Are Frequent Flyer Points Worth it?

frequent flyer points worth it? if you can get 50% off this seat then yes
Are frequent flyer points worth it? The answer is yes of course they are! Otherwise this website would be pointless (sorry). It of course depends on how you use them which will determine the value you get from them. There are numerous guides on this site showing you how to redeem flights but sometimes my methods can understandably seem convoluted. I think of the points game as just that, a game. It is you and the airline each trying to out manoeuvre each other with you trying to eke out every bit of value you can, and the airline trying to make you spend them on whatever costs them the least amount of money. The value proposition of points is always changing and the headline is this. Points will always lose value over the long term. It is in your best interest to spend them as soon as possible rather than hold on to them for years and years. If you’re willing to jump through the hoops and play the game, I promise you the rewards are fantastic. Let’s see how much frequent flyer points are really worth.
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    Cost of acquiring points

    The most common ways to acquire frequent flyer points is through spending money on your credit card. This actually means a lot of people who have frequent flyer points have never even left the ground.

    Credit card sign up bonuses

    The easiest way to get points is through credit card sign up bonuses. This will commonly come in the form of offers such as 100,000 Points for $3,000 spend. This might also happen to come with 1 year of no annual fee which means you can cancel the card in the first year after getting the sign up bonus. Now $3,000 might seem like a lot to spend but the key here is you should just spend money you were going to spend anyway. Pay your insurance bills, utilities, groceries, next holiday all on your card and many people can make the minimum spend easily. An offer like this means the points have cost you nothing to acquire. You have just got yourself 100,000 points for free. If you have ended up paying an annual fee based off the usual yearly cost of premium cards you would pay approximately $400 which will be your cost for getting the bonus points.
    How to churn credit cards and maximise your points to burn

    Everyday Spending

    Most cards worth getting offer between 0.75 and 1.25 points per dollar spent. This means for every $1,000 spent on your card you will get a return of between 750 and 1,250 points. Again this will cost you nothing as you will hopefully be spending money anyway. I hear a lot of people tell me that the surcharges outweigh the benefits of using a credit card. I think that most places where you spend your money such as groceries, utilities and insurance have no surcharge and on some services if you have to pay a surcharge it is often 1% or less. For the purposes of the argument let us say you do pay a 1% surcharge on an average earn of 1 point per $1 spent. This means for every $1000 spent you pay $10 and get 1,000 frequent flyer points in return. The average monthly living expenses for a single person is about $1500 per month so in 1 year you might spend $18,000 on living expenses and say 75% of that was able to be put on your credit card. This means you get 13,500 points per year and have paid $135 in transaction fees.

    Flying

    Believe it or not, you can also get frequent flyer points through taking flights. Although people seem to forget this. For the purposes of this article I will assume that people will go for the cheapest flights (as I do) and not care about frequent flyer point earn i.e. you don’t pay a premium to fly with the same airline just for points. This means again, your points acquisition cost is nothing. If you take 2 return domestic flights a year on the cheapest flights that will give you at least 1,600 points per flight on Qantas or around 1,200 Velocity points depending on the cost of the ticket.

    Supplementary offers

    In addition to all of this you can get even more points through loyalty programs with supermarkets, chemists, insurance companies, phone and internet providers and the list is endless. They commonly have bonus point offers and give you points per $1 spent. This will yield you additional points and allow you to double up if you use your points earning credit card to pay the bill. Again this is all bonus on top of your regular spend so the acquisition cost is nothing. On an average year using these offers I have easily been able to get 20,000 points as a conservative estimate.
     
    As you can see there are hundreds of ways to earn points and if you put these all together your balance can grow significantly. Using the above example for earning Qantas points you could get 135,900 points which has cost you $530 in fees to acquire. Now let’s see what you could get with that

    Value of Using Frequent Flyer Points

    Now we’ve worked out the cost of earning your points, let’s see how much it might cost you to use these points on commonly redeemed things. I’ve tried to take into account all the costs to make it the fairest and most realistic comparison.

    Flights

    This is what most people are aiming to redeem when they set out on this journey. I hear people say all the time that points are only worth it if you redeem them for business class tickets. While flying business class is nice, I don’t think this is true. If you choose your flights carefully you can find worthwhile economy redemptions as well. In the last year since travel has return, demand has been extremely strong and flight prices have gone up significantly. While some points tickets have gone up it is not nearly as big an increase as the cash price meaning you can find some bargains. Let’s start with out 135,900 Qantas points we’ve earned and see how much value we can get.
    frequent flyer points worth it? if you can get 50% off this seat then yes
    For example a return flight from Sydney to New York in economy is 110,400 + $357 in taxes while on the same dates a cash fare is $2000. So you have effectively paid $887 in cash for a ticket or save 55%. I’ll let you be the judge of if that is worth it or not.
     
    Using a similar example for business class a flight from Sydney to Singapore return in business class will set you back 136,800 points (slightly more than what we’ve earned) so I’ll include the $50 in the cost to buy 1,000 points from Qantas meaning you will pay a total of $1,075 in fees and additional taxes. Note this isn’t the cheapest fare but purely an example. The same route paid in cash on the same dates is $3,900 in business class. This means you’ve saved over 70% on the total cost of the flight.
     
    As you can see even when paying the exorbitant Qantas taxes you’ve saved significant amounts on both economy and business fares. You can save even more by reading my guide here on using partner airlines. This goes along with some of the other benefits of points flights. This alone means I will continue to play the game of points collecting for as long as it exists in its current form and I think you should invest the time in learning it.

    Hotels

    Classic hotel rewards are a different story with the Qantas frequent flyer program. People will often ask me “is it worth using Qantas points for hotels?” I think these are poorer value and if you’re looking to redeem points for hotels you’re much better off redeeming hotel program points (more on this another day). However, this doesn’t mean they don’t have any value. In some cases they will still save you money but maybe not to the same degree as if you were using them for flights.
     
    As an illustrative example, 116,000 Qantas points will get you 3 nights at the Sir Stamford Circular Quay. The cash price of this redemption is $1000. On one hand you do not have to pay any taxes. Compared to your acquisition cost of $530 you have still managed to save 47% on the cost of the hotel room.
     
    This is a handy option if you’re someone who doesn’t like to fly or doesn’t have a need to fly as you can take domestic holidays and get some value out of your points.

    Gift Cards

    Gift card redemptions and store redemptions are the most controversial redemptions of all in terms of their actual cash value. Let’s see what out 135,900 Qantas points will get as at the Qantas Marketplace. A Woolworths gift card (something which I think is close enough to cash since everyone needs to shop for groceries at some point) will set you back 54,470 points per $250. Unfortunately you can’t get custom amounts of gift cards and are limited to incremental values. I managed to get $600 of gift vouchers for 130,760 points. Compared to our acquisition cost of $530 we’ve still managed to save 11% on the face value of the gift card. I would argue that this is getting close to the point where I don’t think it is worth it but again, you might not see it that way.

    Valuing a point

    I’ve touched on this before but I think there is no sense in placing a dollar value on points. A frequent flyer points is worth only the value you assign to it. If you don’t fly then you can still get value out of redemptions such as gift cards or hotels and as you can see, despite them being seen as “not worth it” I have shown you that relative to the cost of acquiring these points you are still saving significant amounts of money for you. Anyone who says it’s not worth the effort of playing the game simply doesn’t know how to play it.

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