Why Earning Credit Card Points During A Pandemic Is Still Valuable

Why Earning Credit Card Points During A Pandemic Is Still Valuable

You would think that earning credit card points during a pandemic is worthless and pointless (pun intended). I mean, there’s no point in earning credit card points, especially for travel rewards, when we can’t even travel, right? Think again.

I’m here to make the case that earning credit card points during a pandemic is still valuable. In fact, it may even be more valuable than before.

Here’s why…

 

Credit Card Points Still Have Value and Are Fungible

The pandemic has taken a devastating financial toll. Many people have lost their jobs, businesses, income, and livelihood. A lot of folks are barely scraping by and it’s hard to pay the bills.

Use Points To Pay Bills

Fortunately, some rewards programs allow you to redeem credit card points to pay part of your bills.

For example, Chase currently has a “Pay Yourself Back” feature on most Sapphire, Freedom, and Ink cards. In this program, you can redeem Chase Ultimate Rewards points for statement credits on eligible purchases such as groceries and restaurants (including takeout). Points can be redeemed for 1.25 cents for most Chase cards or 1.5 cents per point if you have the Chase Sapphire Reserve card. This offer is available until April 30, 2021.

Food is usually a significant portion of household expenses so redeeming points at 1.25 or 1.5 cents a piece is pretty good. Every bit of savings counts!

Redeem Points For Cash

Some banking rewards programs even allow you to redeem points for cold hard cash. The most popular banking rewards programs include Chase Ultimate Rewards, American Express Membership Rewards, and Citi Thank you. Each of these programs have their own point currencies and they have different values at which you can redeem them for cash.

In my opinion, Chase provides the best value because Chase Ultimate Rewards cardholders can redeem points for 1 cent each either as statement credits or as cash back.

Citibank only lets you redeem Citi Thank You points at a measly 0.5 cents per point as a statement credit or cash back. That’s not a good deal. However, if you have the Citi Prestige card, then you can redeem points for 1 cent each. Fortunately, I actually have the Citi Prestige card which has been among one of my favorite cards for long while.

American Express doesn’t have great options for redeeming Membership Rewards points for cash either. However, if you have the American Express Platinum Card for Schwab, then you can utilize the “Invest with Rewards” benefit.  With this benefit you can deposit Membership Rewards points into a Schwab account at a value of 1.25 cents per point. Fortunately, I have a Charles Schwab account so I could potentially do this.

Personally, I have about 700,000 Chase Ultimate Rewards points; 650,000 Amex Membership Rewards points; and 150,000 Citi Thank You points. That’s potentially worth $7,000 + $8,125 + $1,500 = $16,625 in cash back. Not too shabby.

 

Flights May Be More Expensive

While redeeming points for cash back is a great option to have, most collectors of credit card points are more interested in redeeming their points for travel rewards.

When redeemed for travel purchases, credit card points can easily be worth at least 1.25 cents per point. But when these points are transferred to airline frequent flier loyalty programs, then the value can be even greater. Often times, you can get incredible outsized value redeeming your points for premium tickets flying business and first class. Getting a value of 5 cents per point isn’t that uncommon.

I don’t have a crystal ball and I’m not sure when travel will become safer and less restrictive. But I still think earning credit card points now for future travel is a good idea since I think flights will be more expensive in the future.

You might be wondering why I think future travel will be more expensive. Here are my thoughts…

Growing Demand

The demand for air travel has been significantly down in 2020 for obvious reasons. Back in late March and much of April 2020, U.S. air travel was down by 95% compared to 2019 according TSA data on checkpoint traveler throughput.

Demand for air travel (and travel in general) is slowly rising again. According to the data, air travel is only down by about 60% now. This will only increase dramatically as the vaccine roll out is available to the general public. While air travel numbers will likely not reach pre-pandemic levels for a while, I still think there is a lot of pent up demand for travel; so much that we may see a significant uptick in air travel by Q3 2021.

Reduced Supply

Supply may not be able to keep up with demand, at least initially.

For now, a lot of the airplanes that were previously used for commercial flights are currently grounded. Many of those planes are parked somewhere in the deserts of California and Australia. It may take some time to make sure that these planes are safe for flying before they get up and running.

At the same time, many of the biggest airlines had to lay off thousands of employees in the past year. It’s possible that there may not be enough staff to handle the needs of increased in air travel. Hiring and re-hiring people takes time.

Higher Costs

The airline industry is already costly even without a pandemic. Just look up the balance sheets of the major carriers (like United, American, and Delta) and the rate at which they are burning through cash and you’ll see what I mean.

These costs are likely going to be even higher  given that airlines have to ensure passenger safety by extensively cleaning the airplanes and other safety protocols even in a post-pandemic world.

Less Competition

Several airlines have declared bankruptcy and some have even gone under.

Wow airlines stopped operating back in 2019. Norwegian airlines just announced a few days ago that they are discontinuing their long half trans-Atlantic flights.

Wow and Norwegian airlines are low-cost airline carriers that sold extremely cheap flights (as low as $199) to Europe from the United States. This drove up competition and many of the legacy airline carriers had to reduce their international airfare prices just to compete.

Now that the competition from budget low-cost carriers is gone, prices will likely go up.

Use Credit Card Points To Offset Travel Expenses

I can’t predict the future and I know that pricing for airfare is complicated. But my speculative guess is that with growing demand, initial low supply, higher costs, and less competition, airfare will be more expensive going forward.

That’s exactly why credit card points can be so valuable in offsetting expensive airline tickets and other travel expenses!

 

Premium Class Will Be More Valuable

One of the major benefits of credit card points is that you can transfer them to airline partners and redeem miles and points for flights in first and business class.

The many perks of premium first and business class is obvious. Seats that can convert to lie flat beds. Better onboard meals. Friendlier and more attentive service from the flight attendants. Amenity kits. And don’t forget that glass of champagne before takeoff.

But there are many more perks and benefits that will make air travel safer during and after the pandemic.

Here are some of these benefits…

Skip The Long Lines

One of the major risks of air travel is waiting in long security lines at the airport. Inevitably there will be some people who don’t wear masks and don’t respect the acceptable social distance recommendation of staying at least 6 feet apart. Not only that, a lot of people at the airport are stressed out and tensions run high. Being in a long line increases your risk of exposure to people who are asymptomatic but potentially infected.

When you have a seat in first and business class, you get to skip these long and horrendous security lines. You will either go straight to the front or there will be a separate line that you can go through that will have very few other people.

In some cases, you don’t even need a business or fist class ticket to skip the long TSA security lines. Some premium credit cards like the Chase Sapphire Reserve, Citi Prestige, and American Express Platinum card come with Global Entry and TSA PreCheck which allow you to go through a separate line that is usually much faster.

From personal experience, I have never spent more than 10 minutes in an airport security line due to having Global Entry / TSA PreCheck.

Hangout In The Lounge

Once you pass airport security, you can relax and hang out at a comfortable lounge. With a premium ticket in first or business class, you have access to some of the airport’s most exclusive lounges.

Many of them are not busy or crowded at all.

Some lounges even have outdoor spaces where you can hang out at.

You don’t necessarily need tickets in business and first class to have access to lounges though. Premium credit cards like the Chase Sapphire Reserve, Citi Prestige, and Amex Platinum (as well as others) come with complimentary Priority Pass membership that gives you access to Priority Pass lounges. Do keep in mind, however, that these lounges are not as exclusive and therefore are often more crowded. It’s still better than hanging out with the masses at the airport terminals though!

Priority Boarding

There is considerable exposure risks when waiting in long security lines and waiting at crowd airport terminals prior to your flight. Boarding and deplaning a flight can also be risky. Think about it. That passenger airbridge that connects the airport terminal to the airbridge is very narrow with not a lot of space or ventilation. It can be a challenge to socially distance yourself in such a small area which significantly increases your exposure risk.

The beauty of having tickets in premium class is that you can hang out in the lounge all the way up until it is time to board. The lounge staff will announce overhead (or in some cases personally alert you) when it is time to board your flight. Then you can immediately head to the terminal and board your flight on a separate passenger airbridge that is a lot less crowded. In some cases, you may be the only one in the airbridge.

Deplane The Airplane First

Think back to all the times you flew on an airplane. Once the plane safely lands and it is fully parked at the terminal, almost everybody immediately takes off their seat belt  and stands up when the seat belt sign is off. Then, people are reaching over other people to retrieve their carryon luggage from the overhead bins. After a long flight, everybody is anxiously itching to get out of the plane. The exposure risks are high.

On the other hand, when you you fly in first and business class you sit at the front of the plane and get to deplane first.

In the post-pandemic era it could be very valuable to avoid the lines, crowds, and the high risks during boarding and deplaning.

Easier To Maintain Safe Distance During Flight

Okay, so long lines, waiting in a crowded airport terminal and boarding/deplaning a plane is risky. But what about the flight itself?

There is evidence that shows air travel can be somewhat safe as modern airplanes maintain clean air by circulating a mix of fresh air and air recycled through HEPA filters. But it is reasonable to question how effective these HEPA filters are. Undoubtedly, considerable risks still remain and it is indeed safer to not travel.

When the pandemic situation improves and travel is less risky and restrictive, I would still take all of the precautions to ensure my personal safety. This includes avoiding crowds, staying a safe social distance, washing your hands frequently, and wearing proper personal protective equipment. Masks will likely be either recommended or mandated and if I were to go flying in the post-pandemic era I would probably wear an N95 mask, eye protection, and a transparent face shield.

It can be very difficult to maintain a safe social distance while on a flight when passengers are seated right next to other and crammed like sardines. However, flying in first and business class makes it a lot easier to maintain a social distance. Premium class seats are often spaced 6 feet apart or more.

Sometimes you can even have your own privately enclosed seat or suite!

Final Thoughts

The bottom line is that while it may not seem like it, earning credit cards points during a pandemic is still very valuable.

Credit card points are fungible as they can help pay your bills and they can be converted into cash if you need the money.

Not only that, credit card points can be used to offset expenses from future travel when traveling becomes less restrictive and safe again. This would be valuable because I am predicting the costs of traveling to increase with growth in demand, higher maintenance costs, and reduced competition among airline carriers.

One of the best and most valuable uses of credit card points is redeeming those points for aspirational air travel in first and business class. Not only is flying in premium class luxurious, fun, and freaking awesome, it may also be a lot safer.

When you fly first and business class, you will avoid the long security lines, the massive crowds at airport terminals, the high risks of boarding and deplaning and airplane with many other people, and it will be much easier to maintain a safe social distance while onboard the flight.

In previous post where I outlined some of my goals for the year 2021, one of those goals was to earn another million of credit card points and miles. It may have sounded absurd given the travel situation of the pandemic. But hopefully now you can see why I think earning so many credit card points during the pandemic is so valuable. I want to travel cheaper and safer in the future.

Until then, stay well and stay safe.