Ask an Expert: Should I Buy Miles?

Recently, a Money Talks News reader wrote me with a great question:

Hi Jason,

I enjoyed your article about credit card airline awards and wonder if you can help me sort out what might be the best for me?

I charge $1,000-1,500 per month, trying to get as much as I can on my card. Always pay in full each month and have excellent credit. Last time I checked my score was 805.

I live in Alaska and most of us have the Alaska Airlines Visa card. I currently have about 32k miles because I’ve used most of it for other travel. I rarely stay in hotels and use all my miles for airfare. I am a missionary and am often called to foreign countries and have to pay for travel myself.

Currently, Alaska Airlines has an offer to buy miles and get a bonus of up to 40% additional miles. If I buy 40k miles, it will cost me $1,100 and I’ll get 40k + 16K (bonus) for a total of 56k miles. Of course I have to fly with Alaska or their partners, and it’s worked pretty well for me in the past.

I’m very, very careful with my credit and know that my score is important. I don’t want to mess it up by applying for another card if it’s not going to help me a LOT.

I appreciate any help you can give me. Thanks and blessings!

My response

Thanks for the kind words, Dolly!

Normally, it’s a bad deal to buy miles directly from an airline, but when they’re offering a bonus, that can change the equation.

For example, in your case, if you pay $1,100 and receive 56,000 miles, you’re paying a little less than 2 cents a mile. The question then becomes: how much is an Alaska Airlines mile worth to you?

The way to figure it out is to compare how much you’d pay for a flight with the number of miles you’d need to get the same one. For example, assume a flight you’d normally take would require purchasing a ticket for $500, or redeeming 25,000 miles. In that case you’d break even – since each mile costs 2 cents, 25,000 miles would cost $500 (25,000 times $0.02.)

So on the surface, this deal only works if the flights you’d buy cost more than $500. And there are other factors that also tilt the scale. For example, award space availability – most airlines have more seats available for cash-paying passengers than for those redeeming miles.

Alaska partners with Delta Airlines, so you could use miles to fly with them. But with Delta, there are very few awards available on any given day. In fact, it’s not uncommon to find no award availability to some destinations for months at a time. And many times award seats are for flights that might have been heavily discounted for cash customers.

It’s for this reason most experts rarely recommend paying more than 1 cent per mile.

The key to making a “buy miles” promotion work is to hold a specific flight first, then buy the miles. For example, if you were about to spend $2,000 for an overseas flight that you could also get for 50,000 miles, reserve the flight, buy the miles, and redeem them. That would save you $1,000.

But when it comes to buying miles for nearly 2 cents each with the hope that you will someday come out ahead? That’s an awfully risky bet.