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.