Would You Pay 2.5-cents Per Mile to Earn 1 or 2 Cents Per Mile in Rewards?

paying for miles "manufactured spending" to meet minimum spend requirements

Should you buy Airline or Reward miles and points?

YES, depending on the circumstances.

In the “old days” of credit card churning, and buying gift cards and reload cards with your credit card to meet minimum spend requirements, you had very little “actual cost” to factor in on these purchases.

Those options are mostly gone.  About the only option now is to pay a convenience fee of 2.5% to use your credit card to make purchases from companies that do not accept credit cards.

[NOTE:  Some airlines also sell miles to avoid this shortage, but it is MORE expensive in most cases than the example I am given.  Purchased miles are usually available at $.03USD per mile].

For example, I noticed $7000USD being paid every month by my company in checks as the vendors being paid do not accept payment by credit card (ie: rent, some insurance, etc.).  We already pay all our taxes (including sales taxes) using the private credit card “tax payment” firms, and we pay their convenience fee so I can earn the miles.

So here is are two real-life scenarios to justify PAYING more than mileage is actually worth.  In some situations it is worth it to buy airline miles or buy reward points.  Obviously buying miles helps you to earn free trips faster. 

MINIMUM SPEND REQUIREMENTS:  In another post, I talked about obtaining a new credit card to get the mileage bonus.  Each card however, comes with a “spending requirement” in the first three months.

In order to meet that spending requirement (lets say $3000USD for this example), you might need to take extra-ordinary measures like paying your RENT or CAR PAYMENT or TAXES by credit card so that you can meet the spend requirements and obtain the free miles.

In this case, $3000USD charged to your card is going to cost you $75USD in convenience fees when you use the pay-by-card services.  Not bad when you consider the mileage you would receive.

[The American Airlines card had a 30,000 mile bonus and a $3,000USD spend requirement.  Paying the convenience fee to pay non-credit card bills with your card would mean you paid $.0025 per mile!  That is less than ONE-FOURTH of a penny per mile.]

FIRST CLASS TICKETS:  On the other hand, imagine if you wanted to take a First Class trip to Thailand.  Use my company example of $7000USD per month as an example.  I decide to pay those bills through a credit card convenience service, so that I can earn the miles.   Imagine that I already have 76,000 miles saved up, so one year of $7000USD/per month would bring me to 160,000 miles — the amount I need for a BUDGET first class ticket to Bangkok, Thailand.

In effect, I would have paid $2,100USD!  [$7000USD times 12 months times $.025 fee].  Was it worth it?

After I booked the ticket, I looked at what it would cost to BUY the same ticket on the same route.  The cost was $9,229.00USD.  So, I paid $2,100USD to book a $9,229USD first class ticket to Thailand.

Cost of selected route for first class travel on United and partners star alliance

I think this was a pretty reasonable deal.  But just in case, take a look at this budget airfare booking site and their best rates for the same route in First Class on a variety of airlines.  First Class tickets range from $9-17,000USD!.

First Class Airfare to Bangkok on Thai, AirChina

If I flew business class on United, I would have used only a few miles less.  So I ran the business class airfare to see how much of a difference it made and whether I would get “screwed” by making this purchase.  The best business class fare was at least $3,800USD.  Even with this example, I doubled the money I spent on convenience fees.

best business fares to Bangkok Thailand on Emirates, Singapore air and Others.Another way to look at it — if the company was going to pay for my trip, I saved them thousands of dollars; and I am able to earn more travel awards.

International tickets and business/first class international tickets are the way to get the most value for your miles.

Do you want to fly from Los Angeles to New York on vacation for 25,000 miles?   Los Angeles to New York for a 25,000 mile point rewardOr fly Los Angeles to London, England for the vacation of a lifetime for 40,000 miles?Free airline ticket from Los Angeles to London for 40,000 Miles

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