Ever wonder why banks keep handing out massive signup bonuses and 5X points on spending, even though we all know points eventually get devalued? Shouldn’t they be tightening the reins by now?
It turns out that the reason is pretty simple: most people are absolutely terrible at using their points.
While you and I are busy scheming how to fly Singapore Airlines First Class or stretch points to the max, the average cardholder is out here cashing in their hard-earned Membership Rewards for… a $60 statement credit.
And honestly? That’s the best thing that could happen for us, who know what they’re doing.
How People Actually Use Their Points
Take American Express, for example. They recently sent out a “Points Pulse” email—a fluffy marketing piece designed to keep cardmembers engaged so they’ll use their points (and, more importantly, keep swiping their cards to earn more). Every once in a while, these emails drop a little nugget of insight into how most people redeem their points—not just us obsessive points and miles folks.
In the email, Amex highlights the many ways you can use 10,000 Membership Rewards points. You could:
- Redeem them for a statement credit at 0.6 cents per point
- Pay with points at checkout for 0.7 cents per point (which might make sense if you have 45 million points like Barstool Sports founder Dave Portnoy)
- Use them for travel via AmexTravel.com or select gift cards at 1 cent per point (though most gift cards offer 0.7 to 0.85 cents per point)
Noticeably absent? Any mention of Amex’s 21 airline and hotel transfer partners.
Then they reveal the most popular redemptions for 2024. Drumroll, please…
- Covering card charges
- Paying with points at checkout
- Redeeming for gift cards
That’s based on total redemptions by U.S. Membership Rewards cardholders from October 2023 to September 2024.
Why This Is Fantastic for the Rest of Us
If you’ve ever wondered how Amex can afford to offer 3X to 5X earning on spending and 100K+ welcome bonuses, this is why. The vast majority of points are redeemed at terrible rates, and Amex is more than happy to keep handing them out because most people aren’t using them efficiently.
The reality is that many people don’t want to bother learning how to transfer points to Singapore Airlines and book a flat-bed seat to Asia. Even relatively simple transfers to Southwest or JetBlue yield 1.3 cents per point, and Delta SkyMiles—despite the jokes—still averages over 1 cent per point.
But instead of unlocking real value, most people are out here cashing in their points for Amazon purchases and statement credits.
And you know what? That’s fantastic news for us.
Final Thought
While I would never redeem my points that way, these low-value redemptions allow Amex to continue offering lucrative spending multipliers and massive signup bonuses.
So, to all of you cashing out your Membership Rewards at sub-1-cent value: thank you. Your redemptions help keep the gravy train rolling for the rest of us—who will happily keep transferring to Aeroplan, Avianca, and Hawaiian (while that Alaska Airlines loophole lasts).
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