Did you know that many loyalty programs will sell you their program’s points or miles currency with no strings attached?
You can jump online, log into your account and buy points or miles with a credit card and a few clicks. These programs usually have generous purchase limits, meaning you can top up your balance with a six-figure sum in minutes.
What’s the catch? Well, the cost. The purchase price per point or mile is usually higher than TPG’s valuation.
The good news is that the program regularly runs promotions to buy points and miles. During these promotions, you can often snag points and miles for almost half their normal value and sometimes even less than our valuation, meaning you can then redeem them for more than what you spent to buy them. .
However, you don’t want to buy points and miles even when they’re on sale. So, in this guide, I’ll discuss when it makes sense to buy points and miles.
When should you buy points and miles?
Buying points and miles means you can redeem them when you get more value than you spent to buy them.
Say you’re looking at a flight worth $500 cash or 20,000 miles plus $50 in fees and taxes. If you can buy those 20,000 miles for 1 cent each during the bonus promotion, the cost of that airfare with your purchased miles would be just $250 (20,000 times $0.01 plus $50 in taxes and fees) instead of $500 for standard cash. rent
That would be a great deal.
For this reason, I look for sales offers where you get bonus miles or a price discount when making a minimum purchase. A good rule of thumb is that when the cost per mile drops below TPG’s valuation of that mileage currency, there’s a good chance you can redeem it for more value than it cost you to purchase it.
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TPG Aeroplan points are worth 1.5 cents each as of our July 2024 valuation, and I know I can easily redeem them for at least that value, whether it’s business-class flights to Europe on Air Canada or Africa on Ethiopian Airlines. .
You can buy Aeroplan points for 3.5 Canadian cents per point, about 2.6 US cents. At this price, it’s about a cent higher than our valuation, so as much as I love my Aeroplan points, I’m not buying them.
However, the program occasionally offers bonus deals when purchasing points, usually between 80% and 100%. A 100% bonus offer means that if I buy 50,000 points at 2.6 cents each, I will receive an additional 50,000 points at no cost. This means I’m buying points for 1.3 cents each, which is an attractive offer.
Aeroplan recently offered a 125% bonus on buying Aeroplan points, which brought the price down to around 1.14 cents each (this offer has now ended, but see the current offers page to buy points and miles, which we update regularly).
The program usually only offers this bonus level once a year, so I jumped at the chance and bought a large amount of Aeroplan points, but only because I knew I would eventually redeem them. If you don’t have a specific redemption in mind or you don’t use a program frequently, TPG generally doesn’t recommend buying points or miles because they depreciate regularly, making storing a currency a bad long-term investment.
Since I book a lot of flights through Aeroplan, I know I can easily redeem my purchased points for at least TPG’s valuation, if not significantly more.
For example, I know I can fly from Western Europe to the Eastern United States for just 60,000 Aeroplan points in business class on partner airlines like Lufthansa and Swiss. By buying points for 1.14 cents each, I can fly Atlantic in business class with less than $700 worth of points plus minimal taxes and fees. That’s a tremendous deal.
But there are caveats.
The above calculation assumes you can redeem miles for the airfare you want at the redemption rate first quoted. The first problem with this assumption is that the availability of redemption is constantly changing. A seat that is available today may not be available tomorrow when you consider buying points and miles.
For programs that use dynamic pricing, prices for the same flight may change constantly.
Related: How Much Will Your Vacation Really Cost? The scourge of dynamic prices is spreading like wildfire
Another issue is that the number of points or miles you need may increase. Most programs periodically increase requirements — known as depreciation — and your loyalty currency becomes less valuable. Some programs will alert members before changes are made, but programs have been devalued overnight without notice.
If you believe you can redeem the points or miles for the purpose you bought them for at a price you’re happy with, it might make sense to buy them, but you shouldn’t be saving this currency for a rainy day. .
Even when you’re a few thousand points or miles short of big redemptions like first-class flights for your honeymoon, it can make sense. Even if points or miles aren’t on sale, it might make sense to top up your account to make a dream-worthy redemption.
Related: How to decide whether to use cash or miles for airline tickets
When should you not buy points or miles?
If it’s cost-effective, you shouldn’t buy points or miles.
It is best to remember that when you purchase points or miles, you are subject to the value of the points or miles and the taxes and fees associated with booking your award ticket. For example, Virgin Atlantic Flying Club only requires 20,000 points for a round-trip flight from New York to London during the standard (i.e., off-peak) season. But before you think you’ve effectively found a discounted one-way flight to London, you need to understand the fee structure associated with this type of ticket.
First, you have to pay a transaction fee to buy points. Then, when booking your ticket, Virgin imposes hefty surcharges and taxes and fees. In this case, the taxes and fees alone can be more expensive than the points are worth. You can do better by paying full cash for the rent paid.
It rarely makes sense to buy points or miles if you don’t plan on redeeming them right away—it’s known as “speculative” buying. This is because you can’t guarantee their value in the future when you decide to use them due to depreciation and other ways loyalty programs can change their programs.
Related: Why Points and Miles Are Bad Long-Term Investments
Which credit card should you use to buy points and miles?
Most of these promotions are processed through Points.com rather than directly through the hotel or airline, so you won’t be able to earn bonus rewards with most. Travel Rewards Card. You’ll want to use an everyday spending card that offers solid returns on nonbonus spending.
The main exception to this rule is American Airlines. This airline codes mileage purchases as airfare, so you may want to use a credit card that earns bonus miles on airfare for the most return when purchasing AAdvantage miles.
If you’re working toward a minimum spending requirement to get a welcome bonus on a new card, using that card may be the best option.
Remember that some cards may incur foreign transaction fees when buying points or miles from a program abroad, so you may want to use one of the following cards:
Bottom line
Under the right circumstances, you can get attractive deals by purchasing points and miles. Over the past decade, I’ve bought over a million points and miles in different programs. That’s because, at the time, I had immediate uses for them.
If you’re considering buying points or miles, know that those rewards are unlikely to be worth much more than they are now. After all, depreciation is frequent. So, if you’re buying speculatively, it’s possible that your newly purchased points and miles may depreciate before you can use them.