How Do Travel Points Work: A Beginner’s Guide

travel points

Think about the last time you booked a flight right from an airline’s website. Do you remember seeing an option to pay in miles instead of dollars? That’s an option you can use if you rack up enough travel points. The thing is, you’ll probably need to put in a lot of work well in advance to pay for your travel entirely in points. With this guide to how travel points work, you can start earning rewards today for your big adventure tomorrow.

What Are Travel Points?

Travel points, a.k.a. “travel rewards,” are a “currency” that credit card companies, airlines, or hotels give you with each qualifying transaction. The more often you use a travel rewards credit card, the more quickly you accumulate points or miles. You’ll generally earn a very small number of points per dollar spent, with some spending categories earning more points than others. 

You can redeem points to pay for airfare, hotels, and other travel purchases. Alternatively, you can redeem points as statement credits on your credit card bill. However, in this guide, only travel use is discussed.

How Do Travel Points Work?

In most cases, a travel credit card will earn you a small number of points per purchase. A real-life example should help illustrate this structure. The Marriott Bonvoy Brilliant™ American Express® Card gives you six Bonvoy points per every dollar spent at Marriott locations. It also gives you three points at restaurants and when you book flights directly through an airline rather than a third party. All other purchases give you two points.

Just as importantly, each individual travel point might not be worth much in U.S. dollars. A typical credit card mile is the equivalent of $0.01 USD. So for that $450 roundtrip flight to Vegas, you’d probably need $450/$0.01 = 45,000 points. On the Marriott Bonvoy card, this total equals 7,500 Marriott purchases, 15,000 restaurant or flight purchases, or 22,500 other purchases.

Of course, the small dollar-equivalent value of travel points doesn’t render them worthless. If that were the case, there wouldn’t be hordes of people who have strategically used their points to travel the world. Below is how they do it.

Types of Travel Points

Most travel points fall into one of three categories:

1. Airline Miles

If you sign up for an airline’s frequent flyer program, you can earn miles every time you book flights with that airline. Just make sure you’ve added your frequent flyer number when you book your flight. This way, your account is credited the appropriate number of miles. Your miles will populate in your account after you’ve taken the corresponding flight.

In some cases, you can use airline credit cards to accumulate airline miles. You’ll earn airline miles every time you use your card for any purchase at all. Typically, you’ll earn more miles per dollar on travel purchases than others, or through special promotions offered by the credit card for purchases made with their partners.

When you book a flight with your frequent flyer number, the number of miles you earn may vary based on your flight price, seat class, and trip distance. Most airlines won’t allow you to transfer their miles to another airline.

2. Hotel Points

Just as airlines have loyalty programs, so too do most chain hotels. These hotel rewards programs also come with hotel credit cards you can use to accumulate points. You’ll probably earn the most points per dollar on purchases made at those hotels. Some hotel points programs also give you more rewards per dollar at restaurants and for airline purchases. All your purchases, though, should earn some amount of points.

Naturally, the fastest way to earn hotel points is to use your card to book a stay at the hotel in question. You might also have the option of transferring points to an airline loyalty program, but the conversion rate is usually low. You’re probably better off pocketing those hotel points until a trip far in the future when booking a room with the hotel chain becomes feasible.

3. Transferable Credit Card Points

Transferable credit card points aren’t tied to a hotel chain or airline. You’ll accumulate them with pretty much every purchase you make on your card, and you can use them for anything you want. That includes cashback rewards and gift cards. It also includes flights and hotels. 

Travel point experts often hold credit card points in higher regard than airline miles or hotel points. That’s because their flexibility means you don’t have to use them for travel. This isn’t quite the case for travel credit cards, whether airline or hotel. Earning points or miles on these cards means you can only use your rewards with the airline or hotel chain in question.

How to Earn Travel Points

Below are some common ways that seasoned travelers earn points.

1. Credit Card Sign-Up Bonuses

If you use your card to spend a certain amount within a predetermined time frame, you can often qualify for a hefty sign-up bonus. Earning these bonuses is perhaps the fastest way to accumulate a strong initial foundation of travel points. Just be sure that you can spend the amount required to earn these points without sinking yourself into credit card debt.

2. Use the Right Credit Card

Let’s say you’re not huge on dining out. In that case, a credit card that accumulates extra points at restaurants might not be for you. Maybe you’re more of an online shopper. In that case, a card that earns extra points for big-name e-commerce purchases may better suit your needs. 

Perhaps best of all is a credit card with rotating purchase categories in which you can earn extra points. Chances are that at some point during the year, one of these categories will align with your purchasing habits.

Likewise, there’s no reason to sign up for an airline credit card if you don’t regularly fly on that airline. Yes, the credit card offer brochure in the little pouch in front of you on your flight might be tempting. But if that’s your first and possibly only flight on that airline, resist the temptation to open an account. Other cards are better options.

3. Book Travel

The most obvious method of earning and redeeming travel points is often the most overlooked. Simply booking flights and hotels with your loyalty program number on the reservation is a surefire way to rapidly accumulate rewards. You don’t need a credit card to take this step, so there’s no reason to avoid it. Just sign up for the airline or hotel’s rewards program, enter your account number as you book, and voila – rewards.

4. Shop Through Rewards Portals

Often, credit card companies, airlines, and hotels run exclusive, limited-time deals with certain brands. When these deals are active, purchasing from these brands through the deal-holder’s portal can earn you extra points. 

For example, if CashbackMonitor shows that buying on eBay through Delta’s portal multiplies your points earnings, use Delta’s portal for your purchase. This way, you get points you simply can’t get through your regular old web browser or an in-store purchase.

5. Dine Out

Almost every travel rewards program offers more points when you use your credit card at restaurants. That makes regularly dining out a fast way to earn points. 

Of course, this approach isn’t feasible for everyone. Dining out can be inexpensive, and what you spend to regularly dine out might eventually outweigh the cash equivalent of your points. At the very least, though, make sure to use your travel credit card whenever you do dine out. This way, you earn points for something you’d be doing either way.

6. Use Your Credit Card On More Purchases

When you pay for purchases with cash, you don’t earn cashback. If you use a debit card instead, you might get a small amount of cashback. That amount, though, is typically a fraction of the rewards available through travel credit cards. Making your credit card your primary purchasing tool can be a conduit to more quickly, reliably accumulating travel points.

How to Use and Redeem Your Points

Below are four common ways in which travelers use their points.

1. Airfare

Obviously, travel points are great for booking the main way you get around: airfare. More importantly, though, is strategically earning and redeeming your points. 

Namely, many airlines belong to one of three alliances: Star Alliance, SkyTeam, and Oneworld. When you accumulate rewards on an airline belonging to one of these alliances, you can use your points on any other airline in the alliance. For example, since American Airlines and Finnair are both part of OneWorld, you can use your AAdvantage miles to book Finnair flights. 

2. Rental Cars

Some major airlines partner with rental car companies, and this partnership offers you another way to use your travel points. Let’s say you see the option to rent a car as you book a flight directly on an airline website. That’s a partnership, and it means you can probably use your airline miles to rent a car through that company.

Credit cards not attached to an airline can also be great for booking rental cars. As explained earlier, the rewards you earn through these cards can be used for just about anything. Rental cars are certainly on that list.

3. Hotels

It’s simple to use your hotel points on hotel stays. Just opt to pay via hotel rewards instead of cash at checkout. 

You can also use non-branded credit card points for hotel purchases, especially if your card has a 1:1 transfer ratio. You might have this ratio if your credit card company has a transfer partnership with a hotel chain. In this case, you can transfer points between entries without any changes in your total number of points. This transfer can be helpful for booking discounted or free hotel rooms, as you can use points to cover some or all of your stay.

4. Discounted Airfare

Just as you can use hotel points for partial or complete payments, airline miles can also cover some or all of your purchases. If you see a flight that costs 12,500 miles but you only have 10,000, you might still be able to score a deal. Assuming each mile is indeed just $0.01 as explained above, your 2,500-mile gap is $0.01 * 2,500 = $25. A $25 flight is miraculously inexpensive – it might as well be free.

Things to Know Before You Begin Your Points Journey

Now that you know how travel points work, you should take a few more steps as you prepare to start earning rewards. These include:

1. Improve Your Credit Score

If your credit score is anything less than excellent, you might struggle to get approved for the very credit cards so crucial to earning points. You’ll instead need to improve your credit score first. To start, try using more credit, opening several types of credit lines, and paying off all your bills on time. Another factor is the age of your credit accounts, so if you’re newer to credit, you might need longer to reach your target score.

2. Make Your First Payment On Time

As mentioned earlier, sign-up bonuses are a worthwhile prospect only if you know you can actually pay off the amount you spend. If not, you’ll find yourself in credit card debt, which rapidly builds interest. It won’t be long before this interest gets high enough that you could’ve just spent the equivalent amount on a flight or hotel.

3. Avoid Cash

Paying with cash never leads to rewards of any sort. Using a credit card, whether associated with an airline or hotel or neither, automatically accumulates points. As such, if you’re looking to rack up points quickly, your credit card is always the way to go.

4. Spend Your Points

In most cases, saving rather than spending is advised. Travel points are an exception. Most travel points decrease in cash value over time, so it’s better to redeem them sooner than later. 

5. Don’t Let Jargon Confuse You

Travel rewards programs can be confusing. You won’t do yourself any favors trying to master their terms and conditions. The advice in guides like this one comprises most of what you need to know. Couple what you’ve learned with a basic understanding of your rewards program’s points structure, and you should be fine. 

How To Start Your Travel Points Journey

After taking in all the above advice, you might be left with one question: Which rewards program is best for me? If there’s a certain hotel chain or airline you use often, that’s the answer. If not, start with a reward-heavy credit card. The American Express travel platform is especially popular on this front, which is why we’ve prepared an Amex Travel Guide to help get you started.

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