Are Airline Flyer Miles Worth Your Time?

October 2, 2017

Author: Dave Gardner

As our recent cool weather in Colorado reminds us, fall is here and snow is near.  While many of us take it as a signal to get our skis ready for the season, it may spur you to plan a warm weather vacation for when the days are short and frigid.   Instead of having to pay for the tickets, wouldn’t it be better if you could use the airline miles you’ve been racking up through flights and credit cards?

Unless you have some Premier Exalted status, using your airline miles to purchase flights on your desired dates and with reasonable routing can be a near impossibility.  If your favorite flights are available, it may be in a category that requires you to spend twice as many miles as the lower redemption levels.

Before you jump up and down defending your six figure miles stash, think if you were to describe flyer miles to someone from another era.  One of best analogs can be found in the gullies of the Rockies: 19th century mining town scrip.  Like the company store of yore, the miles are largely only accepted at one place – the airline itself.

The terms and conditions of the frequent flyer programs state that the miles are only worth something if the airline says it is.  They can change the availability of seat awards, award thresholds for redeeming a flight, and can institute expiration periods that could decimate the miles you have worked so hard to earn.  These are not hypothetical concerns as mileage programs have introduced these changes.  And just like the Gold Hill miners getting paid in scrip good only at the company store, your miles earned through your flights and charges are only good at one place.

If the airline goes bankrupt, as most major carriers have at some point, you are worse than an unsecured creditor.  The airline owes you nothing for your miles unless it decides it’s in the airline’s interest.  Major European carrier Air Berlin declared bankruptcy this summer along with its frequent flyer program.  It’s uncertain whether miles accrued with them will be worth anything.

Airline miles even fall below the company scrip standard when it comes to trading them.  You are usually only able to transfer airline miles to another person if you pay for the privilege.  Let’s say each of your four family members has 23,000 flyer miles with United, and you want to consolidate them so you can redeem them for a round trip every day award ticket to Hawaii.  Three of you would pay $345 each (for a total exceeding $1,000) to transfer the points into one account.  Sure there are ways to find a lower award in many cases and more advanced transfer strategies, but you could easily pay more money to transfer miles to family than the miles are actually worth.

There are exceptions to this flyer miles value equation.  Those who use them to upgrade economy tickets to international business class are generally getting a good deal.  There always seem to be tremendous sign up offers for new airline credit cards, like the 100,000 mile bonus currently available for new British Airways VISA cardholders, provided they meet certain spending requirements.  Many airline branded cards with an annual fee give you free early boarding privileges and checked bag allowances.

But most of us would benefit more from a free, high payout cashback credit card, such as the Citi Double Cash at 2 percent and USAA Limitless Cashback Rewards which pays up to 2.5 percent.  If receiving mere cash back every month seems dull compared to shimmering visions of future worldwide travel, try hoarding your cashback balance until the end of the year.  Then use those funds to pay for your dream trip without paying an annual card fee and stepping through the byzantine rules of frequent flyer mile redemption.

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About Dave Gardner

David Gardner is a certified financial planner with a practice in Boulder County and can be reached at dave@confluencefa.com and at twitter.com/Dave_CFP.