How much are your frequent flyer miles really worth?
Posted by George Hobica on Wednesday, June 5, 2013
How much are your frequent flyer miles really worth? Should you even bother collecting them? The answer depends in large part on the kind of flyer you are, and how you earn and spend your miles.
We've seen frequent flyer gurus estimate that miles are "worth" anywhere between one-half to six cents per miles, when one calculates how much in "fare value" miles will buy. To test that, we looked at five route and fare class scenarios to compare how much each would cost if we were to buy the flight using our hard earned cash versus using miles.
As the accompanying chart shows, and this will come as no surprise to more experienced travelers, miles are worth next to nothing (as little as one-half cent per mile) when spent on relatively inexpensive economy class travel within the U.S. But if spent on more expensive business or first class travel, they can indeed be worth over 5 cents per mile.
For example, one of the worst ways to "spend" miles is to buy an economy class ticket on a flight between New York and Los Angeles, which typically costs around $300 round-trip in tax, and sometimes goes as low as $219. Although the standard mileage award for a domestic economy ticket on most airlines requires 25,000 miles, making each mile's value a paltry 1 cent, airlines sometimes require up to 60,000 miles roundtrip for the same trip, reducing the value to less than one-half cent.
Compare that with buying an economy class ticket on the same route on United for, say, $600 and upgrading it using 30,000 miles round-trip to business class, which usually costs $2700 round-trip (for the sake of argument, we're hypothesizing that $600 is the cheapest upgradeable fare, but sometimes you can upgrade for an even cheaper fare, making the economy to business upgrade one of the better ways to spend miles, even when factoring in co-pays). In that scenario, your miles would be worth over six cents each.
In calculating the value of miles, we also included the increasing number of co-pays as well as taxes and fees associated with using miles to obtain "free" tickets.
And as we've argued previously, if you only use miles to obtain relatively cheap domestic economy fares and you earn most of those miles with a credit card affiliated with your airline, then you might be better off with a cash back credit card, paying up to a 5% rebate, instead.
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