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American Express Membership Rewards points (Amex points) are the most valuable rewards currency. Yet sadly, so many people waste them by getting a terrible value of just 1¢/pt. That’s unfortunate, but one thing’s for sure: at the very least, you should avoid promotions like the new current one for prepaid cards.

Here are the details, along with useful reminders for the world of travel rewards as a whole.

 

2 basic reminders

I’ll take this opportunity to make 2 important reminders:

  • Not all promotions are good deals
  • Redeeming points for gift cards or prepaid cards is almost never a good deal

First, as we often repeat, it’s important not to be gullible: just because a brand has a “promotion” doesn’t mean the promotion is any good at all. They’re often plain terrible; that’s just how it is. With all brands! A very recent example is the Marriott Bonvoy to Aeroplan transfer bonus last week.

Knowing how to do the math is literally 1 of the 6 most important things in the wonderful world of rewards. There’s no way around it, so get used to it now. It’s not that hard, and Flytrippers is here to help.

Second, it’s important not to confuse things that are very similar. One of the best pro tips is using gift cards and prepaid cards, but that is for earning points. That has nothing to do with using points for gift cards or prepaid cards; that’s almost always a terrible idea.

Knowing the redemption options for each reward currency is the most basic and most important thing you must do because the value varies so enormously from one option to another.

 

American Express prepaid cards “deal”

First, let’s explain what the “deal” is exactly:

  • You can redeem points for prepaid cards
  • At a better value than usual
  • 1¢/pt instead of 0.8¢/pt
Promotion (image credit: American Express)

 

Let me be very clear: there is literally nothing less savvy than redeeming Amex points for prepaid cards at the regular value of 0.8¢/pt. Nothing. Don’t do it. Ever.

At 1¢/pt… it’s still completely terrible.

Here’s why it’s such a bad idea… whether you unfortunately want to use lucrative Amex points for cash back or you want to maximize them.

 

If you want to waste lucrative Amex points for cash back

Why is it bad to get 1¢/pt with prepaid cards? 

Because in the worst case, you can always use your Amex points to get cash back in the form of a statement credit at that same value of 1¢/pt (and to be clear, that is still terrible; I’ll get to that in the next section).

This is extremely important to understand: why would you ever want a prepaid card instead of cold hard cash if the value is the same? That makes no sense at all under any circumstances. 

There aren’t even any exceptions; this should be extremely simple to get: either you get cash back directly on your statement (ultimate flexibility, and you keep your spending available for a credit card to earn rewards) or a prepaid card instead (literally no upside). 

If you use points for prepaid cards, whatever amount you spend on the prepaid cards, it’s an amount you waste completely, as you won’t be able to earn rewards at all with that spending.

We just shared a vital guide on how to earn rewards, and it’s truly not complicated: just never waste your spending at a terrible earn rate of 1% or 2% and instead get at least 10% and more back on everything (yes, that’s what you earn by unlocking welcome bonuses)! Really that simple. Maximize the rewards you get for the spending you do. 

Well… earning 0% on your spending is obviously incredibly worse than the already-pathetic 1% or 2%.

It makes no sense. If you want to cash out your points, you can do it as cash back and again: you get the exact same value!

Now, some will say “Well, what if I want to give cash to someone? A prepaid card is smart!” 

Indeed, it’s what you should always do when giving gifts: buy a gift card (better, as there is no fee) or a prepaid card (fee that’s worth it with the right credit card). 

But don’t buy them with points!!! 

Buy them at the grocery store with the American Express Cobalt Card that gives you a minimum of 5% in rewards. Even after deducting the activation fee on prepaid cards (≈ 1.5%), you’re still ahead by 3.5% in pure profit! 

And then, if you really want to use your points at this terrible value to pay for the prepaid card, you can apply your points to the grocery store gift card purchase for cash back on your statement. At least you’ll have earned an extra 3.5% so easily by not wasting your points on a prepaid card directly. Again, doing the math is important. Why wouldn’t you want a bonus 3.5% on the gift you’re giving to someone?

But it can be even better: our Flytrippers Valuation of the Amex points you earn at grocery stores is ≈ 7.5% (meaning you still earn a net of 5% despite the prepaid card activation fees). These are rewards of the more lucrative type with a value that’s literally unlimited, so it can be 10% or even more quite easily if you want!

 

If you want to maximize your Amex points

Everyone’s free to do what they want, and it is certainly fine if you want to use points at a lower value.

But if you do that with Amex points, literally the most precious and most valuable points in Canada, I’m not going to sugarcoat it: you’re really wasting your points.

Honestly, get different cards and keep the huge Amex welcome bonuses for when you either decide you want to invest a bit more time to maximize points or when you realize how much value you can get out of them.

For example, get the Scotiabank Gold American Express Card if you want a card that earns 5% (or even 6% at Sobeys-affiliated grocery stores) instead of the American Express Cobalt Card. Amex points are better if you maximize them, but if you’re gonna waste them at their low value for cash back… why bother?

Anyway, back to using Amex points. We have a whole post about this, but it can never hurt to remind everyone (given that many people still use valuable Aeroplan points for terrible things like toasters): you should almost always use rewards for travel. It’s that simple. 

The value is almost always higher, often much higher. There are exceptions, but Amex points are definitely not among those exceptions.

Just to show you how much value you waste by using Amex points as cash back, here’s a reminder of the value of the redemption options for the best bank rewards currency in Canada:

  • ≈ 2.1¢/pt to UNLIMITED: Specific flights in premium cabins with airline price charts
  • ≈ 1.5¢/pt to ≈ 2.1¢/pt: Specific flights in economy class with airline price charts
  • ≈ 1.5¢/pt to 2¢/pt: Any flights with the Amex price chart
  • ≈ 1.08¢/pt to UNLIMITED: Specific hotels with hotel price charts
  • 1¢/pt: Any trips on any website
  • 1¢/pt: Any trips on the Amex website
  • 1¢/pt: Cash back as a statement credit
  • 1¢/pt: Prepaid cards (with the promotion)
  • 0.8¢/pt: Prepaid cards (without the promotion)
  • ≈ 0.7¢/pt: Merchandise and gift cards

That’s really a huge difference and it’s easier to comprehend it when you look at the value of each redemption option for 60,000 Amex points (what you’ll earn with the American Express Cobalt Card’s welcome bonus):

  • ≈ $1260 to UNLIMITED: Specific flights in premium cabins with airline price charts
  • ≈ $900 to ≈ $1260: Specific flights in economy class with airline price charts
  • ≈ $900 to ≈ $1200: Flights booked with the Amex award chart
  • ≈ $648 to UNLIMITED: Specific hotels with hotel price charts
  • $600: Any trips on any website
  • $600: Any trips on the Amex website
  • $600: Cash back as a statement credit
  • $600: Prepaid cards (with the promotion)
  • $480: Prepaid cards (without the promotion)
  • ≈ $420: Merchandise and gift cards

With Amex being the only bank with a limitation on the number of times you can get the welcome bonus on each individual card (theoretically, because the limit isn’t always enforced after a few years), it’s definitely better to slot those amazing Amex deals into your travel rewards strategy when you’ll be ready to maximize the value of the points!

At 1.5¢/pt, that’s 50% more value than for cash back! That’s 50% more free travel! That’s the difference between just 4 trips a year and a much better 6 trips a year! Without even earning any extra points (and obviously you can certainly earn so much more too), just by using your existing points better.

In the meantime, there are plenty of other great deals, including 2 for October that give you $825+ in free travel as simple rewards that can be used for any travel expense at a simple fixed value!

 

Learning how to travel for less

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Summary

Many people use their American Express Membership Rewards points at a terrible value of 1¢/pt. I am reminding you how important it is to be able to do the math and understand how to maximize the earning of your Amex points and, more importantly, how to maximize their value. And just because there’s a promotion linked to points doesn’t mean it’s necessarily a good deal!

 

What would you like to know about the American Express prepaid cards “deal”? Tell us in the comments below.

 

See the flight deals we spot: Cheap flights

Discover free travel with rewards: Travel rewards

Explore awesome destinations: Travel inspiration

Learn pro tricks: Travel tips

 

Featured image: Maraú, Brazil (photo credit: Johannes Mändle)

 

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Andrew D'Amours

Andrew is the co-founder of Flytrippers. He is passionate about traveling the world but also, as a former management consultant, about the travel industry itself. He shares his experiences to help you save money on travel. As a very cost-conscious traveler, he loves finding deals and getting free travel thanks to travel rewards points... to help him visit every country in the world (current count: 71/193 Countries, 47/50 US States & 9/10 Canadian Provinces).

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