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Aaron Morris

Never Spend Your Points on Amazon (or Cash Them Out)

Posted on September 6, 2020January 16, 2023

points on amazon

I haven’t always been the Prince of Points, the Monarch of Miles, the Count of Cards, the Guru of Globe-Trotting. Back in the day, I was but a fool, having not yet learned the lesson that you should never spend your points on Amazon.

I had the sense to get credit cards with cash back or travel points, just because it seemed better than getting cards that offered nothing, but I never really had a goal in mind. I just figured I’d let the points accumulate, and someday I’d figure out what to do with them.

Then one day I noticed that when I would save my credit card information on Amazon for future purchases, Amazon would offer to let me use the points I had accumulated as cash. I thought to myself, “Ain’t technology wonderful (my mind doesn’t always use the best grammar). Your points automatically show up on the site, so you can spend your points on Amazon instead of cash. How convenient. I need to send my credit card company a nice letter (my mind is also very polite).”

I later noticed that this behavior is being pushed by both sides. Not only does Amazon offer to let me use my points, but the credit card companies encourage this behavior. I started seeing buttons on the credit card sites that would add your card to Amazon.

I now see the evil of their ways.

Let me use my situation with Chase as an example. When I go on the Chase site to pay my bill (I never run a balance), it shows how many points I’ve earned, and has a link I can use cash them out. Without any bonus offers or even any real attention to maximizing our points across different cards, my wife and I have managed to accumulate 305,717 points. The cash value is a penny a point, so Chase offers to cash them out for $3,057.

pennies -- don't spend your points on amazon

But over on the Amazon site, when I go to check out, I am offered all the credit cards I have registered with Amazon. It shows that I have the aforesaid 305,717 points, and states that they are worth $2,445.73. That’s $612 less money, just for the convenience of using my points on Amazon. I cry a little (just a little) when I think back to all the times I’ve spent points on Amazon. Chase isn’t the only offender. Capital One, Chase, and Citi points are all only worth .8 cents per point on Amazon. American Express points are only worth .7 cents. Capital One’s cash back (as opposed to points) is worth full value on Amazon, as is Discover’s.

How to easily beat the system.

If the need to spend your points on Amazon burns in your heart like a thousand supernovas, then at least take this easy step. Go to your Chase portal, and click the link to spend your points. As stated, you can just cash them out for full value, but if putting the money in your bank account just doesn’t provide the thrill of spending this free money on Amazon, then within the portal, opt instead to buy an Amazon gift card. This will give you the full value of your points, and you can just deposit it into your Amazon account. You end up with the same thrill of spending your free money on Amazon, without taking a huge hit.

Spending points is for suckers.

The loss of point value is bad enough, but that’s just the tip of the credit card iceberg.

sucker - never spend your points on AmazonLet’s round down my points to 300,000 to keep the math simple. With those miles I can do a lot of traveling, such as five round trip domestic flights, including Hawaii, plus a round trip flight to London thrown in for variety. Some would even be first class. The out-of-pocket price for all these tickets would be around $18,000, which gives each point a value of six cents. And if I use the points through the Chase Travel Portal, the Chase Sapphire Reserve card multiplies my points by 1.5x, so the 300,000 points become 450,000, with a potential travel value of $27,000. That’s a lot of travel to give up for a $3,000 Amazon gift card.

I often use Hawaii as an example, to the point that my readers (hi Mom) are probably tired of the example. But let’s just think of it as the “Hawaii comparison” rather than me being unimaginative. In a prior article, I explain how to use Citi points to fly to Hawaii, and that is the better deal, but Chase is a great deal as well, costing just 40,000 points to fly round trip, first class, through a travel partner. Thus, I could fly to Hawaii 7.5 times with my 300,000 points (I guess on that last trip, I’ll just have to stay in Hawaii). Out of pocket, those flights would cost about $2,000 each, for a total of $15,000. Again, a lot to give up for a $3,000 Amazon gift card.

Admittedly, I cherry picked some of the better “travel with points” deals to illustrate the point, but even if you found a destination that only represented a yield of 3 cents per point, that still means you’d be giving up $9,000 to $13,500 worth of travel for $3,000 in cash or a gift card. And I’ve only discussed Chase points. I have even more American Express membership rewards points, and Amazon offers to let me use those points for purchases as well. But one of my AmEx business cards refunds 35% of the points used to purchase airline tickets through their portal. If I spent 300,000 points on travel, I’d get back 105,000 points.

Let’s talk about Jack.

There are many who argue that the cash is always the better way to go, because that’s an asset you can invest, instead of a frivolous, unproductive trip. But, for me, all savings and no trips makes Aaron a dull boy. I’ll take the $27,000 worth of travel, over the $3,000.

But let’s look at it one more way, in response to the “cash is always better than trips” proponents.

Let’s take a 30 year old, named Jack, with the grand plan of retiring at age 60 so he can travel the world. So he does what he perceives to be the responsible thing, and cashes out the 300,000 points for $3,000, and puts the money straight into an index fund, earning seven percent. At age 60, his $3,000 will have grown to a healthy $22,836. Impressive, but you have to take inflation into account (assuming the virus caused financial crash doesn’t lead us to a period of deflation). In 2050, the trips listed above that cost $18,000 in 2020 will cost $37,766 (assuming teleporters haven’t yet been invented). So Jack retired to travel the world, and his responsibly earned $22,836 won’t allow him to go on all the trips he could have taken with his points. That’s when he will look back on the personal decisions he made in his life, and realize he didn’t know Jack.

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