The first frequent flier mile was awarded in 1981, when American Airlines started its AAdvantage program. The airline hoped the program, geared toward the growing business traveler market, might attract as many as 50,000 members, thus generating repeat business. Within a year, it had one million members, according to a 2010 Columbia Business School case study.
The point of the program was to appeal to business travelers, who are unique in that they typically don't pay for their own tickets. That means they're not as price-sensitive as your average leisure traveler, and they also tend to be repeat customers. Awarding them frequent flier miles that they could then use toward personal travel would give those consumers an incentive to spend with American, and to spend as much as possible so as to maximize the miles they accrued.
The program was a raging success for American, drawing loyal customers and slashing advertising costs. Naturally, other airlines caught on, and today it's hard to find an airline without some sort of rewards program. But those programs can also be complicated, with arcane and sometimes unpredictable rules guiding their use. An entire community of bloggers and aggregators has developed to help consumers to get the most out of their frequent flier miles and to avoid wasting them. Here are some of their most essential tips — and how they explain the way that frequent flier miles work, and don't.
1) Figure out which program best suits your travel habits
If you have 5,000 miles on United Airlines and 5,000 on American Airlines those are two very different things. There are two main ways that points programs work — they're either revenue-based or miles-based. And the emphasis in recent years has moved strongly toward revenue-based systems.
That means airlines reward you not for how many miles you travel but how much money you spend. Delta recently switched to a revenue-based earning system, and United will in March as well. American Airlines, meanwhile, is sticking to a miles-based program.
Fly from Chicago to California regularly on a revenue-based system, and you might earn different amounts for each flight, depending on how much you pay at booking. Fly on a miles system, though, and you'll get the same number of miles every time. That's especially applicable if you fly occasionally pricy but short commuter routes, for example, in which case you are often better served by flying on an airline with a revenue-based miles system.
2) Sign up for lots of programs, but focus on just one or two
Let's start with earning. On the one hand, you might think it's worth it to earn as many miles as you can, through as many avenues as possible. It's free to sign up for an airline's points program, after all, and just being a member can give you some rewards, says Randy Petersen, editor in chief of BoardingArea.
"There are instances when just being a member of a program can lead to benefits that non-members don't have access to," he says. "When a flight is canceled or other types of inconveniences and as well, opportunities for special fares, being a member of a program, even a general member may have some value to you."
But once you're signed up everywhere, if you scatter your miles over a lot of airlines — especially if you don't fly that often — they could easily expire before you can use them. Many airlines' miles expire after two or three years if you don't keep flying somewhat regularly.
Instead, you should focus on a smaller number of airlines, or even one. If Southwest operates a direct flight that you take cross-country for Christmas every year, for example, that might mean that's a good program to focus a bit more on.
You might also consider the airport you use most. If you live in Dallas, for example, you're right next to an American Airlines hub (DFW airport), and in Minneapolis you're at Delta's hub. That means you're going to get a lot of flights from those airlines out of those airports.
Also consider airline alliances. These are sorts of partnerships between airlines — the three big ones are Star Alliance, One World, and SkyTeam. You can often redeem miles earned on one airline though other airlines in that alliance (but different alliances have different rules about how this works). The bottom line is that you want to be able to spend your points once you have them.
Focusing on one program can also earn you special status with that airline, which gets tangible perks as well as often more opportunities to earn miles. Attaining elite status might mean you get free checked bags, upgrades, or early boarding, for example. And having a lot of miles helps you earn more miles. On Delta, for example, you can earn six extra miles per dollar spent if you have high-ranking diamond status versus two if you have silver status.
3) Pay attention to the points-to-dollars ratio
Credit cards and flying are the two big ways that people earn points, but there are many others. Signing up for a non-retirement account through Fidelity or paying your bill with some utility companies, such as Reliant or Energy Plus, will earn you points with certain airlines. For a more complete rundown of points systems outside of flying and credit cards, Lifehacker has compiled a list, as has The Points Guy.
When you're earning those points, try to think in terms of what you pay to get each incremental one. That will help you determine which programs are worth the money. A credit card that gets you a lot of miles but also overloads you with fees — or worse, tempts you to spend unnecessarily — might not look like such a deal when you think about it this way.
Then keep that math in mind when you go to spend your miles on flight. Different experts on points have different rules of thumb for how to know when you're getting your points' worth — Randy Peterson, founder of BoardingArea, tells Vox that miles should have around 1.2 cents in value each when you spend them. That means a flight that would cost you 25,000 points round-trip should be worth at least $300 in cash (0.012 times 25,000, that is).
Brian Kelly, founder and editor-in-chief of The Points Guy, says your threshold should be higher, and that a point should get you 1.5 to 2 cents in value. But the point is that you don't want to spend them on just any flight — spending a huge sum of points on an already-cheap flight doesn't make sense.
4) Don't sit on your miles — spend them
Hoarding miles can backfire in two ways. First, they can expire. One way to know when your miles are going to expire is to use a program like Awardwallet, which helps you track your miles for free.
Second, airline points can lose value. As Brian Kelly explains, miles operate in an environment where inflation is usually climbing quickly. There are more points being created (or earned) all the time, but the number of flights (or miles flown) isn't increasing alongside those points. It wouldn't make any sense to sit on a pile of cash for too long while inflation is going out of control, and it doesn't make sense to hold onto your points for years either.
This "inflation" shows up when airlines change their rules to make individual miles worth less, which happens fairly often. This can take the form of simply devaluing miles, or it can involve making the rules more complex. British Airways, for example, recently made earning miles harder for economy passengers and easier for first-class passengers, and it made the "price" of redeeming them steeper. American Airlines likewise made redeeming its miles more complicated, in many cases charging customers more points per flight. Airlines change the rules often, especially when an improving economy reduces the amount of unsold flight inventory they have on hand.
Airlines can change the rules on your miles anytime, though often with plenty of lead time. Still, it's better to be ahead of the curve.
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- The Points Guy is a great place to go for information, particularly its great beginners' guide to frequent flyer programs, including a discussion of what makes a good rewards credit card.
- CBS News' Peter Greenberg wrote this great piece last year on just how much money airlines make off of frequent flyer programs.
- A few more great sites to follow: Airfare Watchdog, Flyertalk, UPGRD, and InsideFlyer (subscription needed for most features).