Why Frequent Flyer Miles Are Like Stocks—and How You Can Beat the Market
In On Points, Brian Kelly, founder of The Points Guy, shares his strategies for getting the most out of your points and miles.
Just like stocks, bonds, and international currencies, loyalty points go up and down in value.
A frequent-flyer "currency" becomes worth more when a new partner airline is added, increasing the opportunities to earn miles and redeem awards. When Qatar Airways joined the Oneworld Alliance in 2013, that upped the value of American AAdvantage miles because it was easier to get award flights, especially to the Middle East, Africa, and Asia. (This summer I used just 40,000 AAdvantage miles and $107 to fly first-class in Qatar Airways' A380 from Paris to Doha—and I happened to have the entire first class cabin to myself!)
However, it's more common for airlines to devalue their currencies—most often by increasing the amount of miles needed for award flights. Last February, United Airlines did exactly that, raising the "price" of a one-way first-class ticket from the U.S. to Europe on a partner airline from 67,500 miles to 110,000 miles—a 63 percent jump. Carriers also like to tack on fees, most notoriously "fuel surcharges" that have stuck around even though fuel prices have dropped to near-record lows. British Airways' economy award tickets can be so padded with taxes and fees that they're almost as expensive as cash tickets.
Since you're probably not an airline CEO, there's nothing you can do to prevent the devaluation of miles. But you can make sure you're not overexposed to the whims of airline execs by diversifying your loyalty portfolio. Credit cards are the quickest way to rack up points; to further your diversification strategy, sign up for a card whose points can be transferred to many different loyalty programs. There are four I especially recommend:
- The Starwood Preferred Guest (SPG) American Express card has 34 transfer partners, including American Airlines, Delta, and Alaska Airlines.
- American Express Membership Rewards cards, which include the Gold and Platinum offerings, have 20 transfer partners, among them Emirates, British Airways, and Hilton.
- Citi ThankYou Premier and CIti Prestige points can be moved to 13 other programs, including Virgin America and Qantas.
- Chase Sapphire Preferred with Ultimate Rewards boasts 11 transfer partners (10 in 2016 because they are losing Amtrak).
Even if you're trying to build up miles with a specific airline, these cards can offer better earning potential than the carrier-branded options. For example, the Delta SkyMiles card from American Express and American's AAdvantage card from Citi both offer 1 mile per dollar on non-flight purchases. The SPG American Express card has the same deal—but gives members a 25% bonus for every 20,000 points transferred to airline partners, which include Delta and American. Why would you take 1 Delta mile per dollar spent when you can get 1.25 Delta miles through the SPG American Express—plus the option of 33 other airlines and a host of hotel and experience redemptions?
Diversification isn't all about transferring to frequent flyer programs—you should also have the option of redeeming credit-card points for flights. The SPG Flights program lets you purchase flights at 1 cent per point (so 30,000 points = a $300 flight). American Express and Citi have the same deal, but the Prestige card from Citi offers even better redemptions: 1.33 cents per point towards most flights, and 1.6 cents for American Airlines flights in the U.S. Chase Ultimate Rewards gives 1.25 cents per point towards flights.