When does it make sense to buy points and miles?

May 22, 2020

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Did you know many loyalty programmes will simply sell you the points or miles currency of their programme with no strings attached? You can jump online, log in to your account and buy the points or miles with a credit card and a few clicks. These programmes usually have generous purchase limits, meaning you could top up your balance with a six-figure amount in minutes.

What’s the catch? Well, the cost. The price per point or mile is usually much higher than we would usually value them at. The exact cost differs from programme to programme, but for airline miles and points at least, you can expect to pay close to 3p per point or mile.

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The good news is that programmes often run promotions where they effectively discount the cost by offering bonus miles of up to 100% — which would cut the cost by half.

Related: Save big: The best deals for buying miles and points right now

While that’s a much better deal, you need to understand the various risks and pitfalls of buying points and miles, which can trip up some travellers.

It makes sense to buy miles where you can obtain more value for redeeming them than it costed you to purchase them. Say you were looking at a flight that would cost £500 in cash or 20,000 points + £50 in fees and taxes. If you could buy those 20,000 miles for 1p each during a bonus promotion, then the cost of that airfare with your purchased miles would only be £250 (20,000 x 1p + £50) rather than the £500 for a standard cash fare.

That would be a great deal.

But there are caveats.

A Cathay Pacific aircraft in Hong Kong (Photo by JT Genter / The Points Guy)
A Cathay Pacific aircraft in Hong Kong (Photo by JT Genter / The Points Guy)

The calculation above assumes that you can redeem the miles for the airfare you want, at the redemption about first quoted. The first problem with this assumption is that redemption availability constantly changes. The seat that may have been available today when you considered buying the points and miles might not be available tomorrow when you have purchased the points and miles and try to use them. The second issue is that the amount of miles you need could increase. Most programmes increase mileage requirements from time to time — this is called a devaluation, as the miles become less valuable as a result. Good programmes will give members warnings if changes are planned, though some programmes have devalued overnight without notice.

If you’re confident you can redeem the miles for the purpose you bought them for at the price you are happy with, it can make sense to buy miles.

It can also make sense when you are a few thousand points or miles short of a big redemption, such as first-class flights for your honeymoon. Even if the miles were not on sale, if you only needed a few thousand miles to book that once-in-a-lifetime trip, you wouldn’t want to wait around and risk the seats disappearing or the price increasing when you could just purchase those miles.

But it rarely makes sense to purchase miles if you don’t plan to redeem them immediately — known as purchasing them “speculatively”. This is because you can’t guarantee their value in the future when you decide to use them because of devaluations and other ways loyalty programmes can change their terms and conditions.

Given the current financial difficulties facing airlines worldwide because of the coronavirus pandemic, there is even more uncertainty and instability surrounding points and miles. If your favourite airline collapsed and was sold, if the new owners agreed to retain the loyalty programme so you could keep using your miles, the first thing they might do is a massive devaluation as they try and reduce their liabilities, such as huge points and miles balances.

(Photo by Emily McNutt / The Points Guy)

Right now, we are seeing some of the best-ever bonuses offered on buying points and miles. The optimist in me says this is great for the traveller, and even in a crisis, there is opportunity. The cynic in me says airlines and hotel groups are desperate for cash and selling cheap points and miles is a quick and easy way for them to raise emergency cash that they could burn through quickly anyway.

I’m personally not a buyer in any of the current points and miles bonuses even though they bring some prices down even cheaper than we think the points and miles are worth.

Why? Firstly, I have cancelled months worth of travel from March through August 2020 because of coronavirus. Many of these bookings were made with points and miles, so I’ve received all of the points and miles back. As a result, I now have hundreds of thousands of points and miles with no immediate use for them. Secondly, there is a risk some airlines will not survive this crisis and I don’t want to risk purchased points and miles dying with them. Finally, though I’m not spending any money on travel right now, there’s still too much uncertainty for me to feel comfortable making large discretionary purchases.

Bottom line

In the right circumstances, you can get some amazing deals by buying miles and points. Over the past decade, I’ve bought more than a million points and miles in different programmes. That is because at the time, I had immediate uses for them and could (and did!) really maximise my travel.

If you are considering buying right now, be aware that because of uncertainty and devaluations it’s unlikely those points and miles will ever be worth more than they are right now, though they could certainly decrease in value. If you’re buying speculatively, anything could happen.

Featured image by Liam Spencer / The Points Guy

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.