Should I Do This? Is it Ever a Good Value?
You see the email come into your inbox - Delta is offering a bonus on SkyMiles you can purchase for yourself or gift to someone else. It’s a sale - it must be a good deal! Well wait just a minute!
Let’s look a bit deeper into the option to purchase, gift or share SkyMiles with or without a bonus offer.
Delta SkyMiles bonuses are generally offered based on tiered purchase levels. Therefore, the more you buy, the larger the bonus. Miles are often available in increments of 1,000 up to a maximum of 60,000 miles.
As you know from prior TRVLVIP Perks and Tips, we value Delta SkyMiles at 1.5 cents per mile, which is the value we would be willing to pay for SkyMiles if we could buy them for cash. It is also the minimum value we feel you should expect before redeeming your miles. To see how TRVLVIP determines the value of a rewards point or mile, see our great Tip: What in The World are my Points and Miles Worth?
Without a bonus, to buy or gift SkyMiles will cost 3.5 cents per mile, plus a 7.5% excise tax that increases your cost to 3.76 cents per mile. Therefore, without a bonus, buying and gifting miles (which each cost 3.76 cents) is a very expensive way to acquire miles. And even with a bonus of up to 50%, which is generally only offered near the maximum number of miles you can purchase or gift, you will always pay quite a bit more than 1.5 cents per mile.
The other option you have with Delta is to use the Mileage Booster when booking a flight. You can buy up to 3,000 for each round-trip flight you purchase and the cost is 2.8 cents per mile - still quite it bit more than the 1.5 cents per mile we feel each SkyMile is worth.
To determine the cost to buy or gift miles when a bonus is offered, we suggest this calculation:
Multiply the total required cash outlay for the SkyMiles purchase (make sure you add in the 7.5% excise tax)
Divide that amount by the total number of SkyMiles offered to determine your cost per mile
Does it ever make good financial sense to buy or gift SkyMiles? Maybe – but typically only if you plan to purchase miles in order to secure a specific award flight during a discounted award promotion (vs. a normal or peak award which generally requires more than twice the number of SkyMiles) or if you plan to secure a Business or First Class award ticket.
Let’s walk through a discounted award example:
Delta is having a 30% bonus on the purchase of SkyMiles and we know those cost 3.76 cents per mile (inclusive of the 7.5% excise tax) without a bonus
If you qualify for the 30% bonus, the cost is then reduced to approximately 2.63 cents per mile (still exceeding by a large margin the 1.5 cents we consider each mile to be worth)
Let’s assume you plan to purchase 60,000 miles because you qualify for an economy class discounted award ticket from the US to Europe (normal and peak travel will cost you a lot more than 60,000 miles – and because Delta no longer publishes their award chart it is challenging to know how much more); and let’s assume the award ticket you’ve found has a $65 cash outlay for taxes and fees (which you have to pay separately)
For the purchase of 60,000 SkyMiles to be a good value, the cash price for that ticket should be in excess of $1,643 (60,000 miles multiplied by 2.63 cents per mile plus the $65 you are required to pay intaxes and fees for the award ticket); and the more the cash outlay exceeds $1,643, the better the value
Because a SkyMiles purchase or gift transaction can take up to 24 hours, ALWAYS call Delta to make sure at least a few award tickets are available prior to any mile purchase because while cash tickets are plentiful, award tickets can be scarce, especially discounted awards which require significantly less redeemed miles than normal or peak travel awards
And remember, purchased miles will not count toward SkyMiles Medallion elite qualification for you or the fortunate member to whom you decide to gift your miles.
One final note and this is an important one - Sharing/Transferring miles never makes good financial sense! The price to transfer a mile is 1 cent per mile plus a $30 fee per transaction which results in a very expensive transfer especially if you intend to transfer a small number of SkyMiles due to the $30 fee. If you transfer miles it will cost you approximately 1.1 cents per mile for 30,000 miles, up to 4 cents per mile for 1,000 miles! And because you’re simply transferring existing SkyMiles instead of buying new ones, you have to factor in the value of the transferred miles (which we value at 1.5 cents per mile). This makes it a very expensive transaction at any purchase level. You are always better off using your SkyMiles to book an award ticket for a friend or family member instead of transferring miles.
Instead of gifting or transferring miles it is always a better value to use your miles to purchase an award ticket for the intended recipient. And it rarely makes sense to buy or gift SkyMiles speculatively as it is a very expensive way to acquire miles especially without a bonus. Once, you’ve picked a location and your dates and have taken the steps to ensure award availability, make the small effort to crunch the numbers to make sure the mile purchase or transfer makes good economic sense - you will be very happy you did! Delta no longer publishes their award charts but you can click here to review award availability and to book award travel. If the purchase makes good financial sense based on the flight you've found, you can buy or gift miles through Delta anytime.
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