewards) are easy to earn, even at elevated levels, but the bank’s rewards program is missing something:  the ability to redeem points for cash at rate greater than 1%.  The Chase rewards card lineup nearly has it all:

• more than competitive credit card sign-up bonuses
• cards that earn enhanced spend bonuses on nearly every category of products
• the ability to easily earn at least 1.5 points per dollar spent on any transaction
• the opportunity via the Chase Sapphire Reserve to redeem for travel at 1.5 cents per point
• nice supplemental card benefits like primary rental car insurance

Those qualities make boosting an Ultimate Rewards (UR) balance much easier than some other comparable programs, such as Citibank for example.  Even with some redemptions and partner transfers, I’ve amassed a healthy pile of Ultimate Rewards and over the past couple of years, and had been planning on saving them for upcoming trips in the future.  Some might consider that strategy hoarding, but the people that will be able to afford business and first class flights in the future are those with miles, and lots of them.  I had planned to be one of those people, but other ideas are illuminating a different option.

Show Me The Money

Stockpiling any reward points currency is the accumulating of a depreciating asset, and I’ve quietly and gradually been moving to cash redemptions more frequently in the last year or so.  If I can convert any reward points into cash, that is taking a depreciating asset and (likely) turning it into a highly appreciating asset for the future/long term.

Right now I’m considering redeeming 1-2 million or so Ultimate Rewards for cash.  The downside of that path is the UR cash out rate is only 1%, which means a payout of $10,000 – $20,000.  That cash is a nice chunk of change which would then be immediately invested, but I feel like I should be getting more from my points.  My return might be greater than 1%, as I’ve earned them at an enhanced rate, I value them at more than 1 cent per point, and those points haven’t cost me anything (excluding time for some of them), but the cash out rate is inferior to that of American Express.

Not a stock photo

I’m not that worried about accumulating more Ultimate Rewards.  That program is not my current focus, but there’s still opportunity to earn points en masse, even without being under the 5/24 rule.  For me creating a liquid, appreciating asset is very compelling at this stage of the “game”.  The points game is getting more difficult, and will continue that trend, to get outsized value for your points via elite travel.  Others definitely disagree, but to me that thinking isn’t adapting to the current (and future) environment.  If you’re earning points faster than you can spend them, have millions of points saved already, and those points are mostly just sitting there, then isn’t cash a wiser decision?  Isn’t getting closer to retirement a better path than thinking about hypothetical trips, especially when you have limited time to travel?

Some people make large salaries and are don’t need more cash, they simply want first class flights and splashy hotels on high end trips.  I’m not sure what percentage of the rewards field they encompass, but I’m not really one of them.  Travel is important to me, but cash is also significant.

Chase Is and Isn’t Competitive

If you have a Schwab account and the American Express Schwab Platinum card (annual fee $550), you’re able to transfer Amex Membership Rewards (MR’s) into cash and have it deposited into your brokerage/investment account.  From there you can transfer that money out, invest it or basically do with it what you’d like.  That transfer takes place at a rate of 1.25%.  That rate isn’t amazing, but depending on how many points you can earn, and how fast you can accumulate them, the cash out rate becomes more appealing.  That 1.25% rate can be improved in some circumstances, but some of which may put you on a radar that you don’t want to be on.  Personally, the 1.25% cash out rate has been fine with me.

The difference in cash out rates aside, Membership Rewards were at least as easy to accumulate as Ultimate Rewards, and in some cases, even easier.  That has changed though, and Ultimate Rewards are more easy to accumulate than either Citibank or Amex right now.  That leaves Membership Rewards with a better cash out rate, but not as easy as Ultimate Rewards to accumulate.  However, even though it’s easy to earn Ultimate Rewards, the cash out rate is at least 25% less than that of Amex MR’s.

Basically Chase has been industry leading in terms of its competitive offerings for its customers to earn points.  I think the ability to earn Chase points has been easier for most people, than any other upper end rewards program.  However, I’ve been hoping that Chase would allow a cash out rate of greater than 1% with either the Chase Sapphire Reserve card or via a Private Client relationship, which requires an average daily balance of $250,000 or more in assets with the bank.  Neither has yet materialized, but if it did, would be another step towards maintaining the dominant rewards program.  So now I’m torn; do I cash out a large stack of points that are just sitting there or keep adding to the total?  Is anyone else redeeming Ultimate Rewards for cash?