Frequent Flyer and hotel loyalty award programs are not about pipe dreams such as flying to the far and exotic reaches of the world for nothing in First Class, or staying at fine hotels in a style that may be enjoyed by the Pope, Queen Elizabeth or a movie star. Unrealistic expectations aside, as a member of a company’s loyalty program you will sometimes be accorded unexpected upgrades or accomodations. If you don’t ‘demand’ special treatment, you’re more likely to be given a pleasant surprise; just being a member of the loyalty program can open doors for you. Once, at Hyatt’s Stanhope in New York City, I was given the key to a suite that appeared to be right out of Kensington Palace. Princess Diana would have felt right at home. Why was I granted such luxury? Who knows? Perhaps the hotel needed to free up other rooms and decided a Diamond member of the Hyatt Gold Passport program deserved this incredible suite at no extra cost for such a valuable accommodation in the Big Apple.
Award programs can offer great benefits when used intelligently, and you won’t have to try convincing your spouse and kids that a drive through the country stopping at diners is as interesting as strolling the beaches of Hawaii, which you could have enjoyed if you had only earned enough miles to book award travel.
Earning and spending your miles and points involves economic decision-making. It is just a matter of how to spend real money for a beneficial return or “payoff” in another form such as “free” flights or hotel stays. Just as you give careful thought to investments such as buying stock or property, your “investments” in flying or staying in hotels, whether on business or for pleasure, can afford you an excellent return in the future. A visit to Hawaii on award travel can be a return on your “investment” for all those flights through Chicago during the winter. You can sit on the balcony of your “free” hotel overlooking the beach and wait for room service (which you’ll pay for with an airline affinity credit card to earn additional miles; more about that later).
Airline Frequent Flyer programs are very powerful marketing tools that the airlines promote to reward you for being a good customer and keeping them in business. Many programs have been in effect for over 25 years. You should think of the mileage points you earn as a form of “currency” earned and saved as an investment for a future return, or as part of a “retirement plan” that you can draw on when you have more time to travel. You do have to be careful as some programs, such as Air Tran’s A+ Rewards or Southwest Airlines’ Rapid Rewards, don’t allow you to build big “banks” of miles and they require you to “spend” them within certain time frames. This would be like getting a gift card that expires if you don’t use it in time; in some cases it’s “use it or lose it.” Therefore you should use careful planning in the choices you make in earning miles, in order to obtain full benefit for a return on your travel-purchase investment. Remember, you (or your company) spent money to fly and stay in hotels and earned mileage or point credits in your accounts, and how and when you redeem them can affect the value you receive. Another way to think about spending “miles” from your account is that it lowers the cost of the flights you paid for in the past to earn mileage points. Thus, if done correctly, the money spent in the first place can be “spread” over several future flights when you redeem an award, in effect lowering the cost of each flight.
It is not unusual at business meetings, cocktail parties, backyard BBQ gatherings, and so on, to hear people talk about the miles they have accumulated. However, many people are not all that clear on how to earn miles, how to earn more miles beyond flying, or how to get the most benefit from Frequent Flyer programs. Nor are they aware of how to trade their mileage points for something of value other than flying for “free.”
The first Frequent Flyer program was started by American Airlines in 1980 to create a loyal passenger base, and to create another perk to draw business travelers. Within a year most major airlines had their own programs to compete, fine tuning ever since. About four or five years later most hotel chains joined in with their own loyalty programs. Then as time went on other businesses, such as car rental agencies, promoted their products or services by offering miles tied in with marketing agreements with the airlines, often selling products only remotely related to travel. Finally, credit card companies joined the fray by offering mileage credits for your purchases. No one could have foreseen over 25 years ago that Frequent Flyer mileage programs could have led to such a sub-culture that has become world-wide in scope benefiting many people and companies economically, and bringing diverse people, countries and businesses together so beneficially.
Today buying flowers, groceries, eating out, clothing and entertainment purchases, even paying your taxes, can all build up to a “free” airline flight without even flying for mileage credit! No wonder people started comparing the various programs at social gatherings to determine which airline had the best Frequent Flyer program. Now, airlines wouldn’t dream of ending their programs for fear of losing business to competitors. There is nothing more perishable than an airline seat. Once a flight takes off an empty seat is gone forever, and airlines will do what it takes to fill it before departure. Offering the potential benefits of Frequent Flyer programs helps fill those seats. Even the occasional leisure traveler wants mileage to build for a another pleasure trip. Thus, flying home for holidays adds another potential benefit besides visiting family and friends. So, next time you visit “grandma” you want to take the most advantageous flight plan for mileage and you could then be on your way to a “free” vacation flight. When you book a flight you are doing two things: buying transportation and earning miles in your account for that purchase. Today you can even earn miles in your accounts when you buy regular products or services. Whenever possible every purchase should earn you miles. If you are serious about building your Frequent Flyer accounts you need to give consideration to how you purchase products and services. The $5.00 latte, the $6.00 lunch at McDonalds, the $50.00 pair of shoes, even the ingredients for a great meal, can all be charged on a mileage related credit card and lead to a free trip, without even heading to the airport to take a flight. Add up how much you spend in a year on routine purchases and you might be surprised that you could have earned enough mileage credits for a free upgrade or trip had you just known how. Most people spend more than enough money each year to earn enough credits for redemption of an award benefit. Why not benefit from this economic sub-culture? It’s easier than you might think.
Credit cards affiliated with the various airline Frequent Flyer programs offer one of the best ways to accumulate miles in your accounts. All but a few have an annual fee that can range up to $90 or so, but it is worth it if you earn enough mileage credit to offset the fee. The exceptions are Delta Skymiles American Express card and the affinity cards issued by Barclays Bank, which can be had for free. But, be aware, these credit cards only award ½ a mile per dollar spent. However, you must use discipline when using credit cards for mileage and pay them off each month. There’s no point in paying interest on your “miles” making them more costly and reducing the value of an award benefit. If you are used to paying cash for most everything, then you must set aside that money in your bank account to pay the credit card bill each month. One easy way is to keep a running total of your charges so you don’t over-spend. Use an expanding file with the months of the year on each pocket and put your credit card receipts in the file according to the month, adding each receipt’s total to a tally sheet for that month. This way you can keep track of how much you are spending, the miles you’ve earned and how much is needed when the statement arrives. You can even create separate files for each type of credit card used for mileage to make it easier to check that the mileage for that month was credited to the appropriate Frequent Flyer account (although, I find the airline’s accounting to be nearly flawless).
Most fees on mileage related affinity credit cards range from $50.00 to $90.00 and you have to decide if it is worth it to you to have more than one credit card affiliated with different Frequent Flyer accounts. If you are not going to run at least $10,000 per year through the credit card it may not be worth having that fee based credit card. The point of using a mileage affiliated credit card is to accumulate miles in your Frequent Flyer account almost effortlessly and without having to fly all the time to earn miles for awards. If you think about it, in the course of a year you spend much more than $10,000 on regular living expenses (food, utilities, insurance, maintenance) besides entertainment and other discretionary spending, and using a mileage affiliated credit card would be very advantageous. In this economic sub-culture you are benefiting by obtaining a bonus for your regular economic activity. For your business, credit card companies pay an undisclosed amount to the airlines for the miles deposited to your Frequent Flyer account to keep you as a customer using their credit card at no additional cost to you beyond the annual fee. Since you are paying the annual fee anyway, you should use the card as much as possible. So, imagine the possibilities: you charge food at the grocery store all year and next year you take a “free trip” by redeeming an award from your Frequent Flyer account. This is much better than just getting a “free” set of pots or dishes from your supermarket, wouldn’t you think? Unless, you’d rather cook than travel (but then you’d be reading a cookbook instead of this one).
Debit cards are a different story and not as beneficial as regular credit cards, but you can still earn miles with the right debit card. Bank Of America offers a VISA debit card affiliated with US Airways. It’s free and offers ½ a mile per dollar spent. If you manage your money well it doesn’t make sense to use a debit card as far as mileage accumulation is concerned. Though there are exceptions. I recently renovated an entire kitchen taking advantage of Home Depot’s offer of no payments for 18 months as long as the purchase was put on their credit card. When it came time to pay I was able to use my US Airways VISA debit card to pay the Home Depot account off, as the debit card is the same as cash. I had money ready in the account at the bank from which the debit card draws. By doing this I was able to earn 5000 miles in my US Airways Frequent Flyer account. This was the only way to take advantage of Home Depot’s 18 month deferred payment plan and still earn miles on the cost of the kitchen renovation, and it was worth it, though I only earned ½ a mile per dollar. This is an example of creative ways to earn miles and we’ll cover other ideas as well.
This economic sub-culture is broader based than earning miles in Frequent Flyer accounts. Your regular spending activity can lead to award benefits such as “free” hotel nights, and other products and services that you may never have thought possible. Businesses benefit from your spending activity, and you, the loyal customer, benefit by redeeming your miles or points for award travel, whether for flights, hotel stays, train trips or even a cruise. In the next chapter we’ll discuss your objectives in order to best direct your efforts and spending to achieve your goals and desires.