Speculatively Transfer Points

Banks offer transfer bonuses frequently. These offers are an incentive for a rewards holder to transfer their points to a travel partner. We see many transfer bonuses each year, some even come around a few times a year. One question we always get when these promos come up is whether someone should speculatively transfer points? You know, for those times you don't have a plan in mind to use them. The short answer is almost always no. Let's look into the reasons why, and what you should consider the next time you see a transfer bonus.

Why Do Banks Offer Transfer Bonuses?

Before we get into whether or not you should speculatively transfer points, let's talk about what transfer bonuses are. Credit card rewards programs are extremely valuable for banks. By offering consumers a percentage of rewards in exchange for utilizing your card, banks can build loyalty for their credit products. In the case of transferrable currencies, these points can be transferred directly to hotel and airline partners' individual loyalty programs. These transfers can offer supreme value when orchestrated correctly. So, why then would a bank offer a transfer bonus to give you even more points when transferring?

From a bird's eye view, credit card rewards points resemble a large liability on the bank's financials. At any given time, their customers could cash in their valuable points. The customers could cash the points out for a statement credit, get merchandise or gift cards, book travel, or transfer those points to a travel partner. All of these redemption options have a cost associated with them. In an effort to drive down this future liability, a bank may incentivize its customers to transfer these points by offering a transfer bonus. These opportunities can resemble massive value to award travelers; but don't be deceived by transferring points speculatively. They may also get a deal from the partner on future purchases if they run such a promotion.

Devaluations Are One Reason Not to Speculatively Transfer Points

One risk major risk if you speculatively transfer points is the potential for devaluations. Devaluations are a sad reality in award travel. This is when an airline or hotel changes their award chart to make redemptions more expensive. For example, Turkish Airlines recently devalued their award chart across the board, including within partner airlines.

There will always be some analyst sitting in an office somewhere thinking of a way to save the airline or hotel money. Because of this, you need to be aware that points sitting in a specific airline or hotel program are always subject to devaluation. By keeping your points in a transferrable currency, like Chase Ultimate Rewards, you protect them from devaluation. This is because if an airline devalues their award chart, you can still transfer your points to another program that still offers good value.

No one knows what the future holds. Speculatively transferring your points could put you in a position of your points being devalued in the future.

The Value of Flexibility

One of the biggest appeals of transferable reward currencies is their flexibility. There is a ton of value in being able to transfer your Chase Ultimate Rewards to each of Chase's many transfer partners. When you're ready to book that dream award trip, you have many resources available to make it happen. In fact, we have a guide on why this flexibility is so valuable. If you speculatively transfer points then you lose that flexibility.

Also remember that our travel plans and preferences change, and so does our ability to actually travel. You may think you want to go to Southeast Asia next summer but then you learn about a cool destination in South America you want to see instead. If the airline or hotel program you “bought” points from doesn't serve South America as much, you're stuck without many good options. This is exactly why we value transferrable currencies so much more than airline or hotel points.

Bottom line: if any of the risks above materialize and cause your travel plans to change, you'll be stuck with points from a specific airline or hotel that you may no longer have use for.

So next time you see a big transfer bonus, ask yourself what do you plan to do with those points. If your answer begins with “I could…”, then that transfer bonus isn't for you. If your answer instead begins with “I will…”, then transferring those points could make sense. Just remember to check for award availability before transferring.

Taking Advantage of Transfer Bonuses: When Should You Do it?

Transferring points could make sense when you have an immediate use for those points and you know you can use them right away. This means you have found availability for the exact trip you want to take. Remember: an extra 20% or 30% in points does no good if there is no availability to actually redeem them.

If you find availability, then you can transfer the points, take advantage of the transfer bonus, and book your trip right away. Your points will not be stranded with the airline or hotel, nor will they be subject to the risk of devaluation.

For example, say you want to fly to Europe in business class and Aeroplan has a 20% transfer bonus from American Express Membership Rewards. You found an award flight through Aeroplan that costs 70,000 miles. By using that transfer bonus, you could drive the points required down to just 59,000 (59,000 * 120% = 70,800, more than enough for the flight).

One Time When You Could Speculatively Transfer Points

While we harp on making sure you have a plan before taking advantage of a transfer bonus there is one reason that you may want to do it speculatively. If the bonus is for a program you use routinely, and one of your mainstays, then it could be beneficial even if you don't have immediate travel plans. We all know that if Chase ever had a bonus to Hyatt many people would be transferring right and left no matter what. That is just one such example, even if it is an example that will likely never happen. If you find yourself using a program 5 or 6 times a year etc. then that may be worth a speculative transfer. That wouldn't be an I hope type of situation, but an I know I will type.

No-Fee Options to Preserve your Flexibility

A common reason we hear over in the ToP Facebook group for wanting to speculatively transfer points is because you no longer want to pay the annual fee of a credit card. Fortunately, most banks offer a low or no annual fee option in order to retain your points and be able to transfer them. Below is a list of all of the low or no annual fee options for each bank to be able to retain your points and their ability to transfer.

• Chase Ultimate Rewards: Chase Sapphire Preferred or Chase Ink Business Preferred (annual fee of $95)
• American Express Membership Rewards: Blue Business Plus or Everyday Card (no annual fee)
• Citi ThankYou Points: Citi Premier (annual fee of $95)
• Capital One Venture Rewards: VentureOne Rewards Card (no annual fee)

Speculatively Transfer Points: ToP Thoughts

Transferring points to book an award flight and taking advantage of a transfer bonus can be a killer deal! Who doesn't like getting more points for free? But the costs often outweigh the rewards if you don't have a clear path forward. As always, there is an opportunity cost to taking advantage of a deal. Transfer bonuses are no exception. An extra 20% in free points will do you no good if there is no award availability for your trip.