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In April, Southwest published a boatload of new program updates in response to COVID-19. The most notable of these included Companion Pass extensions, travel fund extensions, and lowered elite status qualifications. Interestingly, Southwest also promised a new ability to convert Southwest travel funds into Rapid Rewards points.
At the time, the details were pretty slim. We didn't know when this ability would start, which vouchers would qualify, and (most importantly) what conversion ratio Southwest would offer. Now, we have answers! It appears that the ability to convert Southwest Travel Funds into Rapid Rewards points is now live.
Offer Terms
- Convert Southwest travel funds to Rapid Rewards points now through December 15, 2020
- Travel funds must have an expiration date of September 7, 2022
- The name on Rapid Rewards account must match the travel fund exactly
- To qualify, funds need to have originated from a ticket purchased from Southwest.com, booked by a Southwest Airlines Customer Service Agent, or approved by your employer
- Rapid Rewards points can't be used to pay for taxes and fees
To access this new ability, start by logging in to your Rapid Rewards account. You'll see the “My Travel Funds” banner at the top of the screen. You can convert your travel funds by clicking “View Travel Funds”. In case you haven't already saved your travel funds to your account, you can also use this section to look up your unused travel funds.
Southwest Travel Funds Conversion Rate
For each dollar on a qualifying travel voucher, you receive 78 Rapid Rewards points. This ratio falls in line with the redemption values we usually see from Southwest of between 1.3–1.4¢ per point.
Take the voucher pictured below:
Converting this $180.98 voucher results in 14,116 Rapid Rewards points, equivalent to “buying” points for 1.28¢ each. That's a great deal for your stranded funds!
Is it a good idea to convert Southwest travel funds?
In a word: yes.
Southwest travel funds are created when you cancel a “Wanna Get Away” fare. The upside is they allow you to retain the value from your booking, even after canceling. The downside is they come with some limitations that can make their use difficult:
- Travel funds (normally) expire one year after the original travel date.
- You can only use travel funds for the original traveler.
On the other hand, Rapid Rewards points never expire and can be used to book travel for anyone. This flexibility makes points more valuable than travel funds for most travelers.
The lucrative conversion ratio only serves to strengthen the argument further. Given that Southwest locks the redemption value of Rapid Rewards points between 1.3–1.4¢ each, buying them for 1.28¢ represents a modest discount.
One reason you might not want to convert Southwest travel funds
The one exception I can think of is if you're chasing Southwest elite status. Using a travel fund is like making a cash booking. By that, I mean your flight will count towards elite status and companion pass qualification. Booking travel with Rapid Rewards points, however, does not. So, if you're trying to earn A-List or A-List Preferred status, you may want to keep your Southwest travel funds.
Other Implications
This new system creates numerous interesting opportunities, which lead to some exciting (and perhaps troubling) implications:
Buy Southwest points for 1.28¢ each
All travel funds created through September 7, 2020 are eligible for this conversion. Hypothetically, you could book a trip with cash, cancel the trip (creating a travel fund), and subsequently convert it to points. That effectively allows anyone to buy Southwest points for 1.28¢ a piece.
“Pseudo-transfer Bonus”
Using a flexible point currency (like Chase Ultimate Rewards or Citi ThankYou points) to book Southwest travel could result in a pseudo-transfer bonus situation. For example, if you hold a Chase Sapphire Reserve®, your URs are worth 1.5¢ each through the Chase Travel Portal. Consequently, you could book a $200 Southwest flight (via phone agent) for 13,333 URs.
If you cancel this ticket for a $200 travel fund, you could exchange the fund for 15,600 Rapid Rewards points. Voila! A 17% Chase-to-Southwest “transfer bonus”… sorta. Booking Southwest flights with Ultimate Rewards points requires calling in, so it's not going to be an easy process. But it's interesting to think about.
Breakage and Devaluation(?)
Rapid Rewards points and Southwest Travel Funds are both financial liabilities for the airline. However, travel funds can expire unused. This is called breakage, and it's obviously very beneficial for Southwest. On the other hand, points never expire. So, there's far less breakage.
Airlines are already struggling, and Southwest is no exception. This conversion tool could put even more of a pinch on the airline. Under normal circumstances (what is “normal” again?), situations like this tend to foreshadow program devaluations. So, it's possible that we might see Southwest lower the fixed value of Rapid Rewards points in 2021.
Bottom Line
Rapid Rewards members can now convert Southwest travel funds to points at a rate of 78 points per dollar. Not only is this a lucky break for folks holding these funds, but it also opens an opportunity for everyone else. If you have Southwest travel funds expiring on September 7, 2022, you ought to think seriously about converting them to points. And you only have until December 15, 2020 to decide.
Do you plan to convert your Southwest travel funds to Rapid Rewards points?
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