Diversify Your Miles and Points Portfolio: Top 8 Reasons

Miles and points are not an investment or a nest egg–they will devalue over time, and sometimes dramatically. Witness the multiple devaluations of Aeroplan miles in 2011, from the new award chart to new fuel surcharges imposed on Lufthansa and fuel surcharges on other Star Alliance partners, and the major devaluation of British Airways miles, now known as Avios, also in 2011 (see British Airways Avios: Goodbye First Class on Cathay, Hello Coach on American).

That said, it's still useful to apply at least one principle from your investment portfolio to your miles and points portfolio: diversification. Not infrequently, I run into folks either socially or via my Award Booking service who have virtually all their points in a single program, often Membership Rewards. Now, a large Membership Rewards balance is not a bad thing on its own, especially since you can now book Singapore Suites Saver Awards with Krisflyer miles, and Membership Rewards points transfer 1:1 to KrisFlyer, but I still wouldn't recommend having all your eggs, er points, in one basket. Here's why:

1. Hedge Against Devaluation

By spreading your miles and points accumulation among several frequent flyer and loyalty points programs, you won't be stuck frantically trying to book most of your reward flights when a devaluation is announced (or is coyly NOT explicitly announced, as in the case of British Airways). Note that you can only book tickets for about a year in advance of travel, so you if you have 1 million miles or points all in one program and that program is devalued, there go the trips you were hoping to take several years from now, until you rebuild your balances.

By instead only having up to a few hundred thousand miles or points in any one program, you'll be able to use them to book awards when a devaluation is announced, then re-evaluate how much you want to earn in the devalued program.

2. Cherry Pick the Best Values in Each Award Chart

Most award charts have some gems and some pretty poor values as well. For example, 135,000 American AAdvantage miles for Cathay First Class from the U.S. to Asia is great, especially with low taxes and given the British Airways devaluation. Similarly, if you can manage to snag Lufthansa first class roundtrip and use a United free one way to maximize your award, that's a great value. Even the much maligned British Airways Avios have good values, such as 25,000 Avios each way for business class on Cathay Pacific NYC to Vancouver, or for LAN business class from Miami to Lima–and both of these have pretty low taxes, since you're not on British Airways metal going through London. On the other hand, you probably don't want to pick British Airways for first class from the U.S. to South Africa, or build up US Airways miles for a planned redemption on Lufthansa first class (which US Air blocks) or build in an international stopover with an AAdvantage award on an all-Cathay itinerary since you'll need to pay separately for the two legs.

3. Access More Airline Partners

If you only build up AMEX Membership Rewards points, your redemption options will be fairly limited, at least if you want to get the most value from your points (hint: avoid ever using Pay with Points). You won't be able to transfer to United MileagePlus or American Airlines and use those award charts, so for most the best transfer values will be to British Airways (especially with transfer bonuses) and Singapore KrisFlyer. And don't be fooled by seeing Swiss Airlines and Qantas among the partners–those are for economy tickets only, and who wants to fly Qantas and Swiss in economy when you could be in business or first class?

4. Flexibility to Book Where Availability Is Best

Can't find the availability to Australia you need with Delta on V Australia? Try US Airways and route via Asia. Having trouble getting business class to Europe in the summer with United miles? Try KrisFlyer miles to get to Frankfurt or Moscow, with a cheap connecting flight to your final destination. If you have good balances of miles or points in several programs, you give yourself flexibility and improve your odds of finding an award ticket.


5. Book Backup Flights

Lufthansa First Class remains one of the best ways to get to Europe in comfort, but unfortunately is only bookable up to 15 days out. Since you don't want to be stuck without a flight, you'll probably want to book a backup flight, and having other types of miles and points in addition to United MileagePlus enables you to have backup plans in case those sought-after award seats never materialize for your dates.

6. Take Advantage of Signup Bonuses

Signup bonuses change often, and are spread among different credit cards and different miles and points earning programs. Check out Best Travel Credit Cards for our current top picks, including 100,000 Ultimate Rewards points if you apply for both the Ink Bold and Ink Plus, up to 100,000 British Airways Visa offer, 100,000 AA miles from 2 AAdvantage card applications and others, but also check your email and snail mail in case you're targeted for an even better offer. 

7. Leverage Category Bonuses

In addition to sign-up bonuses, one of the best ways to earn lots of miles and points is to use a credit card that earns bonus miles for the transaction you're making, for example:

  • Ink Bold or Ink Plus: 5X points for office supply store spend, including gift cards
  • Sapphire Preferred: 2.14X points for all dining and travel spend
  • AMEX Premier Rewards Gold: 3X for airline spend


8. Take Advantage of Transfer Bonuses

AMEX periodically runs transfer bonuses to British Airways Avios; currently, through January 14, it's 30%. The SPG AMEX is also running a transfer bonus on top of its regular 25% transfer bonus for transfers in increments of 20,000 points, totaling up to a 56 Percent Transfer Bonus to British Airways from SPG (there are also transfer bonuses from other hotel loyalty programs, but the transfer ratios are so poor they're really not worth considering).

This is why my most recent credit card applications were for:

Ink Plus: 50,000 Ultimate Rewards points transfer 1:1 to several partners, best values = United and Hyatt

Citi Business AAdvantage: 50,000 AA miles

Mercedes-Benz Platinum AMEX: 50,000 Membership Rewards points transfer 1:1 to Singapore KrisFlyer

SPG Business AMEX: 25,000 SPG points and 2 stay credits, to help me retain SPG elite status


How diversified is your miles and points portfolio?


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