Getting something from the use of airline miles or credit card points is common. These are generally earned in two legitimate ways, and in one somewhat illegitimate (although not illegal) manner.
First, you can fly a particular airline. Or second, you can spend money using a credit card that awards points when you use it. Often, airlines and credit card companies will increase the amount of points or miles you get depending on the activity they’re trying to incentivize.
The third method is known as manufactured spending. At one point, one particularly clever manufactured spender figured out that you could buy coins from the U.S. Mint in bulk using credit cards (and no fees). So he would buy thousands of dollars in coins over many years, and then deposit those at the bank. That way, he didn’t ultimately spend any money, but he received points on all of those purchases. Eventually the U.S. Mint shut that down by generally not accepting credit cards for purchases of coins. But the idea is to earn miles or points by not ultimately spending money. Credit card companies often dislike this, and will close accounts for egregious manufactured spenders.
Once you’ve accumulated miles or points, the next issue is redemption. Airlines and credit card companies try to get you to part with those miles and points for 1 cent or less. Depending on a person’s goals, it might make more sense to hold those points and use them during the limited periods of availability for a flight or hotel (since airline and hotel operators intentionally limit availability to those trying to redeem miles or points).
During this pandemic, most people are either holding these points or using them for cash back opportunities. These are often redeemed around 1 to 2 cents per point. Those redemptions can make sense. After all, if someone dislikes traveling, there’s no need to hold them for a travel purpose. But if you can afford it and enjoy travel, holding them will typically yield a better value for you.
Many miles and points “experts” hold on to those miles and points and only use them for long-haul international flights in business or first class. The world of travel is rapidly changing and uncertain, but many have saved them for a $10,000+ ride in Lufthansa First Class. For instance, an experienced holder of miles and points would earn points using an American Express, and then transfer those points to United Airlines or Air Canada—but only when they found availability, which was usually within two weeks or less of traveling. In short, even when you saved up the points, that was just the beginning. But imagine a flight with a bed, $300 champagne, caviar, airport transfers in a Porsche, and a lounge that looked like a Michelin-starred restaurant? Now imagine only paying for that with only a couple hundred dollars (plus 70,000 Air Canada miles [Editor’s note: the price has now been raised to at least 100,000 Air Canada miles], transferred from spending on an American Express), rather than the $10,000 price for a one-way Lufthansa First Class flight?
Small businesses generally don’t optimize their credit card and travel spending. Flowe can help you with that. We can help develop a simple (or complex) spending strategy so those miles or points can save your company thousands of dollars on expenses.
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