Originally Posted by
MileKing
I think the point holtju2 is trying to make is that people are choosing to take miles/points (such as with the SPG AMEX card) instead of getting cashback. Thus, the cost of the miles/points is actually the lost opportunity to take the cash. Since 1% cashback cards are the defacto standard, 1 cent per mile/point should be the minimum cost you are assigning in any of your calculations. I would further argue that credit card spend for things like gas & grocery purchases should use 3 cents per mile as the cost since that is the going rate on the Chase Freedom card.
Valuing cc purchases at 1 cent per mile is certainly an option.
My only concern with opportuinty cost, is, where does it end?
One could argue that people fly connections instead of nonstops to generate more RDMs, but at the opportunity cost of their being more productive with their time. At $15 per hour, someone who elects a connection trip at 4 hrs. vs. a nonstop at 1.5 hrs. should theoretically add $37 per one way connection to their 'cost to acquire' miles.
For the sake of simplifying an admittedly not so simple issue, it's definitely objective to determine how much money one HAD to spend for the express purpose of earning miles. Airfares MUST be purchased to generate RDMs, credit card spend (for non-airfare purchases) that generates RDMs is a pure byproduct of that spend and does not have a hard cost...only an opportunity cost.