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jun 18 2014

Biggest Reward Program Blunders and How Not to Make Them

Southwest plane

An over-valued merchandise-for-point exchange isn't the only blunder you can make when redeeming. Here are a few other examples of mistakes to avoid when you decide to trade yours in.

(Carlosphotos / Dreamstime.com)

This article was written by Jake Redman, founder and host of ModHop. In addition to producing and hosting shows on SiriusXM Radio, he travels, spending his time in airports, lounges, and hotels, and shares his findings on ModHop.com to help others determine whether travel upgrades are truly worth the extra cost. Follow along with Jake's travel adventures on Twitter @ModHop and on Facebook.

You what?! That's normally the response in my head when friends tell me what they just did with their frequent flyer miles or hotel points. "I bought a 19-inch Smarkyo TV for the bedroom, and it only cost me 50,000 frequent flyer miles!" Really?! Sure, I might spend a bit more time than most digging for the perfect redemption deal, but for that number of miles, you should be able to lock down a saver-level business class seat on a domestic flight (and even that isn't such a great deal).

If I'm starting to sound like the travel version of the cranky know-it-all IT guy at your job, I'm not. Finding real value in your mile and point redemptions involves basic math, and I'm not at all good at it. The little I do understand is that points (airline miles in particular) can be valued between 1 and 2 cents each. Simply put it means that a small, off-brand sub $200 TV isn't likely as valuable a prize as a fancy plane ride to grandma's house.

An over-valued merchandise-for-point exchange isn't the only blunder you can make when redeeming. Here are a few other examples of mistakes to avoid when you decide to trade yours in:

Gifting miles
Sharing or "gifting" miles to someone can be the ultimate "ungift" to yourself. The bottom line is that unless the airline is offering a very hearty mileage bonus when you transfer the miles, it's not going to be worth it. Again, there's math involved, so bring a calculator if you decide to explore this option, and carefully consider the cost of the transfer, along with the airline's service charge. A 75-100 percent transfer bonus might be worth looking at, but those are rare and possibly near extinction.

Forgetting
A few programs have "miles that never expire," but many only give you a certain amount of time to use them before they disappear forever. One way to keep those miles alive is to earn more as cheaply as possible. For example, the Hilton Honors program keeps your points alive for 12 months after your last stay or point redemption. Once that time is up, bye-bye points. Our favorite way to save them from vanishing is to buy anything that costs any amount of money using their "Shop to Earn" portal. Any purchase made before your points' expiration date will keep them alive for another year.

Whatever is on that direct-mail piece you just received
The dollar-to-credit card point value of what are sometimes referred to as "experiences" is subjective. A little bit of research shows that opportunities to try things like driving a real stock car or going for a hot air balloon ride is valued at about .01 per mile. If either has been your lifelong dream, and you don't know anyone with a stock car or hot air balloon parked in their backyard, then maybe—just maybe—there's personal value to this kind of trade. Otherwise, keep looking for something that gets you even just slightly closer to 2 cents per mile.

Not using them
I was at a convention of mileage and point nerds not long ago, and a newbie in one of the sessions asked what he should do with his miles. I forget the exact number, but, when asked how many miles he was sitting on he replied with a number so large that the crowd actually booed him. Don't be that guy.

Airlines and hotels constantly try to find new ways to balance customer reward with profit, and it doesn't always favor you. Over time, it won't be much of a surprise to see those miles continue to be devalued, so time is increasingly precious. Find a way to use miles for things like seat upgrades on long flights or hotel rooms that cost a lot more than you would normally think of spending. Be patient, keep an eye out for the best value, and get the most from your piggy bank of points.

Get Inspired with more from BudgetTravel.com


Note:This story was accurate when it was published. Please be sure to confirm all rates and details directly with the companies in question before planning your trip.

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