[lewko]

Have any of you two ever done any calculations on the question of acquiring mileage points versus paying credit card surcharges?

I ask as a number of my big-ticket bills (rates, strata etc.) are now charging 1-3% for credit card payments versus EFT.

The bastards.

I get 1.5 points per dollar on Amex and 1 point per dollar on Visa.

At say 16,000 Qantas points for a return trip to Melbourne versus say $250-300 cash for a cheapy ticket) and who knows for international flights,
I am wondering at what point one should cop the surcharge or pay the old fashioned way.

[Robert Barlow]

Flood these mongrels with a lot of paperwork and write cheques out to them for a while and let them work out the compliance costs of a paper system vs an electronic system. I find it most inconvenient where a creditor requires a cheque and will not set up an electronic facility. My landlord still requires payment by cheque and if I'm out of the country, I don't pay in advance. So does owners corp but there are discounts for early payment. We are in the 21st century and the sooner all people involved in the movement of money realise it the better.

[Robert Barlow]

I still like the convenience of CC payment and will continue to do so unless the surcharges become too great

[NM]

I would never use my CC points for a QF award fight between SYD and MEL. I use my QF FF points (however earned) for upgrades which cost me between 25,000 and 60,000 points. So if 25,000 points requires $16,667 spend on my Amex, then for billers that charge a 2% surcharge, I would be paying an extra $333. So my upgrade from business class to first class from HKG-MEL would cost me a max of $333 if all 25,000 QF FF points were earned from billers charging a 2% surcharge.

Similarly, an upgrade from business to first class on MEL-LHR would cost me 60,000 QF FF points, which would incur surcharge costs of up to $800 if using Amex Rewards Maximiser and paying a 2% surcharge on all purchases.

But thankfully my Amex spending is such that less than 5% of my spend on that card incurs any surcharges, so my extra costs for such upgrades would be more like $16 to $40, which I see as pretty good value.

For a SYD-MEL return trip I would just purchase the cheapest paid fare I can find (that earns AA miles of course ). My minimum flight rewards are things like BNE-PER or BNE-AKL.

[one9]

I think Australian banks greatly need to increase the ATM card daily withdrawal limit.

I never pay with a credit card if there is a surcharge unless it is going to be inconvenient by another payment method. Normally I would use EFTPOS card, but it has a $1000 daily limit.

Points are worth far less than 1 cent each, so I would definately not consider paying a 1% surcharge.

When people pay using credit cards at my business, we must pay a 0.08% (and a whopping 2.5% for Amex) surcharge. We get a bill for thousands of dollars each month. If people paid by ATM card, it would cost less than $100. So I can see it being reasonable to charge a surcharge. But as Visa/Mastercard is less than 1%, we don't charge a surcharge as this is similar to the administrative hassle of cheques and cash.

[NM]

Originally Posted by one9

Points are worth far less than 1 cent each, so I would definitely not consider paying a 1% surcharge.

That depends on what you use them for. The price difference between Business and First class between say MEL and LHR is a lot more than 1% of 60,000 points it costs for the upgrade. Same for HKG-MEL upgrade being 25,000 points.

But if you use them short QF domestic flight awards, then you are right. But I don't use my points for those.

[one9]

Originally Posted by NM

That depends on what you use them for. The price difference between Business and First class between say MEL and LHR is a lot more than 1% of 60,000 points it costs for the upgrade. Same for HKG-MEL upgrade being 25,000 points.

But if you use them short QF domestic flight awards, then you are right. But I don't use my points for those.

I think a lot of people compare points like you, and I believe it is a mistake.

It is easy to compare the cost difference of an upgrade and the amount of points required and then to try and value the points.

But, what you are forgetting is that the upgrade is not guaranteed. So you need to take into account, the cost of uncertainty, the cost of mucking around, the cost of not getting points for the higher fare etc.

There are many more costs to consider when using points to purchase a ticket. Costs such as uncertainity, the cost of having less dates to chose from, the extra cost if you decide to stay an extra night etc to make your flights work, the cost of inconvenience if you have an earlier or later flight in the day then you would prefer, the cost of often not being able to chose which airline the flight is on, the cost of not getting points, and I believe many people forget to take into account the costs of taxes.

You can not buy an award ticket from Qantas. A ticket (eg economy ticket) that you buy from Qantas is far superior to an award economy ticket with Qantas. As such the credit card company etc. pays far less for the points that you would if paying by cash, as they buy a less superior ticket.

When I first started valuing points, I valued them at somewhere between 1 and 3 cents. Since then I have redeemed a few first class flights and some business class flights. However I now value the points at less than half a cent each. I have around 2 million points, and am earning them faster than I can use them. I wish there was a Visa/Mastercard in Australia that could transfer to AA.

[oz_mark]

Originally Posted by one9

You can not buy an award ticket from Qantas. A ticket (eg economy ticket) that you buy from Qantas is far superior to an award economy ticket with Qantas. As such the credit card company etc. pays far less for the points that you would if paying by cash, as they buy a less superior ticket.

Quite an interesting post, but I think it is natural that people will try to value points and compare the value that they get from the different options available for using those points.

What I am intrigued about, is what you mean by an award ticket being lesser than a normal ticket? What do you actually mean by this?

[NM]

Originally Posted by one9

But, what you are forgetting is that the upgrade is not guaranteed. So you need to take into account, the cost of uncertainty, the cost of mucking around, the cost of not getting points for the higher fare etc.

I am not forgetting these things. I am most certainly aware of the uncertainty. That is why I did not claim the points value was the difference in the fare cost, but use it a point of reference for my comparison. I think spending a small amount extra to have the points available for a shot at an upgrade is still better value than 1c per point. I never put a real monetary value on my points, but look at what I can realistically gain from from.

I use them for upgrades because as a Platinum QF FF member I have a good chance of successfully clearing the waitlist. In fact I have only once not received an upgrade for which I was waitlisted, and that was during the BA catering strike when BA cancelled some flights to Australia so my SIN-BNE flight was overflowing with re-routed BA passengers with their J passengers very unhappy in the QF Y cabin. So an upgrade on that flight was unsurprisingly refused.

So while I hold decent status with QF FF (and lifetime gold should be good for that), I am happy to spend a little extra at time to earn points to use for upgrades.

Originally Posted by one9

There are many more costs to consider when using points to purchase a ticket. Costs such as uncertainty, the cost of having less dates to chose from, the extra cost if you decide to stay an extra night etc to make your flights work, the cost of inconvenience if you have an earlier or later flight in the day then you would prefer, the cost of often not being able to chose which airline the flight is on, the cost of not getting points, and I believe many people forget to take into account the costs of taxes.

Oh, I am so very much aware of the cost of taxes. That is why I now use my AA miles for QF award flights and use my QF FF points for long-haul international upgrades. The best value use of my earning programs by far.

Originally Posted by one9

You can not buy an award ticket from Qantas. A ticket (eg economy ticket) that you buy from Qantas is far superior to an award economy ticket with Qantas. As such the credit card company etc. pays far less for the points that you would if paying by cash, as they buy a less superior ticket.

Indeed. But that does not mean I cannot get value from my points. My last redemption (using AA miles on QF flights) would have been over $7000 worth at the current published rates. I in no way imply that my AA miles were worth 7000/105000 as I would never have paid for 3 business class seats if not using points. In fact, that trip would not have even been planned if it was not for the availability of the AA miles to do it. So I guess you could say the whole exercise is really costing me a lot of money, being $148.43 in taxes, plus the NZ departure tax which will be paid at the airport, plus a passport for my daughter, plus car hire for a few days, etc etc. But I still see it as very good value considering those AA miles were earned on one 3-week ATW trip.

Originally Posted by one9

When I first started valuing points, I valued them at somewhere between 1 and 3 cents. Since then I have redeemed a few first class flights and some business class flights. However I now value the points at less than half a cent each. I have around 2 million points, and am earning them faster than I can use them. I wish there was a Visa/Mastercard in Australia that could transfer to AA.

That is where we differ. I don't put a monetary value on my points. When I make a redemption, I look at the transaction in isolation and make a value judgement as to whether I want to spend the points/miles for the reward. I can't redeem the points or miles for cash, so they have no cash value to me. But in nearly all cases where I have redeemed QF FF points, I believe I have received significantly better than 1c per point in value.

I would never buy points for the sake of buying points. But if a credit card transaction is going to cost me a little more, I will make a value call at the time as to whether or not I am wiling to pay the extra for the convenience of using the credit card and for the extra points/miles. For example, I do play my Telstra bill using my Amex card. But I think that is the only bill I have been charged a surcharge for using my Amex card in the last 12 months or so.

[dajop]

Tend to agree with NM on this one. But it is an individual calculation. Usually, I won't pay more than 1.5% for accruing points, but if I am a few short will pay more.

The other factor is the "marginal" value of points - for example if you're 8000 pts short of getting a really good award - or upgrade - those 8000 points are probably worth much more than if you were just to use them for a one way MEL-SYD (which would make them worthless anyway, given the taxes & fuel fines that must be paid with award bookings).