beachmouse

AmEx Everyday does 2 points per dollar on groceries and has no annual fee. Said MR points can be converted to any number of useful airlines programs.

I'm effectively a Delta spoke captive. The first $200 of any place ticket usually gets me as far as Atlanta. With only moderate amount of hustle, I can get 2 cents or better on SkyMiles redemptions since cash ticket prices tend to be quite high to places I want to go on airlines I feel okay flying. (I'll gladly fly coach unlike some here, but I will so not fly Allegiant out of VPS)

AmEx MR also tends to have rotating bonus categories for travel point redemption. I'm actually waiting for the Flying Blue one to come around again because there are some transatlantic coach redemption sweet spots with VPS or PNS as a starting point that are 3 cents a mile from them even without a MR bonus

sdsearch

But taking a flight (which as a tallish person who can't sleep in economy seats) only because you get business class with miles, that has some value. The big question is whether that value is sanely and clearly determinable. Perhaps it doesn't put "money" in my pocket, but it makes it possible for me to take trips I could never afford otherwise, and so it's a "money substitute" in a sense.

With that in mind, I see a big difference between saying "more valuable than 2 cents each" and valuing at 10 cents each. Not just because of the distance between 2 and 10, but because of the specificity of 10.

In reality, on most airlines award charts are per region, and are the same (if there is availability) 11 months out or 1 month out, but cash costs may vary based on the specific flight, the specific date, and how far out you're booking (not at all in a simple pattern). (Though business class flights don't seem to vary over time as much as economy class flights do.) So which of those many different fares do you compare the miles cost to? (A given person, without a lot of research, might not even know what the lowest ever fare on a given flight was over 11 months.)

But I just thought of another issue:

Is the value of a mile dependent on how many you have already?

If someone has 100 million miles (reasonably diversified), and can only take 3 weeks of time off from work every year (plus weekend trips), they probably have no certain use for additional miles. and thus their value for additional miles may not be at all the same as someone who is short on miles.for a planned trip.

Meanwhile,,even accepting averages, the ratio of cost to miles required is not at all the same for all parts of the world. Sometimes the cost in miles doubles for crossing a division between two regions, but the cash cost doesn't. Some parts of the world have more competition (including for business class fares) than other parts of the world.

So coming up with a single value for miles, even for a given person, can be anywhere between tricky and impossible.

And thus should "more than 2 cents" (without being any more specific than that) be a "good enough" metric for average longhaul business class redemptions?

darthbimmer

pgary, I agree with you on including opportunity cost in calculations of rewards card value. I've been including it in my own calculations for years. As you point out, 1 point/dollar spending is generally not worth it-- aside from doing it to help reach a big incentive bonus. Likewise, even 2-3 points/dollar categories are often not worth it once the cost of an annual fee is added in.

bbriscoe34

If you aren't earning a sign-up bonus, gold/diamond status, or at least a 3-5x category when you swipe your CC, you are wasting your spend. That is why I don't go for the 2% cash back cards personally. I enjoy the upgrades, the executive lounges, the free priority pass, TSA Pre-check, and all the other travel perks, so that is where most of my spend goes - but I spread it out quite a bit as well just to get the various sign on bonuses.

sjackson12

It's hard to make a comparison of paying cash vs. redeeming miles if you would not pay cash for the equivalent service (i.e. business class, etc.). The other thing is that often people will spend money that they simply would not have spent otherwise to meet minimum spend. I certainly have!

Let's say for example that I can get a RT flight in business on a United partner for 160K miles. Let's also pretend there is a magic card that gives you 160K miles for 10K spend in X months.

If for example I got this card and did 10K spend instead of on a 2x cash back card, AND I decided I would only spend 8K normally, I see it this way:

I give up 2% of 8K which is $160.

I spend an additional 2K.

So my cost here is $2160.

I then get my miles. Let's say that flight cost $3500. I calculate a net benefit of $1340. But again here's where it's really difficult, assuming I would make this trip either way, how much would I have been okay spending on my own for that experience? How much for economy?

If I had spent the $3500, there is also some benefit in terms of cash back I could receive from that payment, as well as all the miles I would receive, e.g. I could get 2% cash back which is $140, I could get tens of thousands of miles which have a certain value, etc.

I think overall the benefits are much more marginal than most people think, because churning does change our behavior.

mia

I think not, because you received goods or services in return for that $2,000 incremental spend.

drminn

I routinely get 3 cents/mile or more in redemption value for international coach flights. Bringing my daughter home from Europe over Xmas would have been $1900 if paid cash, I paid 54K AA miles plus $120 in fees. Those miles were earned by spending $4000 on a Citi AA card. You don't have to redeem for business class tickets to find good value.
To meet the 4000 spend I paid my taxes with the CC, cost me roughly $80 in fees vs sending a check - I won't count the stamp - still an excellent deal.

rcmiller

I have been thinking about this lately myself. I've got a targeted offer from Delta for the Gold Skymiles AMEX for 75,000 bonus miles (50,000 for $2k in 3 months, then 25,000 more miles after extra $1k in 6 months). ATL is my home airport so its quite easy for me to fly Delta, however several routes are just as easy and cheaper using AA. I know I have a Delta flight coming up soon so I would be able to use the $50 credit. The minimum spend would be easy and I feel like the 75k miles is a pretty solid offer (could get 4 roundtrips in coach to NYC). Since the $95 annual fee is waived year one I could basically use the card for the first year for free then cancel if I don't want to keep it. Going forward though, I would likely only use this card for Delta flight purchases.. The 1 mile per $ on everything else is just pitiful compared to my other cards. So is it worth jumping on this offer? Or is there another non airline specific card (one of the main AMEXs?) that could get a similar type of 75,000 miles or equivalent bonus offer and would have a much better earning rate for everyday purchases?

beachmouse

The sweet spot for the $95 annual fee airline credit cards is the person who flies 3-4 times a year on the airline and likes to check bags- you more than cover the annual fee at that point and a lot of times, the slightly better boarding group is helpful as well.

Those cards are less attractive if you do have status and if don't need those benefits. If that's the case one of the AmEx cards that offers good bonus categories and promotions for Member Rewards points can be better for long term use,

But in the mean time, the AmEx Delta gold targeted 75K is a good offer for that one in terms of sign up bonuses.

sjackson12

I mean yes that's true, I'm just trying to get across the point that spending money I wouldn't otherwise is worse than money I would spend in either situation.

darthbimmer

Your example of spending $2k out of $10k on things you normally wouldn't purchase is extreme. The only money I've spent solely to meet a bonus target was an $85 convenience fee for charging $3700 of taxes.