The Economics and Practicality of Frequent Flyers Programs

tonyjzx on 01/06/2015 - 22:53

I have a jaundiced view of FF.

I just want to educate myself more.

Just say for example, if you're the avg. family buying $100 of groceries a week and you try to pay all your bills with an FF credit card and you spend $50 a week on fuel thru that program.

What is the likelihood that you will derive an appreciable benefit?

I'm not interested in trading these points for useless goods.

From my line of thinking the only benefit to me seems to be the use of these points to get upgrades from economy to business on my yearly overseas trips.

Is this feasible? Would I gain enough points in an average year to get such a class upgrade on my airfares? Just say I spend $3,000 on two people for a trip to the US or the EU every year.

Am I correct in saying this is the ONLY real benefit? There is no price discount on airfares (is this true?). Excuse me if this is naive, I'm pretty sure this is no possible.

If you ask me to spend 2yrs spending thru the FF program to get an upgrade on a single international trip then this is not a useful use of my time.

Thanks

Financial

Comments

  • jaybmate on 02/06/2015 - 00:11

    You can also trade those points in for Gift Cards, basically cash if you get the coles / woolworths ones to spend on your shopping / petrol. Not as better return compared with flights but it doesn't force you to take a flight (to get a benefit) if you weren't gonna fly anyway.

    Also, are you asking just about frequent flyer points programs or all credit card points programs?

  • GnarlyKnuckles on 02/06/2015 - 00:13

    "Am I correct in saying this is the ONLY real benefit? There is no price discount on airfares (is this true?). Excuse me if this is naive, I'm pretty sure this is no possible."

    If I understand you correctly, you think that you cannot acquire flights using just FF points; only get flights you've bought (with money) upgraded? Because that is false. You can 'buy' flights solely with points; i.e. spend no money. Also, with some cards you can pay bills (and rego, and house/car insurance, healthcare-cover etc.) and get about a point per dollar spent. So that can yield a lot of points, depending on how high your bills/ ongoing family expenses are.

  • mskeggs on 02/06/2015 - 07:44

    If your monthly spend is limited to $1200 on participating card you are likely to find the FF programs marginal.
    We get such a card included in our mortgage, and spend considerably more than you on it each month. We have used points to redeem flights at peak times, when no discount tickets are available (but also few FF seats are available, you need to book well in advance).
    Choice magazine asked this question, and they calculated $1000 per month was the watershed, so it might be worth it for you:
    https://www.choice.com.au/travel/on-holidays/airlines/articl…

    A bit like cashrewards.com.au, I look at FF points as a bonus. I make my decisions based purely on economics, but if I get some points along the way, that is great.
    As an indication, we have been a member of Qantas FF for 20 years and have about 400,000 points accumulated through this approach.

    • GnarlyKnuckles on 02/06/2015 - 12:43
      +2

      Have you considered "playing the new CC game" kegs? I.e. applying for new cards with attractive points bonus on sign-up, and annual fee wived for the first year? I've accumulated well over 100,000 points this way in less than 12 months. So presumably if you and your spouse both did it, you could add >200,000 to your (already impressive) total collective points, in a relatively short time. I've only ever applied online/ it's never cost me much time.

      • mskeggs on 03/06/2015 - 14:38

        I have looked at them, but haven't acted.
        As mentioned, I view the points as more of an unearned bonus, rather than something to chase. And to be honest, while we have enjoyed a couple of upgrades and a trip paid with points, the taxes and fees for a Qantas flight added to the points are about what a ticket on Jetstar or Airasia costs!
        So there are only limited occasions to redeem the points when you get more than the gift voucher exchange rate.
        Add in the sovereign risk of holding so much QFF "currency" and I don't especially want to add to it if it takes effort or possible costs (like forgetting to cancel and getting hit with a renewal fee).
        I do keep looking at the deals, however, so maybe I will be inspired.

  • ilikeradiohead on 02/06/2015 - 12:47
    +1

    Someone I know did a calculation of the value of the programmes, and found that geting 1.5 FF points/$ (like on most platinum Amex cards) is worth around a 1% discount on purchases, if you turn them into gift cards. The value is much higher if you convert it into business class upgrades as they have the best 'exchange rate'. I simply rerouted my expenditure from my bank debit to card to my Amex/Visa. It has had no effect on my behaviour, and I haven't paid any interest.

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