Is Chase Ultimate Rewards Still the Best Rewards Currency?

I’m certainly not the first person to re-evaluate Ultimate Rewards in light of recent devaluations by several of its transfer partners, but I will try to put my own spin on the topic as always.

By far one of the best uses of Ultimate Rewards points is to transfer them to other loyalty programs such as United’s MileagePlus, Southwest’s Rapid Rewards, Hyatt’s Gold Passport, and British Airways’ Avios. There are a few other partners, but these are typically the best values and also have the most extensive opportunities for redemption (e.g., Avios can be used to book domestic flights on American Airlines and Alaska Airlines). You also have the choice to redeem points at a value of 1.2 cents each through the Ultimate Rewards travel agency. A transfer often provides greater value, so let’s see if that’s still the case.

Southwest Rapid Rewards — 1.43 cents per point

Southwest Airlines was the first shoe to drop. With a fixed-value award currency, the best deal has been to redeem for their “Wanna Get Away Fares” at what was once a rate of 1.67 cents per point but will soon become 1.43 cents per point. I don’t have a Companion Pass, and I don’t travel often enough (or ever) on Southwest to get one. I could use credit card bonuses to get a pass, but that’s a one-year thing. I’m using 1.43 cents as my valuation; others may prefer to use 2.86 cents if they want to include the value of a Companion Pass.

United MileagePlus — 1.8 cents per mile

Then along came United’s Black Friday announcement. I previously assigned these miles a value of 2 cents each. I was comfortable with that because I have always been able to find domestic flights that cost $500+ but only 25,000 miles. This part of the award chart is not changing. But the main thrust of my strategy with United is to pay for my domestic flights and redeem miles for international premium cabin travel, particularly on their excellent Star Alliance partners. Before the devaluation, and at 110,000 miles for business class to Europe, among other good deals, I could see myself defending 2 cents. Such tickets often go for $4,000 and up, but I *might* be willing to pay around $2,200 if they were available for cash.

So how to compromise between domestic value staying the much the same while international utility decreases?

I explained earlier that I can still see myself using my United miles on international business class flights on United-operated planes. Their product is improving, and I actually look forward to flying on the 787 on some routes like LA to Shanghai and Seattle to Tokyo (delayed the last I checked). I will probably be fine relying on other currencies like Membership Rewards and Miles & More to fly on United’s partners.

I feel I should lower the value of United’s currency due to these added restrictions even though I still see myself finding plenty of opportunities to get around 2 cents of value. I will settle on a somewhat arbitrary valuation of 1.8 cents each.

Hyatt Gold Passport — 1.5 cents per point

I previously pegged these at around 1.7 cents per point, and obviously the new award chart has made free nights more expensive. One could argue that the cash rate at hotels areĀ also more expensive due to inflation.

The price that Hyatt charges and the value I assign aren’t necessarily the same, but fairness requires that my valuation be subject to inflation, too. If before I would have used 22,000 points for a hotel that I valued at $374, and now Hyatt wants 25,000 points, they are implying that I should increase the value I assign to that stay to $425. Are they correct? I’ll defer making that call for now.

On the other hand, Hyatt has imposed their own restrictions, such as moving a handful of hotels to a new Category 7. (Actually, just 6 out of 543, or 1.1%.) I’ve never stayed at them, and only three actually appeal to me, but I do try to use my points for such aspirational stays. So I will lower my assigned value to 1.5 cents per point.

British Airways Avios — 1.5 cents per point

There have been no devaluations by British Airways this year. And I can very easily find awards for 2 cents or greater value per point. I often use Avios for short flights, especially those operated by regional jets. So if I’m paying 4,500 points plus $2.50 tax for a $120 flight, I’m still coming out ahead if I value these points at 2 cents each ($90).

That said, I am talking about a very select use case. It works often enough when I need it to. I never consider Avios for trips that require a connection, and at some point I will want to book an international award and will have to pay some giant fuel surcharges (e.g., British Airways first class from Seattle to London is 150,000 points + taxes, fees, and fuel surcharges). Given these deficiencies, I think 1.5 cents per point is a better long-term average.

Putting It All Together

We have here four primary redemption opportunities — all transfer options from Ultimate Rewards are 1-to-1 — that can be valued between 1.8 cents and 1.43 cents per point. The next question is “How do we reach a single value for Ultimate Rewards?”

I think a good place to start is with the value of the best transfer option. If nothing else, I can always transfer my Ultimate Rewards points to United Airlines and get 1.8 cents per point. There is not much reason to average down by including the value of other currencies. At least 95% of my transfers have been to United thus far, and if I were to transfer to another program it would only be for select cases where I believe I can get equal or better value than through United. That is, I think I have found a case where I can get greater than or equal to 1.8 cents through Hyatt, for example, rather than Hyatt’s average value of 1.5 cents.

One Mile at a Time wrote yesterday that he ought to assign a premium to his Ultimate Rewards points because of their flexibility. I am not so sure.

I just explained why I set a floor for Ultimate Rewards even when I might still transfer to a program that usually has lower value. Ben suggested that such flexibility gives added value to a loyalty currency. I think instead that it only means it can imply greater value for the currency on the receiving end of the transfer.

Look at it this way: If I value United’s miles at 1.8 cents, and I have to give a 0.1 cent premium to Ultimate Rewards points for the sake of their flexibility, then the final value of Ultimate Rewards would be 1.9 cents. If Ultimate Rewards are worth more than United, why would I ever transfer them to a less valuable program?

Matching the value of Ultimate Rewards to the most valuable transfer option available — and no more — makes more sense. I can transfer to United as a default choice or to other programs only in outlier situations where they offer United worthy competition. Hyatt Gold Passport may provide 1.5 cents on average, but there are certainly cases where it can approach 1.8 cents, at which time I would transfer points from Ultimate Rewards.

Update: Food Wine and Miles posted a comment suggesting a two-choice dilemma where I have to pick 1,000 UR or 1,000 UA. I would pick UR for the flexibility. But what if I was offered 1,000 UR or 1,001 UA? I would pick UA because there are more of them, and I don’t value UR more highly than UA. Each person has his or her own threshold, and this is a good way to test how you value a convertible currency like UR.

The Effect of Devaluations on Ultimate Rewards

Devaluations still have an effect on Ultimate Rewards. One reason to think a premium valuation is necessary is because if one currency goes down there is still another transfer option available. Yet the value of Ultimate Rewards doesn’t stay the same.

Instead, the value of Ultimate Rewards still goes down. In my model, it drops to the level of the new MVP (“Most Valuable Points”). That’s still United, so it drops from the former 2 cents per point to the new 1.8 cents per point. It could have been Hyatt, Avios, or someone else, in which case Ultimate Rewards might have fallen to 1.5 cents or lower. I don’t think United fell that far.

I admit I’m not an economist, though I don’t think Ben is either. But I have a really hard time assigning Ultimate Rewards any kind of premium for their flexibility. I still prefer to earn Ultimate Rewards over another currency but only because I know I have options. I know that if United’s miles were to drop again to 1 cent next Friday, my Ultimate Rewards would only fall to 1.5 cents — the next highest value among their transfer partners.

In that sense Chase can feel somewhat secure about the long-term value of their currency. They have a range of partners, and most of them remain good transfer options. I certainly don’t see the same value in Citi’s ThankYou points. But Ultimate Rewards are dropping closer to the level of Amex’s Membership Rewards. Even if that happened I think Chase would benefit from their good customer service and the relative ease of earning points. It would probably take some drastic changes to Ultimate Rewards itself before I would consider focusing on Membership Rewards instead.

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  • JB

    I believe the deval of United points (and by default the deval of UR) is based on the cash equivalency of the international business class they will replace. You say you would be willing to pay $2,200 for the biz ticket – I say my buy point is lower – maybe $1,700 (but lets go with your $2,200 number for now). You quoted a RT award at 110K miles but on PARTNER airlines (I almost always use partner airlines – how else would you get around Europe or jump off to Asia for that matter?) the number is now 140K to redeem or 1.57 cents per mile. Since 90% of my UR redemptions are on United and the other transfer partner options pull the total value of UR down slightly – I settle at 1.5 cents per mile. If you go with my cash value ($1,800) of the biz ticket it would be 1.2 cents per mile. ouch.
    The old award structure redeemed miles at 2.2 cents per miles (based on your numbers) or 1.8 cents per mile (based on mine) so we have a deval range of 18-33%. Compare that to your calculation of only a 10% deval of UR.

    • Scottrick

      I wasn’t particularly clear about using past tense when I referred to 110K miles, so thank you for reminding me.

      As for the rest of your question:

      (1) I think I did explain why I lowered my valuation, but not by much. I, too, would prefer to fly on a partner. But I think I will be satisfied with United-operated flights if that’s what I have to do. I can still get good value out of United-operated flights. I linked to an earlier post where I discussed this compromise more fully.

      (2) My travel patterns also don’t often take me bouncing around Europe or Asia. I’m happy to land in Germany on a United flight and take the train, or in Asia there are low-cost carriers that often provide more frequent service to some of the destinations I want to see.

      (3) Based on the West Coast, a flight from the U.S. to Europe is worth more to me than someone on the East Coast. I have to connect through San Francisco or Los Angeles, and I hold out for non-stop flights if possible. At least I can make up for that with cheap flights in economy class to Hawaii!

      • JB

        I’ve rethought my valuation because I realized we both were basing our cash equivalency on a paid RT ticket with no stop-overs/open jaws. A to B is probably worth $1800/$2200 … but A-B (stopover) -C [open jaw] D-A is probably worth $2300 -$2800. That works out to 1.65 cpm up to 1.9 cpm. I am changing my number to 1.65 cpm for United so 1.6 cpm for UR.

  • dhammer

    I’ve been flying Southwest ever since UA merged with CO. Here’s the best part of, and most unwritten part of the Southwest (WN) program. If you want to use your points, and book far enough in advance (and check during fare sales), you can find low point redemptions. For example, we flew LGA/FLL for 8040 points R/T. That’s less than Avios and much less than the 25,000 miles it would cost you on a legacy carrier. Another example was LGA/SNA for ~15,000 points. LGA/SLC was 14,900 points. A one-way LGA/SAN was 5940 Southwest points. One-way SAN/LAS was 2280 points!

    My point is that if you have to change planes in your travels, WN isn’t so bad.
    My Chase URP will be moving to Avios and Southwest.

  • Food Wine and Miles

    I would argue that valuing at a slight premium to the MVP due to flexibility makes sense because you shouldn’t have to settle for “average” valuations. For me, transferable points are usually a “top up” to get me to where I need to be for a given award. At the margin, I’d be willing to pay more for those points (e.g. I need 50,000 for a booking, but I only have 45,000. I’d be willing to pay more than 1.5 cents each for those remaining 5.000 to get me to where I need to be). If UR is your primary source of UA, Hyatt, Avios and you tend to transfer amounts for full awards, then I tend to agree with the “UA as a baseline value… other programs more selectively” mindset.

    If this were AMEX, there’s also the matter of transfer bonuses, but that’s obviously irrelevant in the case of UR.

    • Scottrick

      UR is not my primary source of United miles or Hyatt points. Thus, I don’t see them as being that essential to top off my accounts, but I do see your point.

      • Food Wine and Miles

        Let me put it a different ways as well: If you won a contest, and were offered the choice of 10K UA miles vs. 10K UR points, would you ever choose the UA miles? If the “value” per point of each is the same, you should be indifferent, but choosing the UR is a pretty easy one in this case (IMO). The question becomes, how many more UA miles would need to be in the mix until you’re indifferent? Is it 10:10.1? 10:10.5? etc. That ratio would be another way to assess the value of one to the other.

        • Scottrick

          In my case, I would choose the UR points all else being equal. But if there were more United miles offered, I’d pick those instead.

          • Food Wine and Miles

            Yep, I suspect almost anyone would – which implies UR are “better” / “more valuable” than UA. Could be a very slight advantage (e.g. if you’d choose 10,001 UA over 10,000 UR), or a bit more substantial (e.g. would choose 10,000 UR over say 11,000 UA). I’ve never been faced with this situation, but I think my personal “break even point” is somewhere around 10,500 UA vs. 10,000 UR – which if UA=1.8, implies that UR are somewhere around 1.9 (for me).

            A nice thought experiment though!

          • Scottrick

            The contest is a much better way of assigning a premium, if any, and I wish I’d thought of it first. Like I said, I would pick whichever one offered more, even if it was 1,000 UR vs. 1,001 United miles. That implies some kind of parity even if I’d prefer 1,000 UR over 1,000 United miles.

            But other people have their own thresholds. It would be interesting to see the distribution.

          • Food Wine and Miles

            Now I’m getting all kinds of nerdy thoughts :)

            Would love to see a plot of the curve from where 0% of people prefer UA over UR (<=9999 UA to 10000 UR?) up to where 100% of people prefer UA (I'm guessing it's higher than 11000 UA vs. 10000 UR but who knows)

  • TJ

    If there is *no* value to the optionality, then do you instantly transfer the points to United the second that you earn the minimum needed to do the transfer ? If not, why ? The “why” is the optionality value – if the average value of a United Point is 1.8 cents, but saving the points as Chase UR means you can wait to redeem from a variety of partners at an average of 2 cents, then the optionality is worth .2 cents. You’d have to calculate it yourself given how much or how little travel you do, but if you do a lot of travel, I would think the optionality is probably worth quite a bit – if you travel enough to use all your UR by *only* transferring when you can beat the 1.8 cents of united, what ultimate average value would you get ? That extra value is the value of the option.

    • Scottrick

      I don’t transfer immediately because I don’t necessarily need the points in a different program. Only once this year (for a 300K+ redemption) did I fall short. Otherwise I’m earning about as fas as I’m burning.

      I still use 1.8 cents (or at that time 2 cents) when figuring if the award is worth the transfer. For me it’s not so much about whether it’s worth transferring the UR but rather if it’s worth using United miles and if I have enough United miles. My UR points are effectively United miles as I’ve only transferred them to a few other programs in small quantities.

  • Scott

    I agree with JB, but wanted to piggyback. If the primary reason for high valuation of UA miles was for international business or above travel, the effective loss of partner airlines due to the 60-90% increase in miles makes UA miles worth even less. Valuations are arbitrary anyhow – but generally speaking, what I said above is the primary reason for people who read this and other blogs to use UA. I give a slight bump for the ability to use miles on one-way awards, but I’d still put my valuation around 1.4 cpm now.

    That’s only slightly better than the stated rate of using UR for their own travel site, which show as paid tickets – which are mile/status earning (1.25 cpm). I actually value this around 1.4 – 1.5 as well because you still earn miles and status. Works great for domestic redemptions on inexpensive tickets for mileage runs and the like. I really don’t like WN, but they’re much more convenient for me on certain routes where they’re the only ones with a non-stop, and they’re still consistently the best domestic award program out there, despite being revenue based. It’s possible to get a RT flight for < 6,000 points. That's better than Avios!

    The real benefit of UR over SPG or MR is instant transfers. However, if with the US/AA merger, AA becomes a transfer partner of SPG or MR (taking US' place), then those programs will get my primary business. I've never cared for UA, only liked their award charts and *A. Now that it is pretty much worthless if you don't want to fly UA, I have no real reason to stick to them. I will stick with UR for now, but mainly for Avios, WN and Hyatt redemptions.

    • JB

      Domestically I have the SW companion pass so for the next 3.5 years (wife will get it end of next year) so I will fly free or at a UR redemption of 2.9 cpm. After that hopefully I will have my private jet. As far as flexibility and lower last minute change fees, I can often squeeze out another stop/open jaw so that could push my biz cash replacement cost up to your number of $2,200.

    • Scottrick

      It depends on the kind of international travel you do. If I can still find international flights on United at the cheaper United-operated award rates, and if I value those flights the same as I did before, then I don’t see a reason to greatly devalue the currency.

    • disqust101

      WN better than Avios? Well, only if you ignore that Avios can be earned at 2x/3x with Amex transfer bonuses on top (20-30-40%). You can easily get ~3x for Avios, but you’ll never get more than 1x for WN. That dramatically shifts the value proposition towards Avios (and even makes long range flights competitive despite their distance-based chart).

      So that ~6000 pt WN redemption will require $6k in spend. But a 9000 Avios flight may only require $3K in spend (ie 50% cheaper even though ~50% more miles needed).

      Way too many of these points comparisons are ludicrously shallow analyses as they ignore bonus categories. That’s why I constantly shake my head in disbelief when I read “SPG points are valuable” – yes, but since you only earn at 1x, there are often much better cards to put your spend to get even more value.

      • Scottrick

        We have a disagreement here between price-based costing (my perspective) and cost-based pricing (your perspective).

        I base the valuation of my points on the award I want to take and how many points it would require to redeem for that award. If I can earn 2X or 3X points for the same amount of spend, no matter. The value of the points when I go to redeem them stays the same. The bonus just means I can just earn them for really, really cheap.

  • greek2me

    UR points deserve a premium. In your case look at it this way: 1 UR is simply 1 United that still retains flexibility to transfer to other programs in specific cases when you can realize better value. That option is worth something, hence a premium is justified.

    • Scottrick

      But what is that premium, and why? I haven’t seen any way to value it.

      I already hold off on using my United miles for all but the best use scenarios. And even if I didn’t, the idea that I would use my UR points for awards worth > 2 cpm and my native United miles for awards worth < 2 cpm only means that the average value of United miles goes down to compensate for the increased value of UR points.

    • Scottrick

      Update: See Food Wine and Miles’ comment below. His idea of offering a choice between different pots of United miles and Ultimate Rewards points is a good way of determining what premium, if any, should be assigned to UR. In my case, there’s no premium.

  • Levy Flight

    With more options for using UR points (flexibility and hedge), and a wider range of ways of acquiring them (at higher rates), I place considerably higher value on UR points than Mileage plus points.

  • bksfinest

    Would it be worth it to pay off my bills with points as I have been doing or start to transfer to partners? It seems like partners are worth more than 1000 points = $1

    • Scottrick

      You should be able to redeem Ultimate Rewards points for cash at a rate of 100 points = $1.

      Alternatives are redeeming them for air travel booked through the UR travel agency at 100 points = $1.20 or transferring them to a high-value program like United or Hyatt for about 100 points = $1.40-1.70.

      The first thing I recommend is you don’t carry a balance. If you’re paying off your bill with points because you don’t have the free cash, keep doing that. But if you have the money and just don’t know how else to use your points, then one of the alternatives above is probably a better option.