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Hey, it’s Jeffrey — back again!
I've earned over 2 million points in my lifetime. I currently have 900,000 sitting in accounts doing nothing.
For years, I've told myself it's worth the complexity because someday I'll use them for business class. But here's what I realized: someday isn't a redemption strategy.
I just haven’t had the right opportunities the past couple of years. That’s what got me thinking: would cash back have been a better idea?
So I ran the actual math with my real earning rate, my real redemption value, and what 2% flat cash back would have paid on the same spending. The answer surprised me.
Here's the prompt I used:
What I found:
The first number looked great: at my real redemption rate of 1.9 cents per Avios, my effective return on $70,000 in spending is around 10.9%. That's 5.7 points per dollar on average across my cards, multiplied by 1.9 cents per point.
Cash back at 2% generates $1,400 a year. Points generate closer to $7,600. Not close.
But when I dug into the spend-based earning alone, the margin over 2% cash back narrows to about $880 a year. And my three premium cards run roughly $1,650 in annual fees before credits.
So the honest question isn't "points or cash back?" It's: Am I extracting enough value from my points cards to justify the complexity and the fees?
Then there's the 900,000 idle points. If I value them at 1.9 cents each, which is on the low end for business class travel but the high end for economy, that's roughly $17,000 in theoretical value sitting there. And it’s slowly at risk of devaluation. British Airways has devalued Avios multiple times. Amex points expire if a card lapses. Chase UR transfers change if you drop your premium card.
The conclusion I didn't expect: my point setup is probably fine, but only if I actually use the points and do so soon. The action item isn't to switch to cash back. It's to stop accumulating and start burning before the programs move on me.
Keep going? Once you've run your numbers, try these:
"Based on my idle points balance, how many months do I have before devaluation risk becomes a real problem?"
"If I can only take 2 trips in the next 18 months, how should I prioritize burning my points balance?"
"What's the breakeven redemption value where my points setup beats 2% cash back given my actual earning rate?"
Reply and tell me what scenarios came up for yours — curious how different they are from mine."
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One quick note: This newsletter is for educational purposes only and does not constitute financial advice. I'm not a financial advisor — just someone sharing ideas and tools I've found useful. Use what works for you, skip what doesn't, and always do your own research. Some links may be affiliate links or sponsored content for which I may receive compensation.