A Point is Not A Point (At Least As Far As Airline Miles Are Concerned)

Along with my previous post about how easy it is to accrue points and miles, I thought it would be a good idea to illustrate the difference in value between various points and miles.  I think this is one of the most overlooked comments when people try to redeem their points or miles.  After all, if you can redeem them for a free airline ticket, that’s great, right?  Maybe.

Easy example.  Let’s say you accrued 25,000 miles on American Airlines.  You need to buy two airline tickets for you and your significant other for an upcoming vacation.  One ticket is going to cost you $250, the other is $1,000.  You can use your miles to buy either ticket.  Which one would you use your miles for?

Here’s hoping everyone answered that they would use points to cover the $1,000 ticket.  🙂

If you use the points for that ticket that would have cost you $1,000, then you only have to pay $250.  But, if it’s the other way around (you use the points to buy the ticket that’s $250), you have to spend $1,000 for the other ticket.

Now, let’s take it a step further.  You only need to buy one ticket right now to fly to Florida on vacation.  You can use your miles or spend $250.  Easy answer is to use the miles so you don’t have to spend the $250.  But, what if you were going to Hawaii 6 months from now, and that ticket was $1,000.  Well, certainly you’re better buying the $250 ticket and saving those miles for the Hawaii trip.

Those of us that are obsessed about points and miles use some terms like “CPM” or cents per mile.  For example, if you had to use 25,000 miles to buy that $250 ticket, well, that would mean you got a redemption value of 1 cent per mile ($250/25000 miles).

But, if you use the 25,000 miles for the $1,000 ticket, your redemption rate is 4 cents per mile.  Much better, right?

So, what the heck does this have to do with the relative value of a point or mile?  There are a lot of different places you can earn points just by getting a credit card affiliated with that program.  Every major airline and hotel chain have their own branded programs.  So, which one is the right one?

My sister has mentioned to me on more than one occasion that she has a credit card for Spirit Airlines.  Now, I wouldn’t be caught dead on Spirit, but they serve a purpose.  She collects miles on that card because she can fly Spirit around the US, and to some select Caribbean and South American destinations.

If she spends $1 on the Spirit card, she gets one  mile.  Let’s just say that Spirit is charging 25,000 miles to get to California from New Jersey.  That means my sister needs to charge $25,000 on her Spirit card to earn that free ticket.

But, what if she got the Starwood Preferred American Express card instead?  Well, then she would earn one Starpoint for every dollar spent.  Then, she could redeem those points by transferring them to a number of different airlines (American, Delta, Virgin, and a bunch of others).  And, for every 20,000 points she transferred, Starwood gives her a 5,000 point bonus.  So, now she only needs to spend $20,000 on a credit card to earn that free ticket to California.  20% discount just for using a different piece of plastic.

Take it a step further.  Go get a Chase Sapphire card.  You can read more about this on the View From the Wing blog. But, the basics are you can earn 2 points for most travel dollars and some everyday purchases.  Plus, you get a 7% bonus at the end of the year for everything spent on the card.  Now, instead of needing to spend $25,000 on a credit card to get that free ticket, you can spend more like $12,000 (or possibly less).

As you can see, not all points are created equal.  Starwood and Chase Sapphire are my two current favorites.  No question different points and miles fit different people.  It depends on some degree where you’re traveling and who’s going along.  Coach or First Class?  First Class for me, thanks!

Hope people find this information helpful!