Frequent flyers are facing growing challenges in maximising the value of their rewards as banks and credit card companies adjust their loyalty programs in response to regulatory changes. However, experts say the way travellers redeem their points remains a critical factor in obtaining the best returns.

As the Reserve Bank’s October 1 ban on credit card surcharges approaches, many financial institutions are revising their reward structures, prompting travellers to reassess the worth of their points. Specialists in frequent flyer programs emphasize that understanding the true value of point redemptions is more important than ever.

Adele Eliseo, founder of The Champagne Mile, highlighted that the value of a redemption often depends on the initial spending required to earn points. She suggested that a redemption value below half a cent per point is considered poor, around one cent is acceptable, two cents is good, and anything above three cents represents a very strong redemption.

Industry experts commonly agree that several popular redemption options offer significantly lower value compared to premium flight bookings. Among the least effective methods is exchanging points for gift cards. Eliseo pointed out that gift card redemptions typically provide around half a cent per point, far less than premium flight rewards. Steve Hui, founder and CEO of iFLYflat – The Points Whisperer, echoed this view, noting that redeeming points for gift cards is essentially swapping points for cash at a poor rate. However, he recommended purchasing gift cards with cash when bonus points are earned but discouraged spending points to acquire gift cards.

Similarly, redeeming points for merchandise such as electronics, apparel, or alcohol through airline online stores is viewed as an inefficient use of points. Brandon Loo, editor-in-chief of Point Hacks, stated that these “marketplace” redemptions often yield values of around 0.5 to 0.6 cents per point, substantially lower than the more than two cents per point often achievable with flights.

Qantas’s Points Plus Pay and Virgin Australia’s similar Velocity feature, which allow travellers to pay taxes and surcharges on reward flights with points, are also described as poor value. Loo noted that these redemptions typically offer only 0.6 to 0.7 cents per point, while economy and premium reward flights can deliver two to five times that value.

Recent changes to Qantas’s reward system, including the introduction of Classic Plus in 2024, have seen a significant expansion in available reward seats but with a steep increase in points required, sometimes four to five times more than before. Eliseo cautioned against assuming that all business or first-class reward seats represent good value, emphasizing the need to factor in sizeable carrier charges, which can reach nearly AU$2,000 for return Emirates business-class flights to Europe.

Hui also noted that economy reward seats frequently deliver less than a quarter of the point value of business-class seats, with some one-way international business-class redemptions worth up to seven cents per point due to their high cash prices.

Despite these disparities, many travellers continue to opt for low-value redemptions such as merchandise, gift cards, or hotel bookings. Hui suggested that some do so simply because it feels like a “free” purchase, while Loo acknowledged that casual earners of points who accumulate small balances might find it acceptable to redeem for gift cards or other convenient options, especially if the points were earned passively.

Ultimately, experts advise frequent flyers to carefully evaluate redemption options, as the difference in value per point can be substantial, potentially affecting the overall benefits of participation in loyalty programs.