A No Nonsense Explanation On Why An Air Mile Isn't A Mile
A very long time back in 1981, American Airlines started the very first frequent flyer programme. It had been called AAdvantage. A host of other airlines followed suit, and air miles were born. What's interesting is that air miles, in the distant past, actually did equal the disposable miles you have to visit. This is what changed.
What Are Air Miles, Really?
A long time ago, when the idea of air travel rewards came into being, bonus miles were just that: should you had a free ticket to a country 500 miles away, then you got 500 bonus miles. Unfortunately, it didn't stay that way for very long.
Today, air miles (or bonus miles, or miles points) are a random measure. For instance, there was a time 125 KrisFlyer miles was more vital or less S$1. During the same period, for Delta Airlines SkyMiles, 125 miles is all about S$4.83.
To confuse you extra, some airlines let you redeem a free flight at 10,000 miles, whereas many others can offer to you at 8,000 miles. Some airlines use kilometres or miles points, and all it is a giant mess.
At this point, you can think of each type of air mile (from each airline or charge card) as its own currency; and they all have an exchange rate against one another. For example, one Delta SkyMile is clearly more vital than one KrisFlyer mile, and so forth. And since the airlines change the number of miles required to redeem flights and upgrades, there are shifting exchange rates.
But how did we end up getting this type of mess, and why can't we clear it up?
The Problem Began With Inflation
The first reason is air miles inflation.
Air miles inflation is a big topic, among individuals who collect them. As more people caught on to air miles, they started to game the system to attain more. Some have even reached the stage where they can fly around the world free of charge.
There was once all sorts of tricks to it, for example maxing out charge cards on iTunes gift certificates (when iTunes gift certificates were anything), after which reselling those gift certificates.
Why? To generate huge amounts of air miles, without actually spending money. These miles are then used for free flights or business class upgrades.
You get the picture: people learned to game the system, and accrue absurd levels of miles. Airlines had to respond, otherwise they'd go bankrupt: so that they raised the number of miles needed to redeem tickets and upgrades.
Each airline did this at different rates; only one thing is apparent: every year, more and more air miles are necessary to claim the same quantity of rewards. As such, a visit of 500 miles may now have to be redeemed with 10,000 or 20,000 miles – there's no longer a correlation between the bonus miles, and also the actual miles travelled.
There's actually an essential lesson in economics here, as money works inside a comparable way. Just as money devalues when governments print more of it, so too do air miles devalue as airlines give out much more of them.
Airlines And Credit Card Companies Value Their Miles Differently
The second reason behind this development is that airlines and credit companies value air miles differently.
As we've pointed out above, some air miles are worth more than others. You can't really standardise all of it as a single currency: some airlines are more generous than others, or are on a promotion drive – they might be willing to provide you with more for his or her miles than competitors (or the other way around).
Furthermore, each airline has its own deal with the credit card companies. We can not see how are you affected behind the curtain; but we do know some credit card issuers can wrangle more out of airlines (e.g. if American Express can be used by 80 per cent of an airline's customers, they can pressure that airline to in the worth of its miles, or issue more bonus miles to Amex users).
Spend, Not Horde, Your Miles
The most important takeaway all these? Spend your miles, lest they become devalued. Weight loss people become popular to presenting air miles, and airlines keep giving them out, the value of each air mile will decline faster. Singapore Airlines, for example caused a ruckus when it devalued its miles.
This means that people who hoard their miles take a big risk: you can painstakingly gather 10,000 miles for a year, only to discover that by next year, those 10,000 miles are worth just 5,000 miles!
This also means that particular strategies, such as hoarding miles just for the rare, “big value” ticket, might be flawed. A safer method is always to rely on them quick, as you don't know how quickly their value will erode each year.
From now till 31 January 2021, DollarsAndSense is managing a special promotion with SingSaver for six Different Air Miles Cards.
Use these links below to sign-up for just about any of these 6 air miles cards to get exclusive cash and vouchers from SingSaver, along with any perks given by individual banks. Them entitled to the promotion are:
1) American Express Singapore Airlines KrisFlyer Credit Card
[SingSaver Exclusive]: $150 Cash for new and existing customers, 26,600 bonus miles if you spend $3,000 within the first 3 months, and another $3,000 between 4th month and 6th month.
2) American Express Singapore Airlines KrisFlyer Ascend Credit Card
[SingSaver Exclusive]: $150 Cash for brand new and existing customers. 49,900 bonus miles should you spend $6,000 within the first 3 months, and another $6,000 between 4th month and 6th month, and spend the money for annual fee of $337.05
3) Citi PremierMiles Visa Card
[SingSaver Exclusive]: $200 vouchers Cash for new Citi customers. $30 for existing customers. 30,000 bonus miles should you spend $7,500 within the first three months and pay the annual fee of $192.60.
4) Citi Rewards Visa Card
[SingSaver Exclusive]: $200 vouchers Cash for new Citi customers. $30 for existing customers.
5) UOB PRVI Miles Visa Card
[SingSaver Exclusive]: $50 Cash for brand new and existing customers.
6) OCBC Titanium Reward Cards Credit Card
[SingSaver Exclusive]: $100 Cashback for new customers.
