When you sign up for an airline miles rewards program, it seems like a really great thing: You receive a mile for each dollar you spend. If your frequent flyer program is connected to a airline miles credit card, you can earn miles even faster, piling them up quickly.
The idea of building up airline miles offers a strong pull for many people. You have enough rewards, and you can redeem them for free airfare. Your mind fills with visions of free flights to exotic destinations, all because you are spending money with the right credit card, or flying on the right airline.
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Unfortunately, as soon as you see what a free flight “costs” in terms of miles, things suddenly become less appealing.
Airline Miles Aren’t Worth Very Much
The truth is that airline miles aren’t worth very much. Sure, it might seem like you have a lot of miles when you look at your 12,000-mile rewards balance. But it quickly becomes apparent that you can’t buy anything with that balance. Indeed, in many cases, if you want a free flight across the country you will need at least 40,000 miles.
To put that into perspective: You want an airfare that costs $350. You need 40,000 miles to redeem for that flight. If you divide 350 by 40,000, you see that each mile is worth 0.00875 cents. Of course, it varies from airline to airline, but you get the idea. And let’s not forget that, if you get one mile for each dollar you spend on an airline miles credit card, you’ve spent $40,000 in order to pay for a $350 ticket.
There are some extenuating circumstances. For instance, you might receive one mile for each mile flown on a previous flight, or you might have a rewards card that rewards you bonus miles. So you might have spent less. But the fact remains that you need to spend tens of thousands of dollars in order to qualify to redeem your miles for that airline ticket.
Of course, if that’s money you would have spent anyway, it’s not such a big deal. You’re still getting a good deal. As long as you pay off your credit card balance each month, and as long as you aren’t buying things just to rack up more miles, it’s still like getting your ticket for free. However, if you make purchases just for the miles, or if you are paying interest on a balance, then it severely erodes the value of your rewards.
Airline miles can be a fun way to get rewarded for regular spending. However, you have to realize that one mile does not equal one dollar. Realize that it takes a lot of time and effort to build up enough miles for a significant reward.