Three types of points

Discussion in 'Newbies' started by Beachgirl07, Nov 20, 2013.

  1. Beachgirl07

    Beachgirl07 Silver Member

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    Can you explain to me the three types of points on a credit card. Transferable, Co Branded,
    and Fixed Value. Please give me an example of each and how it works. Thank You Very
    Much. I just joined milepoint recently and I love this place!
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  2. MSYgirl

    MSYgirl Gold Member

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    Welcome to MP! :)
  3. moongoddess

    moongoddess Silver Member

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    Fixed value points are just that: their value is pegged to a particular dollar amount (usually around 1-2 cents per point). So if you want to redeem the points for an item that costs $100, you'll need 10,000 points. If you want to redeem for something that costs $1,000, you'll need 100,000 points. Fixed-value points therefore work best for purchasing relatively inexpensive things, as it takes too long to earn enough of them to get an expensive award.

    Co Branded points are points associated with either a specific hotel program, a frequent flyer program, or a credit card brand (like American Express Membership Rewards or Capital One Venture "miles"). The value of the points depends on the program in question. Some, like the Capital One "miles," are fixed value, while others (like airline frequent flyer miles) have a value that varies depending on the particular award you're trying to redeem for. For example, a domestic coach class Economy ticket on American Airlines costs around $25,000 AAdvantage frequent flyer miles; that ticket's cash value is probably no more more than $500. A round-trip award ticket from the US to Europe in Economy class on American Airlines costs 50,000 miles during the summer months; the same ticket bought with cash would run around $1400 dollars. A round trip ticket from the US to Europe during the summer in Business class only costs twice as many miles as the Economy class ticket (100,000 miles), but the cash value of the ticket is far higher at around $5500. So you get a better value-per-mile redeeming for a European vacation than for a domestic trip, and you also get more value-per mile redeeming for the more expensive Business Class ticket than you do the Coach Class ticket.

    Transferable points are just what they sound like: they are points that can be transferred between partners at a fixed rate of exchange. Examples include Starwood points, which are hotel points that can also be transferred to a long list of airline frequent flyer programs (usually at a 1:1 ratio), and American Express Membership Rewards points and Chase Ultimate Rewards points (both of which are credit card points that can be transferred to several different hotel programs and to several different frequent flyer programs).

    Clear as mud, right? :)
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  4. Randy Petersen
    Original Member

    Randy Petersen Founder

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    Well you are certainly starting off right with questions like these. We've got many experts here that can assist and I'll lay down the base of information for you.

    In addition to Milepoint, I can highly recommend a blog that specializes in the topic. It is closely associated with the family of websites that Milepoint is part of so you know it is good. Called Frequent Miler, this blog is considered a must read for those interested in the topics that you just asked about—credit cards.

    Transferable: These types of card programs are referred to as "transferable" because one of the main benefits of the program is they give the cardholder the flexibility to "transfer" points earned into other programs, such as airline and hotel programs and including merchandise oriented programs. An example would be the American Express Membership Rewards credit card program or even the Chase Ultimate Rewards program. This category can be tricky to describe because some other program cards such as the Starwood SPG American Express card which is actually a Co-Branded card is actually often used as a "transferable" card since savvy members often (and for good reason) use the card to transfer SPG points into airline miles because of the extra bonus.

    Co-Branded: The most popular category, this often is used to describe various airline/hotel credit cards that are associated with a particular brand. An example is the Delta SkyMiles credit card by American Express. The "co-brand" comes into play because the "ownership" of the cardholder is held by two differing companies. In this example Delta Air Lines since they issue the reward currency and American Express because they provide the credit extension to the SkyMiles member.

    Fixed Value: These program cards are called fixed value based upon the initial value of the redemption currency. The best example is a cash-back card since typically your earnings have a fixed value of one cent per currency unit (point/mile/credit) upon redemption.

    The above is really just the primer. There are so, so many nuances to all this that it is and will always be slightly confusing. While you asked specifically about these three types of card programs, in reality it's really just a comparison between two types: fixed or flexible. The real conversation is what type of card/program is best for you and likely you'll discover that most if not all cardholders need to be able to name more than one type of card when asked "what's in your wallet?" Fixed value cards are typically more for those not comfortable with taking risks or having the time and interest in determining prime value for redemption. Transferable programs are extremely popular for those individuals who are interested in maximum value and enjoy "chasing choices" when it comes down to redemption time. And of course Co-branded cards are the most popular because they often drive the best value because of large acquisition bonuses and own most of the app-o-rama applications.

    Again just an intro, welcome to Milepoint and please let me know if you find reading the Frequent Miler blog to be of value.
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