What’s the real worth of all those frequent-flyer miles?
A few years back, some economist with nothing better to do calculated that frequent-flyer miles were the world’s third or fourth largest currency. The total value of miles in circulation can only have increased since then. But calculating aggregate value doesn’t really help anyone: The real test is how much miles are to you, individually. And that’s a surprisingly complicated calculation.
There’s an entire community of blogs devoted to frequent-flyer minutia and arcana. And they regularly post current values for airline miles, transferable bank miles, and hotel points. Most recently, Gary Leff ’s excellent blog, View from the Wing (viewfromthewing. com/value-of-frequentflyer-miles) posted its own latest values, alongside current values from two other top blogs, One Mile at a Time (onemileatatime. com) and The Points Guy (thepointsguy.com).
The interesting finding isn’t that they show substantial variance; they’re all in surprisingly close agreement on the value of miles in each program.
Giant airlines: 1.3 to
1.5 cents a mile, with Alaska and Korean a tad higher; Delta and Hawaiian a tad lower.
Bank cards with transferable miles (American Express, Capital One, Chase and Citi): 1.6 to 1.8 cents a mile.
Hotel points: 0.4 to
0.7 cents a mile, with Hyatt higher at 1.4 to 1.7 cents.
You won’t find much disagreement about collecting points by flying: Regardless of precise value, they’re worth something. The complexities arise with valuing miles earned by credit card. The problem is straightforward.
The best earning bank cards earn 2 cents cash per dollar spent, compared with one airline mile per dollar charged. A few even earn 2 miles. So, on average, regardless of airline affiliation, you’re better off concentrating your charges on a 2-cent- or 2-mile-back reward card than on an airline card.
Many cash-back credit cards earn only one cent per dollar, so your best bet is either to use a miles card or switch to a higher earning credit card.
Most airline cards earn one mile per dollar charged.
Some miles-earning bank cards offer premium rates — up to 5 miles per dollar charged — on some charge categories, so consider one of those cards for just the specific categories.
I’ve been amassing miles for years, and generally concluded that the best use was for premium cabin international trips. But those high value calculations you see comparing mile cost with cash cost for business class to Europe using regular business class fares are ridiculous. Sure, you can get a $4,000 business-class ticket on some lines for around 120,000 miles, but those miles are worth the calculated 3.3 cents each if — and only if — you’d be willing to pay $4,000 if you didn’t have the miles. I’d probably be willing to pay no more than $1,500 for that ticket, so the value of the miles to me is about 1.25 cents each. You can often catch airline flash sales for business class to Europe from the West Coast at less than $2,000 round trip, which puts the miles worth 1.67 cents.
And you also have to consider the fact that many 120,000-mile frequentflyer trips are available only on flights at unpopular hours or trips with multiple connections and long layovers.
Obviously, transferable credit-card points are better used for airline miles than hotel points. And just about everybody agrees that miles used for cash purchases are worth only 0.5 cents or less. Don’t use them for non-airfare purchases.
Only you can decide what any given set of airline miles is worth. Compare the cash price for a ticket you’d actually buy with the price in miles, and decide.
When I first looked, miles were really valuable: fares were consistent and award charts were more generous. But frequentflyer miles, do not improve with age. The quicker you use them, the more value you’ll retain.