The True Value of Points - Why the Experts Are Dead Wrong
The True Value of Miles – Why the
“Experts” are Wrong
I really never understood why anyone would buy miles for
their Frequent Flyer account. If I could
“earn” 1 mile per
dollar spent on my credit card (or sometimes more), paying more than a penny
per mile to purchase them never seemed to make economic sense. OK, I understand
there might be times that you need to top off an account to purchase an award
ticket that you would like to book NOW!But, to go to the airlines and say “I
want to buy 50,000 miles ”
seems crazy to me! I don't care that you use it for aspirational award travel and can get 5 cents per mile for your 1st class seat.
I was reading one of my favorite blogs the other day. The author is one of the most respected Bloggers on the subject of points and miles. He is widely considered to be an expert on the subject. His blog has some great tips and he seems to really know how to work the system. In this particular post he was touting this great American Airlines promotion to purchase miles. He went through all the calculations in detail showing how the cost was just slightly more than 2 cents per mile. He then said this is the lowest price he’d EVER seen from AA! He did stop short and say that unless the price was about 10% less, even he still wouldn’t buy them. That brings me to today’s point.
Now how hard to you have to work to recover those 50,000 miles or the $500? I will leave the $500 portion of the question
up to the reader. If I apply for a new credit card that has a 50,000 mile sign up bonus with a
minimum spending requirement of $2500, I need to spend $2500 from my checking
account to obtain those 50,000 miles . What if I don’t need $2500 worth of stuff
right now? Here’s the simplicity of it all and why the “experts” are wrong. If I purchase $2500 worth of VISA or MC gift
cards with my new credit card, (assume each gift card costs $5) I will have met
the minimum spending requirement and will have replaced the 50,000 miles in my account. Now, what do I have left? I have $2475 in my checking account ($5000-$2500
in gift cards -$25 fee for the cards).
But I still have $2500 in gift cards to spend. Since gift cards are almost exactly the same
as cash, I have really only "spent" $25 to obtain the 50,000 miles ! By my calculation,
that’s a cost of just under .05 cents per mile as you actually now have 52,500 miles in your account. As
far as I can tell .05 cents per mile beats 2 cents per mile any day. The airlines have to be laughing at us when
we purchase miles like that!
As far as Hilton points being the least valuable, on a point per point basis, yes they are not worth the same as a Starwood or Ultimate Reward point. I can however EARN Hilton points by the boatload! I get 6X Hilton points per dollar on purchases at supermarkets and drug stores and 3X points on everyday spending. With the new Bluebird card, I can purchase Vanilla Reload cards at CVS or Walgreens and earn them back at a very rapid rate. Again the question comes down to, how hard do I have to work to earn back Hilton points?
In the end, we all have to be comfortable with the
purchasing decisions that we make. I
would never pay cash for a hotel or airline ticket if I could earn back those
points so easily. Obviously this strategy
will not always work as there are not always deals available when you need the points. The points and miles don't post right away either. There are times
that paying for a flight or hotel room makes perfect sense. We just have to make an informed decision
about the true value of points and miles.
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About THE POINTS DOCTOR
THE POINTS DOCTOR is Bruce J. Wilderman DDS of Artistic Expressions Dentistry. Dr. Wilderman has a practice limited to Cosmetic Dentistry, serving patients of the Philadelphia Area since 1986. He and wife of 40 years have enjoyed traveling the world in first class since 2012 for little or no money with the points and miles they have earned from the credit card companies. Dr. Wilderman with his 10+ years of experience in the field of miles and points would love to teach you how to do the same. You may reach him at ThePointsDoctor@gmail.com.
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