I received the following question today from a reader, and wanted to dig into it to help others with some mental calculations, here is what Tim asked me:
I have a points question for you Matt. I want to buy this Tumi bag and found the following offers:
Direct from Tumi.com– price: $175– points offers via EVreward: best offer of one airline mileEbags– price: $219– points offers via EVreward: best offer 8 UR miles/$Question is, do I spend $45 more to get the extra points? Thanks for your advice.
For me, it is an easy ‘hell no’ and I am sure for many of you too. However, to give a little color to the story, some people are more inclined to chase the points if they are harder to come by. Tim is based overseas, so he doesn’t have access to MS, and credit card apps coincide with when he is visiting the US so he can collect the cards. I think this, plus a perhaps a little outsourcing of grey matter syndrome is what prompted this question, so lets dig into it mathematically so that he, and others, can think about such things the right way.
The question is sound. There will be times when paying $45 more for extra points makes sense, and perhaps more so when they are harder to come by. It boils down to a points valuation question initially. We could have 175 (lets assume UA) miles, or we could have 1752 UR, which would transfer to UA or other airlines, and as such are worth more than an UR mile. Even though at first blush we are comparing 1x and 8x, due to the way we start counting from $1 the extra $45 payment actually generates 10x more miles, at a 1:1 valuation between UR and UA.
The quick math:
$45/ [1752 (x valuation multiplier) minus 175]
- Economy 35,000+ $77.50
- Business 65,000 + $77.50
- Global First 80,000 + $77.50
Should we then apply a purchase price of 2.85 cents we get the following:
- Economy $997.50+77.50
- Business $1,852.50+ $77.50
- Global First $2280 + $77.50
I think the Economy fare is certainly overpriced (these are one way rates) but Business and Global First are priced reasonably for a person who cannot otherwise obtain miles and would otherwise pay for regular priced tickets. Don’t get me wrong, for me being here in the US I wouldn’t touch anything like this price point, but I value miles way lower than 2.85 cents because they are so abundant.
Variable nature of valuations
I’ve found myself leaning recently on the fair trading prices of points by Frequent Miler. I like the guy, think he puts enough thought into them and therefore can’t be bothered to cross check every nuance of his pricing. It’s good enough for me. However, I was recently pondering the notion that we are still overpricing our miles (generally speaking) and I thought to myself if a few things were different, I would be happy to sell my miles at 0.5 cents each. Many of you might think that the country life has addled my wits, but in fairness, if you could find churnable card deals and apply for 8 cards each 91 days, you could make good coin in just cashing in the points even at that ‘country bumpkin’ rate.
Points are cheap as chips in America, but not so much for folk overseas.
A better way
One thing to remember is that historical pricing is key to spotting a deal. Last year eBags was offering 35 AA miles per dollar, so that makes 8 UR seem very disappointing in comparison. When you decide to go with a firm like eBags you are basically agreeing to buy miles, perhaps for that $45 premium, but what is a fair exchange? Clearly if you knew they were throwing around 35X offers the current one is less appealing.
A better solution is the middle ground. When you find a company like Tumi they are selling through a plethora of channels – my solution would be to search through a portal consolidator like evreward for vendors that sell bags, look for any hot deals, and then price out the value per mile. It really is no different from going straight over to ebags – the only difference is realizing that ebags has the name and offers luring bonuses, but might also hike up the price, whereas somewhere like Macy’s might offer the same bag at a better price and at an attractive multiplier.
The trick is to find out who sells what, I used this in the past to buy a pair of Oliver People’s sunglasses offline. I spotted the pair I wanted in Nordstrom, walked over to Staples and picked up giftcards, walk back over to Nordstrom and bought the glasses. Staples wouldn’t sell Oliver People’s gift cards, and SunGlass Hut (which I think they did have) were over priced. I could have also squeaked out a few more points by ‘doubling dipping’ and using those Nordstrom cards on Nordstrom online through another portal, but I instead haggled $50 off the price, which is worth a lot more than the points… sometimes people are better to deal with than machines!
Don’t forget gift cards
BigHabitat just earned over 220,000 SouthWest Airline points in under a month by buying through Sears at 20x (The Double Dip earning 10x for the cards, then using the giftcards for 10x for the merchandise) that’s 2 SouthWest airline Companion Passes with zero credit card applications, and zero bum in seat miles! I’m not 100% sure if eGift cards counted here, I think they did, but perhaps a reader could confirm? If so, that would be a great solution for someone overseas to access more points and having greater shopping options.
Conclusion
So, what price would you pay for points? The answer is ‘it depends’. For me, at this time I wouldn’t pay a dime for points, other than the first year annual fee that comes with a slew of them at signup bonus time. I don’t buy points, and I don’t manufacture points (baring one outlet) I use signup bonuses for 99% of our miles, and I earn cash back everywhere else. But if things were different, and I was living overseas I might well start trying to earn more points and miles at a less efficient rate. The only way to know what the proper rate is for you is to go back to ‘The Math’ above and see if you are comfortable paying those rates for those flights.
It’s all about you, and what options you have.
Does Tim have an American Express? There’s a $20 off $100 sync offer. I could sell him a gift card for $80 😉 and would lower the math on the cpp a bit.
Please explain more on how you haggled the office @ Nordstrom! I’m curious how you could do that’s
I’ll write up a post 🙂
check your amex offers. there may be one for ebags. if you can enroll two cards, thats $40 off.
Matt, eBags through UR is currently offering 15 points per dollar.
Great tips guys! Thanks very much. I sent him this post so he will read them and hopefully he has the Amex plus can take the 15 points.
ebags.com has a price match policy that should work in this case.
Great tip- thanks John
“apply for 8 cards each 91 days…” Which is give or take 32 hard pulls a year. I get a lot of cards but not that many. Assuming decent income, low utilization etc is 25+ inquiries a year no big deal?
I don’t know for sure, but generally speaking in my position I see it as no big deal. I wonder about impact for someone with a more traditional lifestyle though – as things like loan applications, and perhaps job applications may become pertinent.