What are Frequent Flyer Miles Worth?

Like everything else in this world, the value of what you own is determined by the value of what you can trade it for.  Paper money has no intrinsic value, but the home you can purchase with it does.  The same is true of your frequent flyer miles.  The value is not in the miles themselves, it is in the free tickets you can exchange those miles for.

How do I Calculate the Value of my Miles?

It’s easy.  Just look at how much the plane ticket costs, and divide that number by the amount of miles you would need to get the same ticket for free.  If you could pay $400 for a ticket, or use 25,000 frequent flyer miles, then the value per mile is $400/25,000 = $.016, or 1.6 cents per mile.

Don’t forget the Taxes and Fees!

Most “free” tickets aren’t totally free.  For US flights you usually have to pay the TSA security fee of $5 – $10.  On international flights you usually have to pay international airport fees, and often times you’ll need to pay a booking fee for booking over the phone.  Make sure you subtract those fees from the cost of the ticket before dividing by the number of frequent flyer points.  For example:  Say you could pay $1,100 for an international ticket or you could use 50,000 frequent flyer miles and pay $100 in taxes and fees.  Your value per point is ($1,100-$100)/50,000 = $.02, or 2 cents per point.  Because you still have to pay the $100, your miles don’t contribute any value to offset that charge.

What is the Average Value Per Mile?

The potential value of the miles can range from less than one penny per point, to over 15 cents per point depending on how you use them.  The below examples for United Airlines will give you an idea of how the value can fluctuate.  I booked these tickets 11 months in advance using the least possible required mileage.

New York to D.C. = A $175 economy ticket required a Standard Award of 50,000 miles for a paltry value of .34 cents.  In general using any major airline awards for short haul flights will get you terrible value.  You either want to save up your miles for longer and more expensive flights, or use a regional airline like Southwest or jetBlue in order to get decent value for your miles on shorter routes.

Los Angeles to New York = A $515 economy ticket required a Standard Award of 50,000 miles for a value of 1.02 cents.  A $1,975 business class ticket was available for a Saver Award of 50,000 miles for a value of 3.94 cents per mile.  It’s not uncommon for business Saver Awards to be available even if economy Saver Awards are sold out.  Make sure to check this on your award flights and you could end up flying business for the same amount as coach!

Chicago to Paris = Only Standard Awards were available in each class of service.  The $2,500 coach ticket for 110,000 miles came out to 2.16 cents; the $5,700 business class ticket for 210,000 miles equaled 2.66 cents; and the $11,500 first class ticket for 270,000 miles came out to 4.22 cents after all the fees were deducted.

Those are all popular United routes so most of the Saver Tickets weren’t available.  By contrast, if you have AMEX points you could transfer 119,000 into Singapore Airlines and get a $15,500 first class ticket Saver Award from Los Angeles to Tokyo at a whopping value of $12.81 cents per miles.

What Should I be Trying For? 

Now that you know you can get up to $.15 per mile for international first class, you still may not want to.  After all, it requires a lot of miles that you could use flying economy to a lot more places.  There are basically two rules of thumb for the right point value:

Rule #1:  Never get less than a Penny Per Point

This is what the airlines want you to pay.  They will offer you one penny per point all day long to try and get your points back.  They’ll even let you shop online and spend the money with a partner so long as they only have to pay you one penny per point.  The bottom line is, you can always get a penny per point, so at least make sure you’re doing better than that.  I personally won’t use miles for less than 2 pennies per point.

Rule #2:  Get more than you pay for the Miles

Before you start to pay for miles, make sure you know what value you will use them for.  The most common form of paying for miles is with an airline credit card.  You may not think you’re buying miles with these credit cards, but you most certainly are.  These credit cards almost always charge an annual fee, and they have higher interest rates.  If you carry a balance on these cards you will never get any value.  After all, a 15% APR will even wipe out the value of a first class international ticket.  Therefore you should only get an airline card if you can pay it off every month.

Another form of buying miles is choosing to pay an additional fee for the “convenience” of using your credit card.  For example, the US Government will allow you to pay your taxes with your credit card but there is a 2.49% fee.  If you have an airline credit card, you could essentially use this to buy miles for 2.49 cents each.  This is a great deal if you intend to use them on first class tickets valued at great then 2.5 cents.  But it is a total waste of money if you’re flying domestic for 2 cents per mile.  The same is true when the airlines offer to sell you additional miles.  Be smart and do the math.  Never pay more than you’ll be able to get back!