Don't Let Frequent Flier Miles Take You For A Ride
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I have a lot of airline miles sitting around, and I’m sure many of you do too, accrued through years of travel and having tried a number of airline credit cards. In addition, we signed our kids up for frequent flyer accounts on our airline of choice (Delta) before they took their first flights.[1] But with us grounded for the foreseeable future, and Delta having conveniently taken down their SkyMiles Marketplace “for updates”, there aren’t many uses for these miles.
That’s why this recent NYT article - Airline Miles Programs Sure Are Profitable. Are You the Loser? - particularly resonated with me. These programs are not just profitable for the airlines, they are outrageously profitable, sometimes more valuable than the airline itself (crazy, right?). In addition to rewarding fliers, airlines sell these miles to the credit card companies, who then provide these miles to customers as credit card rewards on travel cards (as opposed to cash back or point-based cards). Selling these miles is extremely profitable because:
Many customers (like me) rarely redeem miles, instead letting them sit.
Others never accumulate enough miles for a flight, and those miles are never redeemed.
Unlike unclaimed property, miles are typically not the property of the customer, and often do not transfer with a person’s estate unless the beneficiaries jump through hoops.[2]
Over time, airlines can devalue miles, further reducing their value and cost to the airline. For a long time, Delta SkyMiles were derisively called “SkyPesos” because of Delta’s habit of flooding the market with miles, making it difficult to find available award seats.
The biggest problem with miles earned with a credit card (the most common source of miles for most people) is that they are rarely more valuable than the comparable cash rewards you’d earn with a 2% cash back reward card, such as my card of choice, the Citi Double Cash.[3] According to The Points Guy, the value of a frequent flier mile on various airlines generally ranges from 1-2 cents.[4]
In real-world use, I’ve found Delta SkyMiles to be worth meaningfully less, generally closer to 1 cent (and that doesn’t factor in that award tickets are generally ineligible to earn miles themselves). And of course, until one accumulates enough miles to earn a flight, the miles just sit there. I’m sure I’m not the only person who has accumulated small amounts of frequent flier miles with several airlines.
I know many people who swear by their airline miles card, and there is something attractive about being able to associate your rewards with something tangible (like a free plane ticket) rather than just reward dollars deposited into your bank account. But in most cases it is very dubious whether the value of the tickets earned through spending outweighs the cash rewards the person would have earned on a 2% rewards card. If you currently use an airline card for the bulk of your spend, now is a good time to calculate the value of the rewards you earned in the past year or two (your savings from any tickets or other rewards you purchased with your miles), making sure to add the additional perks included with the card, but also to subtract any annual fees. And if you’re not flying at all right now and pay an annual fee, you should consider cancelling your card altogether.[5]
Some other helpful frequent flyer miles tips:
If you have kids, make sure to enroll them in miles programs as soon as they are eligible (in the case of Delta at least, children can be enrolled at any time). Even 1-2 flights per year will add up over time.
If you have small amounts of miles spread across several airline programs (far too few for a reward ticket), consider trying to redeem them for magazine subscriptions, especially ones you currently pay for. Mags for Miles, the main magazine redemption provider for airline programs, has a surprisingly broad selection. Just make sure not to provide your credit card info or consent to automatic renewals.
When redeeming miles for flights, make sure to compare the miles cost to the dollar cost of the flight (just check what the flight would cost in dollars) to make sure you’re getting a good value per point. Generally, the best values per point are for premium seats or international flights. By contrast, redeeming miles for a coach ticket on a popular route is rarely a good value, generally yielding around 1 cent per point or even less.
And now…Andrew’s pick of the week:
The U.S. Elections Project
One of my favorite sites to obsessively reload is the (nonpartisan) U.S. Elections Project’s early voting tracker. Run by a political science professor at the University of Florida, the tracker aggregates early voting data reported by the 43 US states (and Washington, D.C.) and reports fascinating turnout data by state, even including party affiliation and location in some cases. As of the last time I refreshed, over 26 million Americans have already voted, 18.8% as many as voted in the entire 2016 election. I sent in my ballot last week - if you are hesitant to vote in person, I hope all of you do as well (this is a great guide to voting methods by state).
I hope this has been helpful. If you liked it, please share it with a friend! Also, please send me your feedback, requests, and success stories.
[1] It’s surprisingly easy - you just sign them up at the SkyMiles enrollment page and specify that you are the parent/guardian.
[2] I’d be shocked if more than a handful of people think about frequent flier miles when settling the estate of a family member anyway.
[3] As a reminder since this might sound like an endorsement - I am *not* compensated for anything I mention in this newsletter. I do this newsletter purely for fun and don’t make any money from it.
[4] I have mixed feeling about The Points Guy, which is an extremely lucrative business owned by Red Ventures, a massive private equity-backed multibillion dollar conglomerate of media properties. The site has a lot of useful info, but seems to constantly promote affiliated products and encourage people to apply for new credit cards to chase bonuses.
[5] Depending on the card issuer, you may even be able to get a recently-charged annual fee refunded.