Worth paying "convenience fee" to earn miles?
 

I am debating whether or not to put a $9,000-10,000 charge on my Citi AAdvantage card (or possibly SPG AMEX). If I spend $10,000 during a year with my Citi card, I'll get a total of 20,000 miles. Therefore, earning 2 miles per dollar. Without putting this charge on my card, I would likely not spend $10,000 on the Citi card.

Since this is for my college tuition, they charge a "convenience fee", which is 3%. So for a $9,000 charge, I would have to pay an extra $270.

Is it worth it to pay the extra fee to get the 20,000 miles?
My immediate thought would be "no" but if I used the miles for an international flight, I could probably get them to be worth more than 1-2 cents per mile.

Who's charging the convenience fee, Citi or the college?

If you're using a Citi convenience check, you probably won't get the miles, so be careful and read the fine print. If it's the college charging the fee and it's a regular charge transaction, getting the miles shouldn't be a problem.

Many AA fans here on FT would value their miles at one to two cents each. As you mentioned, if you're using them internationally, you may do much better.

Sallie Mae Servicing is charging the fee. They are a third party that processes the payment for the college.

You should be okay on getting the miles, then, as long as it's not a Citi check. It would be a no-brainer without the three percent add-on, but still might be worth it.

Depends on what you're using the miles for and your valuation of them... if you're using them for international or business class, 2c/mile is a pretty good estimate

Even though I value a mile higher than a cent, 1% fee is the maximum I am willing to eat. 3%? No way without a slightest hesitation.

Well, there's another factor that may make it more "worth it" if you are going to use it for AA miles (but wouldn't if you were going to use it for any other airlines' miles): AA miles fromall sources (including credit/debit card miles and all bonus miles) count toward Lifetime Gold status (at 1 million lifetime AA miles earned from all sources) and Lifetime Platinum status (at 2 million).

So if you're accumulating toward that, there's some additional value toward putting the miles into your AA account, no matter what you'll use them for. But only if you're likely to get to 1MM (from all sources) within a reasonable number of years. If 20ish k mles is all you're going to earn each year, then you'll probably "never" get to 1MM (before they eventually possibly get rid of "all miles from all sources" as a way to get there), and in that case you can't factor that into the value.

(All other airlines that have lifetime status only count actual paid flight miles -- aka BIS or "butt-in-seat" miles. That's why this factor is AA-specific.)

With the 10,000 mile bonus, you're paying 1.5 cents/mile. Sounds reasonable to me if you're going to use the miles for premium flights. For example, if a RT flight to Europe in biz is worth more than about $1,400 (depending on taxes) to you, it's a good deal. My limit for purchased miles is about 2 cents/mile.

IMHO, it is not worth paying to get miles (which could be heavily devalued overnight at airline whim). I am happy to get lots of miles at no cost. I am not willing to pay anything to get 'em.

Every time I have paid I have regretted it.

While this would be a legitimate concern at any program operated by (for example) Carlson (e.g. Goldpoints, Amtrak, British Airways) I wouldn't be concerned about American Airlines. AAdvantage has a good track record of pre-announcing changes to its award redemption schedule.

Are you going to be revolving the balance? If yes, then I would keep the balance as low as possible and not use the card and pay the extra fee. However, if you are going to get your loan money in or be able to pay the balance off quickly, then I saw go for it. Another issue, do you have a trip in mind that this gives you the needed balance to redeem?

To the OP's point, AA could devalue the mileage currency. They generally do notify with sufficient time, but still a concern if you are saving up miles over a long period of time.

No, I'm definitely not revolving the balance. I'll be paying it off in full.

Oh, and thank you all for your input. I decided to pay the convenience fee to get my miles. It seems worth it to me. I was thinking of visiting Tokyo since my sister is living there now. The economy award seems a good deal at 50K miles while they sell for over $1,000 I believe. The business class award is an even better deal it seems but I might want to save those extra miles for another flight. :rolleyes:

Also, since I'm a college student, the typical "backpack through Europe" trip is inevitable. I doubt that I'll have difficulty finding a good use for the miles.

These fees can yield good savings. I paid about $300 in total to pay my taxes this year on my Citi Plat Amex. That yielded over 50K in TY points. Which off the bat is enough for $500 in gift cards to retailers I frequent. Or a good chunk off of a Biz Class fixed point ticket. Either way I came out ahead.

Whether to "buy" miles or not depends on how many AA miles one has already accumulated as well. If I have zero AA miles, I would buy one mile at 1.5 cents with no problem, but with existing 200K miles I would be hesitating to pay 1.5 cents.

The same thing applies to the decision of whether to work or not. If one is wealthy enough, he would not work 1 hour for 20 bucks each, but if he is cold and hungry, he would work even at 5 bucks.

Also take into consideration that if the $9000-$10000 you are charging is college tuition, you might qualify for the Hope or Lifetime Learning Credit, or at the least the education tax deduction when filing in April 2009. There are limits and all depends on your tax liability, of course.