Yahoo Finance The truth about frequent flyer points
A friend of mine has been a fanatical user of frequent flyer and other points that are linked to buying ‘stuff’. She’s used them for great holidays, while other people I know use them to get other things. But are they really worth it?
In the past, the consumer watchdog Choice has looked at this question.
As a starter, Choice’s team tell us: “With stiff competition for passengers, you may save more than the points are worth simply by buying the cheapest ticket. Unless you fly often and are prepared to get your head around a very complicated (and ever-changing) system, don't let the pursuit of frequent flyer points dictate your itinerary.”
Here are some important revelations you need to consider. Let me give you a quick summary of the main findings, so here goes:
The return from being an accumulator of frequent flyer points differs depending on how you use the points.
The pay-off to you varies depending on whether you use the points for an international flight, a domestic flight or to buy a product.
The best uses of these points in order were for seat upgrades, purchasing flights and then buying gifts or vouchers.
The points have become less valuable over time. “When we did our frequent flyer point breakdown in June 2015, points used for seat upgrades were worth as much as 14 cents,” Choice revealed. “In 2018, the best value upgrades we found were worth less than half that.”
You really should do your homework when you give up a lot of points to fly on expensive trips.
This Choice case study says it all: “A CHOICE community member wrote in to tell us about an experience he had, which demonstrates the value of shopping around before blowing your hard-earned frequent flyer points,” it explained.
“Our member booked a trip for himself and his wife to Honolulu on a Qantas 'classic award' arrangement, using 61,500 points per person and paying $406.26 per person in fees and charges. He subsequently received a Jetstar email with a special offer for return flights at just $567 each, including all fees and charges, for the same travel dates. ‘Had I known that I would have been able to use the Jetstar offer, I would not have used my Qantas points in this way,’ he said.”
Many small business people use credit cards and build up points to fly, which can help cash flow. But it’s critically important to work out what interest rate you’re paying on your cards. A lower interest rate card could actually provide plenty of cash to seize good deals, especially if you fly when the demand for travel is low.
The top frequent flyer cards charge interest around 20 per cent. So if you had a balance of $10,000 a year, you could be paying $2,000 in interest each year.
By switching to a low interest rate credit card at 10.99 per cent, you could save $900 a year that could buy over 19 one-way flights between Sydney and Melbourne, given Jetstar advertises $46 flights!
And you’d nearly get a return flight in business class with Virgin, so it certainly pays to do your homework and work out the pay-off of being a points-seeking, credit card high flyer!
