why can’t i make frequent flyers work?

I joined the frequent flyer community not long ago with mile high expectations. Like many of you, I did so with the hope that it would help me earn free flights just from doing everyday things like spending. I wondered how amazing it would be if I could do nothing but yet still earn enough points to get me a flight each year? If that was so, I didn’t mind spending that little bit extra each year in order to achieve this goal.

I started doing some maths.

If I want a return flight to Hong Kong on economy, I need 60,000 points. If I want to go to Tokyo and back, that would require 72,000 points. That’s not too bad, I thought.

Then I started looking at what I had to get me there. So far, just one orange card from Woolworths that earns me one point for each dollar spent over $30 at Woolies or Big W. I have not used this card once. All my purchases at Woolies have been for less than ten bucks. Fail. Even my Myer One card sees the light only slightly more often.

Then I began looking into frequent flyer linked credit cards. In particular, ones promoted quite widely by certain banks. Then I began to learn that it costs quite some money to be a proud holder of  these credit cards, ranging from $50 to over $300 annually. In other words, you must pay to have a card that leads to even more spending. That is, using money to buy the privilege of earning frequent flyers. As they say, there’s no such thing as a free lunch.

Then it gets even more confusing. Some banks gives you two cards: a Mastercard/Visa and an American Express (AMEX) card, each with varying points earning power. Not surprisingly, the AMEX card earns at a higher rate of around 1 to 2 points per dollar spent. As we all know, not everywhere excepts AMEX cards and where they do, a higher credit cost may be charged. Is it worth this catch 22 for that extra point per dollar? For a $50 spending, would it be worth that extra credit card cost, for those extra points?

As well, some cards may set a maximum points amount further restricting your points earning ability.

Is there a way of using these credit cards to our advantage?

So my maths boils down to this. If I had a card that earned 1 point for every $2 spent, then I would need to spend $120,000 to earn enough points for a return trip to Hong Kong, and $144,000 for a return trip to Tokyo. Bear in mind that the only cost to me is is the annual fee. This is just how much I would need to spend in my everyday spending.

A Virgin Atlantic return flight to Hong Kong would cost me around $1,100. That’s less than 10% the amount required under frequent flyers. This begs the question, is it even worth me spending the annual fee for the privilege at all? I might as well put that $300 towards the $1,100.

My conclusion is that it is not worth having a frequent flyers credit card. I also conclude that I will never realise a frequent flyers dream.

Having said that, of course I realise that this scheme is incidental to normal everyday spending on a credit card. I don’t deny that I use a credit card. Essentially, you are gaining benefits from doing nothing, so the fees are expected. It is whether you are able to justify these charges for the greater goal. Five years of annual fees may be the equivalent of a return ticket, but have I collected enough points within those five years to earn myself an equivalent ticket or more? Would I be able to spend $120,000 over five years on my credit card? That is the equivalent of a house deposit, a new car and maybe even a holiday or two.

My answer is no.

Have I made an illogical conclusion somewhere? I just can’t get the logic, if there is one. Feel free to discuss.

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4 responses to “why can’t i make frequent flyers work?

  1. Not Really actually, most people use the credit card for business expense, therefore it works. So when you get a job that lets you write off stuff, its way worth it!

  2. ben have you just watched ‘up in the air’??

    like the movie i think these cards are worthwhile if you’re regularly going on business trips (which you don’t pay for) to rack up the miles or own make the purchases through the credit card.

    i had a friend who set up an crafty plan to accumulate points. he started a share trading account which accepted CC top ups. every month he used the cc linked to a frequent flyer points to top up his account by several thousand dollars. the next week he would refund the amount from his trading account back to the cc – ingenius i say! until the cc rang him up telling him they knew what he was doing hahah

  3. oh and not to make you feel bad…but I guess if you work at a bank like I do…then you can get the rewards card without paying the annual fee =P Yes, I enjoy earning 3 points per $1 on my amex card, though I only use it where it’s free to use (which is at woolies, coles, petrol stations, etc so it’s not that bad). Well actually I earn altitude points though…I guess I had the Earth card I could get frequently flyer points…but meh.

  4. It’s great how people are finding ingenius ways of maximising their frequent flyer points! haha. But it’s definitely better if you don’t have to pay the credit card off yourself. That privilege I just don’t have.

    Maybe when I get to that jetsetter stage in life, things will look up ay?

    Right now, I’ll continue to stick to not spending any money at all! Maybe I should hop to a bank for my next job. haha

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