Buying Miles

Discussion in 'Newbies' started by nleuck, Feb 4, 2013.  |  Print Topic

  1. nleuck

    nleuck Member

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    Newbie here. I hope this hasn't been covered; my search didn't deliver anything...

    I've seen the deals that airlines have been putting out to buy miles. I'v read about when buying miles can be a good idea (topping off, etc.) I can see how you can figure out exactly what it ends up costing on a per mile basis. My question: Is there a good rule of thumb for what is considered a decent deal for just straight up buying miles to have them? (i.e. what is a good cut-off price? 2 cents per mile and under? less?)
     
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  2. malikguy

    malikguy Silver Member

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    For AA, generally miles are estimated to be conservatively worth 1.8 - 2.3 cents per mile so the current 90K Buy Miles deal is a good deal for AA. You can use this as a good cost basis.

    If flying with AA, try to book MileSAAver tickets whenever you can and I think for the most part that you will get the best value out of International fares. Try to treat your miles like cash based on the cost basis I provided and it will definitely help you determine if you are getting the best value for your miles.

    I don't know how this translates for other airlines but I do know it will vary quite a bit. I personally like to buy miles because I can float the cash and I know that I will always have International travel planned.
     
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  3. Sweet Willie
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    Sweet Willie Gold Member

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    I personally wouldn't buy miles unless I have a specific use in mind for the purchased miles. An easy rule of thumb, is it cheaper to purchase miles than to buy the ticket you have in mind? (& is award space usually available for the route/class of cabin you want?).
     
  4. anabolism
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    anabolism Gold Member

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    My advice? Forget the rules you read about 2c/mile or whatever.

    As I see it, there are two kinds of miles coming in: those you pay extra to get, and those you don't. The first group includes buying miles, paying a surcharge to use a mileage-earning credit card, paying more for a product from a merchant offering miles, etc. Just device how much you pay to get the miles by the number of miles you get, and that's the cost per mile.

    Next, consider how you use miles. Do you use 25k miles for a domestic coach round-trip that would otherwise cost $250-$350? Do you use 200k miles for an international first class award that would otherwise cost $15k? Perhaps your usage falls in between, or outside these examples. Just divide what you're saving by the miles you're spending, and get your own personal value per mile.

    As long as your cost per miles is lower than your personal value per mile, paying the cost makes sense for you.

    (As for me, I'm happy to pay 2.5 cents per mile for miles I'll spend at 10 cents per mile.)

    And welcome to Milepoint, nleuck!
     
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  5. HaveMilesWillTravel
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    HaveMilesWillTravel Gold Member

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    The key here, in my opinion, is not to get carried away with what the sticker price of the ticket is. I would be willing to pay $250-$350 for that domestic coach ticket, but I personally would NEVER pay $15k for an international first ticket, and so those 200k miles are not worth $15k to me. I'd be fooling myself if I considered that (7.5 cents) the value of the 200k miles. The airline could jack up the F ticket price to $50,000 and hyper-inflate the value of my miles otherwise :)

    That I agree with, but my definition of personal value depends not on the price of the ticket, but what I realistically would be willing to pay for it in cash.

    To make things a bit more complicated, though, I tend to also factor in the cost of the miles I don't earn on an award ticket (vs. revenue ticket) as well as the potential cost of the EQMs (if I am interested in earning status).
     
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  6. anabolism
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    anabolism Gold Member

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    So how do you value a ticket that you would never realistically pay for with cash? An international first-class ticket is rarely cheap enough to fall into that realm (outside of rarities like the Easy-Up fares from December), so using miles for it may be the only shot (or buying business and upgrading with miles or a VIP, in situations where this is possible and realistic for the traveler). How do you value something that you want but can't afford?

    Both are valid costs, but should be considered separately, IMHO. The opportunity cost of losing elite-qualifying points/miles/sectors vanishes if one will re-qualify anyway. The opportunity cost of the lost redeemable miles should be added to the incidental cost of the trip, which includes the taxes, fuel surcharges, ticketing fees, etc., plus food and lodging.
     
  7. HaveMilesWillTravel
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    HaveMilesWillTravel Gold Member

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    Example: C from SFO to FRA costs $10k+ on United. I have bought Z fares for $3200 on that route. I cannot see myself going above $3500. So the 100,000 miles that I'd use on a business class award on that route would never be worth more than 3.5 cents/mile to me.

    What does this mean? I would not ever pay more than 3.5 cents per mile to get the award (leaving out the value of earned RDM/PQM/... to keep it simple).

    If you valued that 100,000 mile award at $10k, would you be willing to pay United (or me :D ) 9 cents a mile, i.e., $9000 for 100,000 RDM?
     
  8. anabolism
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    anabolism Gold Member

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    Right. You are pricing an award for something that you can and are willing to purchase for a certain amount. You are right to value the award at what you have paid when you bought it. This is a different situation from that of an award for a trip that you are are not willing or able to purchase.

    I think it's obvious what this means and what you meant, in the context of valuing an award for a trip that you have on other occasions purchased. The fact that you have and may again purchase the trip for $x makes it sensible and easy to value the award at $x, and hence the miles at miles/x.

    The two contexts are different, but to go along with your reductio ad absurdum, I would only be willing to buy the miles at that cost if I was also willing to purchase the ticket at or near list cost. If you wish to extend this line of reasoning to assert that you would never pay for for a mile more than the value of that mile for an award for which you would pay cash for the underlying trip, that's fine, that's a perfectly valid personal choice. And that's really my main point: the value of a mile is a personal matter. I can't tell you how to value your miles.
     
  9. HaveMilesWillTravel
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    HaveMilesWillTravel Gold Member

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    Agreed. Which is why I started my first comment here with "The key here, in my opinion, ..." :)

    The reason why I posted my approach is because the OP asked



    So I posted how I derive my threshold. And actually, I don't usually buy miles for the time being because I earn enough chasing status, so it's really a theoretical threshold at the moment. E.g., US may currently be selling miles way below my threshold, but i am not buying because I have enough already and don't want to stockpile any more. That will hopefully change next year.
     
  10. anabolism
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    anabolism Gold Member

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    I value your perspective, I'm just trying to understand your points.
     
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  11. servo

    servo Silver Member

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    This actually is a great debate. I'm new to overseas flying as an adult (did it a few times when I was younger), and I know domestic redemptions really aren't worth it more often than not on legacy carriers. The issue I've had with people saying what they'd personally pay for a ticket and value the miles at that rate, is that the price I'd be willing to pay to take an overseas flight is not anywhere near realistic. Heck, I think domestic tickets are overpriced now too, especially for what you get.

    For example. I have 120k AA miles that I plan to use for 2 tickets to Europe next year. I'd want an open jaw flying into either CGD, MAD, BCN or FCO. I pulled a sample multi-city fare this May of MCO-MAD, then 3 days later MAD-FCO...train to CDG then CDG-MCO 10 days after the trip start returning on Sunday and I come up with a grand total for 2 tickets of $2,979. I wouldn't really pay more than $500 per RT ticket cash out of pocket for an economy seat overseas. Does this mean that 120k miles are worth less than a penny to me? I don't really believe that.
     
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  12. HaveMilesWillTravel
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    HaveMilesWillTravel Gold Member

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    No, it means that you're cheap :)

    I wish could regularly find revenue tickets to Europe (from the west coast, admittedly) for $500 RT :)

    Ultimately, if you get $3000 tickets for 120,000 points, that can be your value if you choose to use that approach.

    I would not value my 100,000 points (from the example above) at $10k because I would have an alternative: flying coach and paying less. So my value is somewhere between the coach and the business class fare.
     
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  13. autolycus

    autolycus Gold Member

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    Doesn't happen that often from the east coast either, at least not the SE. Not if you have to plan vacation in advance and have periods when travel isn't possible at all, anyway. But hey, I wish I could get such cheap fares to Hawai'i, Australia, etc. as y'all get from the west coast. :p

    I think I'm with you on my value being somewhere in the middle. If I'd pay $700-800 for coach tickets, I might be willing to pay $1000-1200 for business class because of no bag fees, which could mean $100 or so on top of the economy tickets anyway, better rest, meaning more enjoyment of the vacation destination, etc. So I'd value 100k miles at something like coach ticket + up to ~50%, depending on the route.
     
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  14. servo

    servo Silver Member

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    You won't get any argument from me
    Suffice it to say that it's very subjective as to what those miles are worth to you, but it really wouldn't be valued at less than the cheapest possible fare for your desired route.

    Now, hotel points? That's a different story.
     
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  15. HaveMilesWillTravel
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    HaveMilesWillTravel Gold Member

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    Heh, yes, there's always that Motel 6 down the road to give you lower-priced options ;)
     
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  16. Wandering Aramean
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    Wandering Aramean Gold Member

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    By considering how much I would be willing to pay for the trip anyways. If I'm not willing to spend $2000 on the trip - even if it is in biz instead of F or whatever - then it is hard to justify buying the points at that price point just to get enough points, even if it is in F.
     
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  17. servo

    servo Silver Member

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    This brings up point # 2 I keep pondering. People keep raving about the Life Miles promos where you can buy them for 1.5 cpm. But, my intent is to pay as little as possible, and likely over time, rather than buying $2k worth in bulk. Why? Because well, I'm not Scrooge McDuck. I have a limited savings at this point due to prior mistakes (like marriage #1), and dropping $2k in one month just isn't feasible to my current financial means. However, if I could acquire miles under 1 cpm and can fit about $80-100/mo in load fees into my normal monthly budget, then I'm not creating a financial extenuating circumstance for myself. I don't get miles right away, but I still get them, and that $2,000 is spread over 20 months.
     
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  18. HaveMilesWillTravel
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    HaveMilesWillTravel Gold Member

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    I think it's very important to do what's right for your own situation and not get carried away by all the great stories about F class travel here and on blogs. Savings (cash in the bank) are IMO more important than a stash of miles for a future trip. If I can afford (and find) a $500 ticket to Europe, that great 100,000 mile deal by purchasing miles at 1.5 cents/mile for a C award isn't the right choice if the cost doesn't fit in my budget.
     
  19. anabolism
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    anabolism Gold Member

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    Indeed, this is the essence of what we're saying.
     
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  20. Ed Chandler
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    Ed Chandler Silver Member

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    At the end of the day, this is what it's all about.

    I have yet to find a mile or point that I can get cheaper than it's cash selling price, but I'm still not going to buy them if they don't help to get me where I want to go.
     
  21. anabolism
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    anabolism Gold Member

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    You mean you can't find a way to obtain miles that is cheaper than buying the miles outright?

    AA, for example, sells miles for around 3 cents each (often more). With the current bonus it drops to a little more than 2 cents a mile. Paying one's taxes using a credit card and paying the 2.5% fee is less than the usual ~3 cents per mile. Buying from a merchant via AA E-shopping results in free bonus miles (or a slight cost if paying for shipping or of the product price is higher).
     
  22. Ed Chandler
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    Ed Chandler Silver Member

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    I meant "can't."

    Whoops. :)
     
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  23. anabolism
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    anabolism Gold Member

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    That makes much more sense :)
     

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