A reader contacted us with a link to an article in Travel + Leisure talking about not hoarding your miles and points indefinitely, asking if this was the strategy he should follow.
We try to answer this question for him as well as for our other readers as this is a topic that comes up every now and then.
Generally speaking when and how to use miles is a very individual matter and can’t be answered in a blank statement what type of redemptions do and don’t make sense. One thing is certain though, namely that programs are not getting more generous – rather the opposite – which is an indicator that it would be advisable to redeem larger awards as soon as the balance is available.
Our reader Adrian referred to this article published in Travel + Leisure a while ago.
Plenty of travelers are under the misconception that saving points—like saving money—is a wise idea. But there’s a big downside to socking away miles: they lose value dramatically over time, thanks to constantly changing program rules. On February 2, for example, British Airways increased the price of short-haul award tickets in the U.S. from 4,500 to 7,500 miles one-way. Voilà: your points just became worth 40 percent less. …
Maybe you’re reluctant to spend your points because you’re concerned that you’re not maximizing their value—that if you swap them for a weekend away, you’ll miss out on a longer, more luxurious stay. …
The good news if you’ve been hoarding: the best values for award bookings tend to be on luxury products. A business-class ticket from San Francisco to London on American, for instance, costs 100,000 miles, while in cash it would be more than $6,000— you’re getting about 6 cents a mile. Book far enough in advance, and you can jet from San Francisco to Singapore in one of Singapore Airlines’ suites for around 70,000 miles. On the hotel front, a night at the Ritz-Carlton in Half Moon Bay, near San Francisco, runs $565, or 60,000 points.
Indeed the outlined points have substance to it. As I mentioned before the programs are increasingly making it more difficult and less lucrative to redeem miles and points. This isn’t necessarily limited to an increase in pricing for an award like pretty much all major U.S. programs have done in the last 12 months but also in tightening the conditions for a redemption.
See United Airlines as an example where the Mileage Plus program was recently cut down (details on their website here) . You used to be able to piece together a multicity itinerary that allowed routing an award for a point to point rate through different gateways. In March I redeemed a ticket from Bangkok via Hong Kong and Singapore to Auckland using the Multi City function. This is no longer possible as United now prices multi city as separate segments, claiming it is ‘easier for the customer’. That’s utter nonsense for obvious reasons. At the same time United eliminated stopovers on their awards which were of big value before.
Customers who have very large balances are more prone to get hurt by such last minute and often unannounced changes. At the same time you really should try to reach account balances that allow for the redemption of premium awards which present the highest return value.
Does it make sense to leave a balance for ‘Emergency tickets’? That really depends how international you are and if you actually have a purpose and need to fly very last minute in which case such a mileage cushion could save a substantial amount of money.
A mileage account isn’t a bank account and points should be seen as an investment. The constant devaluation of loyalty points should encourage people to bring down their balances in reasonable but constant effort in order to reduce their vulnerability against changes initiated by the programs.
A very common misconception is the assumption that ‘keeping miles for retirement’ is a good idea. For the reasons outlined above this is absolutely not the case. Especially if you aren’t even close to retirement age this is a gamble that will likely not pay off and I can only discourage anyone from pursuing such a course of saving up miles over decades as a substantial loss can be expected.