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Does it Make Sense to Purchase Airline Miles?

I cannot tell you how many emails I get each week trying to get me to buy airline miles. It is typically American and Alaska who offer “bonus” miles or “extra” miles when you purchase miles during the promotion.

Is purchasing miles a good deal?

Whether or not it is a good deal ultimately comes down to the value you can squeeze from the miles. If you are buying miles simply to use them for a domestic economy round-trip, it is usually NOT a good deal. If you are going to use your purchased miles for a one-way flight in business class to Japan, it MAY be a good deal.

Before you start thinking about purchasing miles to have to know how you are going to redeem them. The most popular miles to purchase are Alaska Airlines and American. These airlines allow you to use your miles on many of their partners for first class international flights.

 

What if I need just 1,000 miles so I can get a free ticket?

This is what we call, ‘topping off”. Let’s say you have 11,670 American miles, just shy of the 12,500 needed for a one-way domestic flight. Is it worth buying 1,000 miles to reach the threshold? Well, sadly it will cost you $61.00. Is that not insane?

I rarely find it logical to buy points to top-off. You would be better off renting a car with American’s current promotion. With Avis or Budget, you simply need to rent a car for a minimum of three days to earn 2,500 miles. Even if you spend $100 for the three rental days, you are still in better shape than paying $61 for nothing (well, 1,000 points). At least you have something to show for your money spent plus you will earn 2.5x the miles.

 

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$61 for just 1,000 American points – not a good value

 

Not so fast with a miles/points purchase.

Another thing to note is that American Airlines offers short-haul flights for just 7,500 miles one-way. So before you start booking rental cars or buying points, think of where you could travel for under 500 miles one-way. San Fran to Los Angeles, New York to Boston, Miami to Tampa or Chicago to Minneapolis would all qualify. Alaska offers 7,500 mile one-way intra-state flights. That means San Diego to San Jose would qualify.

 

I can keep my points from expiring?

It may make sense to purchase miles if your large pool of miles are about to expire. Most airline/hotel miles expire in the 18-24 month range. Good news is that Delta miles DO NOT expire. If you had 20,000 United Airline miles, you could keep them from expiring by purchasing just 1,000 miles. Another option is to fly on a paid flight and that will also restart the 18 month clock.

You can fly from Phoenix to Los Angeles for $42 one-way on United, earning you roughly 150 redeemable miles. That isn’t a ton of earned miles but it would restart your 18 month expiration clock saving your points. Not to mention you get a flight instead of just buying 1,000 miles.

 

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81,000 Alaska miles for $1,773.75

 

What about buying points during a promotion?

Right now you are able to buy 81,000 Alaska miles for $1,773.75. That sounds like a LOT of cash, and it is, but we’ll look at what those miles can get you.

 

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Same flight is $2,008 if paying cash.

 

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Only 50,000 Alaska miles plus $19 for one-way BIZ class to Tokyo

 

That’s fancy.

For a business class seat from Los Angeles to Tokyo you can either pay $2,058 cash or redeem 50k Alaska miles + $19. Keeping in mind that 81k Alaska miles can be purchased for $1,773, it would make sense to purchase miles and use them to book your flight to Tokyo on American Airlines. (The two airlines are partners)

You would save over $275 and have 31k Alaska miles left over after booking your business class ticket from LAX to HND. With your left-over miles you could book a one-way return flight from Tokyo in economy for 25k Alaska miles + $55. The key is to research your redemption options and compare the cash ticket price vs award price BEFORE purchasing miles.

 

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Your business class seat on the AA 787-800, not a bad way to spend 12 hours. Image Courtesy of American Airlines

 

Do’s and Do Not’s

I do not recommend purchasing miles on airlines that have dynamic award pricing. Southwest, JetBlue, and Virgin America all relay on a dynamic award pricing structure. This means that the cash price of the ticket will equate to the number of points needed for the given flight. A Southwest flight that is $100 will require roughly 5,500 points. A $50 flight will require roughly 2,750 points.

Because there are typically no “sweet spots” with dynamic pricing, it almost never makes sense to purchase miles/points with these airlines. Alaska and American used fixed award pricing which means that the cash price of the flight does not directly correlate to the number of points needed. Calculate the number of points required versus the cash price of a ticket and MAKE SURE you are getting over 1 cent per point.  (1.5 cents per point is a better target)

 

Phoenix to San Francisco one-way; $56 cash price or 12,500 American Airlines miles. The math is: 56 divided by 12,500 = .004 or .4 cents per point. VERY BAD redemption.

Phoenix to Miami one-way; $256 cash price or 12,500 American Airlines miles. The math is 256 divided by 12,500 = .020 or 2 cents per point. GOOD redemption.