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Senator Robert Menendez — possibly corrupt, definitely bad at using AmEx reward points

Kena Betancur/Getty Images

Only a jury can decide whether Senator Robert Menendez (D-NJ) is guilty of corruption, but based on the facts alleged in the federal indictment he is definitely guilty of poor credit card reward points management.

Consider this:

From on or about April 8, 2010, through on or about April 11, 2010, MENENDEZ stayed in an executive suite at the five-star Park Hyatt Paris-Vendôme valued at $4,934.10. MENENDEZ solicited and accepted from MELGEN 649,611 American Express Membership Rewards points (hereinafter "AmEx points") in order to pay for the suite.

In other words, Menendez and Melgen scored about 0.76 cents' worth of value per AmEx point. That's not very good.

AmEx Pay With Points is a bad deal

"If you use your American Express rewards points right, you can get a value of 1 cent per point or better," according to NerdWallet's Tim Chen. "But if you choose the wrong option, you’ll see your rewards rate slashed."

How did Menendez and Melgen end up going wrong? Well, the deal was done via American Express's Pay With Points option — which, as Chen explains, is a bad deal. "If you book travel through AmEx, you get a lower rewards rate. Plus, you can’t take advantage of discount sites like Kayak or Orbitz, so you’re trusting your savings to a company that has no incentive to give you the best deal."

What should they have done? Well, there are two sensible options for a rich man trying to use credit card reward points to bribe a US senator with a free hotel stay in Paris:

  • Transfer AmEx points to Starwood points and book the senator at a Starwood hotel like the nearby Paris Westin.
  • Use Chase points instead of AmEx points, transfer them to Hyatt, and use those to book the senator at the Park Hyatt.

The Starwood option

The simplest way to get value out of American Express Membership Reward Points is to buy gift cards. There, you generally get a one-point-equals-one-cent exchange rate, and that's both pretty decent and pretty simple. But that won't get your senator a trip to Paris. And both timing and location are key here: Menendez wanted to stay at the Park Hyatt because a woman he was having an affair with was also there on those nights.

More complicated but more optimal is to take advantage of the various time-limited transfer bonus programs that pop up and let you turn AmEx points into airline or hotel reward points at favorable rates.

But a decent fallback option available at all times is to turn AmEx Points into Starwood Hotels points at a ratio of three AmEx points per Starpoint. This won't get you to the Park Hyatt Paris-Vendôme, but it will get you a suite at the Westin Paris, which is also located at the Place Vendôme and thus appropriate for a tryst. This is a lower-end Tier 6 hotel, so a basic room there costs 20,000 Starpoints per night and a suite upgrade costs another 20,000 per night. For three nights, that's 120,000 Starpoints, meaning 360,000 AmEx points, which is way less than what Melgen used. For an extra 40,000 Starpoints, Menendez could have both booked a fourth night and taken advantage of Starwood's "fifth night free" program to end up with a five-night stay. And who doesn't need a little more Paris in his life?

For a slightly fancier experience, Menendez could have stayed at the also-nearby W Paris for 50 percent more Starpoints. The 180,000 Starpoints comes out to about 540,000 AmEx points, which is still a way better deal than the Hyatt.

Use Chase points to stay at the Hyatt

All that said, while American Express cards have certain virtues, Membership Rewards just isn't the best rewards program out there. Lots of people are best served by simple cash-back reward programs. But if you're looking to turn credit card points into travel loyalty program benefits, Chase's program is often the most favorable — in part because Chase points are easier to earn than AmEx points.

This is especially true if you're interested in staying at a Hyatt. Chase Ultimate Reward points can be turned into Hyatt points at a 1-1 ratio. The Park Hyatt in Paris is a Hyatt Category 7 hotel, so a suite there would cost 48,000 points per night.

That means if Melgen had used Chase Ultimate Rewards points rather than American Express Membership Rewards points he could have gotten the exact same hotel room for 144,000 points instead of 649,611 points. Sloppy!

The cash option

Lately the trend in political corruption has been politicians — former Virginia Governor Bob McDonnell, for example — accepting gifts from wealthy supporters. But as the Menendez case shows, unless you're quite savvy it's actually very difficult to get good value from in-kind gifts.

Accepting gifts rather than money may feel less subjectively bribe-y to the individuals involved. But in many ways it is difficult to beat the efficiency and anonymity of old-fashioned cash. Suppose Menendez had simply booked the hotel himself and Melgen had mailed him an envelope full of euros, awaiting Menendez's arrival at the front desk — who would be the wiser? Credit card reward points leave nasty paper trails. If you can use them properly, it may be worthwhile. But as we see, many politicians (allegedly!) on the take don't know how to do this. If you're not interested in really diving deep into the weeds of how these programs work, stick with the money.

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