Miles Aren't Free: Establishing An Overall Value

Hello, my name is Tom and I'm a domestic economy redeemer. You've heard of people like me? Well, I'm one of them. Really.

I'm more than delighted to redeem AA miles for a $450-$500 domestic roundtrip, a trip I have to take anyway. I consequently value AA miles at maybe something like 1.5 cents and, absolutely yes, I wouldn't dream of using a miles card for ordinary daily 1x spending. That's why God, or Citi anyway, created the Double Cash card (2% cash back).

The consequence of the foregoing means that the Prestige, with its 1.6 cents per point and its 3x bonus categories, essentially combines with the Double Cash card to squeeze out mileage cards completely. In other words, for me it's the Double Cash for daily unbonused spending and the Prestige for air/hotel spending at 3x. (Citi also gives me an annual 25% points bonus.) There's no room for anything else, analytically speaking.

The other key point here is that efficient miles usage requires the finding of "saver" space while TYP usage for an AA ticket is an "any ticket/any time" redemption.

That's the simplified version of what I do.

I'll leave Amex points and short-haul Avios redemption on AA for another day since, as Travis has already noted, when you really dive into this stuff the analysis can get somewhat involved.

Nice exercise, but much like many in the scientific world, convenient assumptions like ignoring spend to meet sign-up bonuses and ignoring category bonuses, to make a theoretical point rings hollow as I think few, unless they are meeting minimum spend to get a sign up bonus, are only spending at 1x.

Cash back at 2% is better than earning miles at 1x = not such an earth shattering discovery!

I would recommend using more realistic factors in the next exercise.

According to your chart, sign up bonuses = stupid stuff
I personally just value my miles at 2c per mile. It makes the math easier when I do it in my head at the store. $200 VGC at 5x = 1000 miles = $20 which is more than the $7 fee.

Travis, there are other factors that can sometimes make it worth buying miles at the same or even a higher price than you redeem them. For example, the flexibility of Southwest awards (which are fully refundable) makes it worthwhile for me to make award booking when my plans are likely to change, and revenue bookings when my plans are firm. (Yes, revenue bookings have no change fee, but the restrictions on reusing the funds make them much less flexible than award bookings.) Bottom line - if I'm short on Southwest miles, I'm willing to pay a little more for them than their redemption value to gain this flexibility.

(Along the same lines - when Southwest dropped some fares recently, I changed a points booking to save 2,000 points, but did not change a revenue booking to save $30.00, even though the value of the savings was about the same, because of the added hassle of tracking and reusing the ticketless travel funds.

Also, I find I can almost always get greater value out of un-bonused spend with miles and points than I can with cash back. For example, SPG Amex points are worth about 2.2 cents each, so wherever Amex is accepted I use the SPG card for un-bonused spend. And I'm always chasing annual or other bonus thresholds (for example $10,000 spend on Citi HHonors Reserve for an annual free night, or needing some additional Southwest spend to renew my Companion Pass).

UAPhil -- I agree. I generally put unbonused spend on SPG as well, as I value them at greater than 2 cpm.

Tom -- I think you are reading into something that isn't there. Calling something a stupid (or silly) way to earn miles is based on the activity -- signing up for MyPoints, for example, or getting a consultation for hair loss (back in the day, that earned up to 20K I think). It's not a judgement on whether those miles are cheap at all -- just so happens that my example for that category was actually really lucrative.

I would put credit card signup bonuses in their own category. I just didn't include them in this analysis. But yeah, they generally have a very low acquisition cost as well.

The MyPoints 750 point bonus's "sweet spot" is to keep miles from expiring. For example, my partner has about 50,000 UA miles in her account, but all her recent UA flights have been on awards booked from my account. So she hasn't had real activity in her account for over three years. She's kept her miles alive with small transactions like the MyPoints bonus, and buying a single digital track for 110 points. (Buying magazine subscriptions is another low-cost technique.)

Great, another post about how miles aren't free - how many more of these are you going to post. We're not idiots you know