Right now American is offering 15,000 bonus miles if you purchase 40,000 miles. At the normal purchase rate of 2.5 cents per mile, along with the $30 transaction fee, that means you can get 55,000 miles for $1,030. Certainly not a bad deal at under 1.9 cents per mile, though I’m betting hardly any of you took advantage of this offer. As a matter of fact, I’m betting that with very few exceptions, only people that were looking to “top off” an account for an award took advantage of this offer.
That brings me to this very interesting FlyerTalk post. The basic argument is that we’re basically “paying” more than that per mile every time we use a credit card, yet we don’t think twice about it. As I’ve mentioned many times before, Charles Schwab offers a 2% cash back credit card without an annual fee. So that means that in theory, all of us using our American AAdvantage Citi credit cards should instead use the Charles Schwab 2% cash back credit card and outright buy the miles. But to many of us, miles from credit cards seem a bit like Monopoly money. When I buy something for $10 and use a cash back credit card, I get 20 cents. What’s 20 cents, really? A fifth of the way to a 500 calorie donut? When I use a mileage earning credit card, I get 10 miles. What’s ten miles? Well, probably nothing, but it could be those last ten miles towards a Cathay Pacific first class award. Hell, sometimes I don’t feel guilty when I buy something just because I know I’m earning miles. At the same time, if I got 2% cash back, I doubt I’d feel as “ok” about it, since I’m only earning back a tiny bit of what I spent.
Of course those of using a Starwood American Express card can do slightly better than the two cents per mile above, most likely, though there are still better options. Unless we have an unlimited amount of money, we’d probably be best off just using the Charles Schwab 2% cash back card and saving that money for great mileage offers, like the recent US Airways holiday promotion where you could essentially buy miles for 0.7 cents each. At that rate I could earn nearly three miles for every dollar spent, something you can’t get with any other credit card.
Unfortunately I doubt I’ll be changing my behavior, as much as I should.