Frequent Flyer miles programs can be difficult to understand. We all seem to want to accumulate the points (miles) and talk about the times we used them for ‘free flights’, but have you ever tried to work out what they are really worth?
Here is a simplified guide to valuing your Frequent Flyer points. We have used the Australian Qantas Frequent Flyer program to demonstrate how to value Frequent Flyer points. However, the principles of the guide should be valid for similar programs. To note, reference to points has the same meaning as miles.
To help we have created a simple Frequent Flyer Points/Miles Cash or Fly? calculator to compare different options for using your points. This will guide you to make the most of those accumulated points.
We compare exchanging Frequent Flyer points for a department store gift card against the value of using the Frequent Flyer points in exchange for a flight. However, you can use the calculator to compare across many options.
The Frequent Flyer Points/Miles Cash or Fly? calculator is now only available to subscribers. This is the same calculator as highlighted at Lifehacker – Use Frequent Flier Miles To Buy A Ticket?
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Below is a guide as to how you can manually calculate the points. This will assist in better understanding the calculator.
Question 1 – What is a Frequent Flyer (FF) Point Cash Value? Or in the Qantas Frequent Flyer program, the value of a department store gift card (as close to cash as we could get!).
This step is quite straight forward. You divide the dollar value of the gift card by the number of FF points required to buy that gift card. For example:
To purchase a $100.00 Gift Card, you require 13,500 FF points. Each FF point is therefore worth $0.007474 ($100.00/13,500 = 0.007474). This means a FF point is worth less than ¾ of 1 cent!
It is easier to look at the Cash Value per 1,000 FF points. In this example 1,000 FF points = $7.41 ($0.007474 X 1000 = $7.41 rounded).
You may find it easier to do the calculation by moving the decimal point three numbers to the left. In this case it will be $100.00/13.5 = $7.41
Question 2 – What is the FF points Ticket Value (value of FF points if exchanged for a plane ticket) and is this greater than the Cash Val ue?
To calculate the Ticket Value of the FF points, complete the following:
- Find the dollar cost of the plane ticket
- Know the number of FF points required for the plane trip
- Divide cost of the ticket by the number of FF points – this gives you the Ticket Value for the FF points
- Compare the Ticket Value against the Cash Value which is $7.41 per 1,000 FF points
- If the Ticket Value is greater than the Cash Value, buy tickets with the FF points. If not, use your own cash and consider exchanging FF points for a gift card.
The table below shows two return flight scenarios.
Sydney – Melbourne
Perth – Melbourne
|FF Points required||
|Cost of Flights||
|Ticket Value per 1,000 FF Points||
|Cash Value per 1,000 FF Points||
|Difference in Value||
|Exchange Points for Cash or Ticket||
Let’s walk through the Sydney to Melbourne return flight:
- Find the dollar cost of the flight – We managed to spot a special return flight at $161.00
- FF Points required for the ticket – 25,000
- Divide this dollar cost by the number of required FF points (per 1,000 points) = $6.44 This is the Ticket Value per 1,000 FF points ($161/25 = $6.44)
- Compare the Ticket Value to the known Cash Value of points = $6.44 V $7.41
In this example, the Cash Value (gift card) of $7.41 is greater than the Ticket Value of $6.44. Therefore, you would be better off cashing in the points!
What else you should consider
The following are a few tips to consider before using your FF points for flights or cash
- Can you book a flight with FF points that is convenient? – A cheap flight may not be that cheap by the time you spend extra on accommodation and food just to suit the flight times.
- Frequent flyer seats are limited – it can be tough to book particularly at peak times which will give the most amount of benefit, i.e. ticket prices will be more expensive.
- When comparing flight costs – look also at other airlines for their special deals. The same principal applies for the calculations.
- Beware of taxes and other costs – Often you need to pay cash for taxes associated with a ticket when purchased by FF Points. This can be a very costly extra particularly for international flights and therefore reduces the value of exchanging points for plane tickets.
- Buy goods instead of gift cards? – Simply do the same calculation as the gift card value. That is divide the value of the goods by the points required and compare against the gift card.
- Points don’t earn any interest for not being used – You could be losing value with the effects of inflation, i.e. you may need more points to buy the same flights/good/gift cards in the future
- Always check the terms and conditions.