An Introduction to Miles & Points Programs

How the game works  

• Points programs were started in the 1980’s to generate customer loyalty and increase revenue.  Today they are the most profitable parts of airlines generating revenue from selling miles to partners.  The goal of these programs is to drive incremental revenue for the program. 
• These programs are also very valuable to consumers, if the game is played well.  The two sides of the game are earning points and redeeming points.  Points can be earned cheaply or expensively and spent on high or low value awards.  Most people don’t put any though into their points, but if you see points like a currency, then you can gain significant value from the points game.  Points and miles should be viewed as a currency with a value (proposed valuations post) and this mindset will help clarify points based decisions.  Before spending points do the math on the value because it may be cheaper to pay in cash in some cases. 

US Airways Jets at CLT

Earning Points & Miles

• Flights and Hotel Stays:  The first way to collect points is by flying on a plane or staying at a hotel.  Airline earning is based on distance traveled (mostly) and hotel earning is based on total spend.  Bonuses are given for status members too.  Flights are usually an expensive way to earn points, but there can be some values
• Credit Cards: Credit Cards are the fastest way to collect points.  Most cards offer a sign up bonus, usually 30,000 or more points, and then give points for purchases on the card.  An easy way to boost your mileage balance is to ditch the no rewards card and upgrade to a points card.  Then use your card whenever possible.  The spending will add up and quickly increase your mileage balances.  Never carry a credit card balance because the finance costs outweigh the mileage benefits.
• Other Partners:  Online shopping portals, car rentals, flowers, and hundreds of other partners can earn you miles.  If you can earn miles for doing something you do anyway, take the opportunity.

Delta 777 at ATL

Spending Points & Miles

• Flights and Hotel Stays:  Redeeming for flights on airlines and hotel stays for hotel chains is usually the best value available.  International flights in premium cabins provide the highest value from your miles and the best stories.  With hotel stays, just do the math on the lowest available rate plus tax divided by the number of points for the same room.  If the points value meets your minimum redemption value threshold, then use points, if not, use cash.
• Points have an exponential value until the value plateaus.  2,500 points are worth a magazine subscription, 25,000 is a round trip in the USA, 50,000 is a round trip to Europe, and 100,000 is a round trip to Europe in Business class.  The more points you have, the more options are available, and the more those points are worth.
• Other Rewards:  Merchandise, gift cards, auctions, and a myriad of other things are available to buy with points.  These are usually very poor values.   Programs need these low value choices so the program costs stay low and members who don’t know any better will feel like they got a deal.  You could get a $200 watch or a $2500 trip to Europe for the same number of miles. 

Austrian Airlines Lounge - Free Access For Star Alliance Gold Members

Elite Status

• How to Earn:  Status in a points program makes traveling much more relaxing and rewarding.  With enough miles flown or hotel stays in a year, points programs will award a higher status. 
• The key to earning is crediting your travel to as few accounts as possible.  20,000 miles a year with American, Southwest, and United will not get status in any program, but 60,000 with any will yield Gold status.  The best way to maximize miles is to stay within an airline alliance, for example my Lufthansa flights credit to United.  My American and Delta flights credit to Alaska.  I still can earn miles with American, Delta, and US Airways with credit cards and other promotions, but flight miles are best concentrated in as few programs as possible.
• Airline Benefits:  Most airlines are very similar in their status benefits and tiers.  Silver level gives free checked bags, bonus miles from flights, elite lanes, and upgrade eligibility (unlikely to see many since silvers are at the bottom of the list).  Gold is like Silver, but a little better in most areas.  Top tier status gets most fees waived, top of the upgrade list, special customer service number with great reps, and more perks.  Here are the details for United, American, Delta, Alaska, US Airways, and Southwest. 
• Hotel Benefits:  The first benefits are earning more points per dollar spent and being eligible for room upgrades.  From there, each chain does it differently.  In most cases, club lounge access, free breakfast, free wifi, and welcome gifts are given out at different program levels.  Here are the details for each program: SPG, Hilton, Hyatt, Marriott, IHG Priority Club, and Fairmont.