Should You Do This? Is it Ever a Good Value?
February 2016
You see the email come into your inbox - United is offering a discount or bonus on miles 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 miles with or without a discount or bonus offer; and the opportunity to acquire miles using the United MileagePlus Award Accelerator when purchasing a flight.
United MileagePlus discounts or bonuses are typically offered based on tiered purchase levels. Therefore, the more you buy, the larger the discount or bonus. Miles are generally available in increments of 1,000 up to a maximum of 150,000 miles.
The Valuations:
As you know from prior trvlvip Perks and Tips, we value United MileagePlus miles at 1.5 cents per mile, which is the value we would be willing to pay for MileagePlus miles if we could buy them for cash. It is also the minimum value we feel you should expect before redeeming your miles.
Without a discount or bonus, you have the option to buy or gift miles through United anytime at a cost 3.5 cents per mile, plus a 7.5% excise tax that increases your cost to 3.76 cents per mile.
You also have the option to buy additional miles using the Award Accelerator when you purchase a flight at approximately 2.1 to 2.6 cents per mile, which is a more economical choice.
Without a discount or bonus, buying and gifting miles (which each cost 2.1 to 3.76 cents) is a very expensive way to acquire miles. A sale on Award Accelerator miles would be highly unusual and if you use the option to buy miles anytime, you will almost always pay quite a bit more than 1.5 cents per mile.
To determine the cost to buy or gift miles when a discount or bonus is offered, we suggest this calculation:
Multiply the total required cash outlay for the miles purchase (make sure you add in the 7.5% excise tax).
Divide that amount by the total number of miles offered to determine your cost per mile.
The Choice:
Does it ever make good financial sense to buy or gift MileagePlus miles? Maybe – but typically only if you plan to purchase miles to secure a specific award flight during a discounted award promotion, if “Saver Award” space is available (vs. a “Standard Award” which generally requires more than twice the number of MileagePlus miles) or if you plan to secure a Business or First Class award ticket.
Let’s walk through a “Saver Award” example:
United is having a 30% bonus on the purchase of MileagePlus miles 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 a 60,000 mile “Saver Award” ticket from the US to Europe and your cash outlay for taxes and fees (which you have to pay separately) on the award ticket is $55.
For the purchase of 60,000 miles to be a good value, the cash price for that ticket should be in excess of $1,633 (60,000 miles multiplied by 2.63 cents per mile plus the $55 you are required to pay in taxes and fees for the award ticket); and the more the cash outlay exceeds $1,633, the better the value.
Because a mile purchase or gift transaction can take up to 48 hours, ALWAYS call United 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 “Saver Awards” which require significantly less redeemed miles than “Standard Awards”.
Some good news - Unlike many other airlines, United processes their own reward mile purchases, so if you use a credit card that rewards you with extra miles for airline purchases, your purchase or gift should qualify for the extra miles. But remember, purchased miles will not count toward MileagePlus 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 miles never makes good financial sense! The price to transfer a mile is 1.5 cents per mile plus a $30 fee per transaction. So if you transfer miles, the cost will range between 1.6 cents per mile for 25,000 miles and a whopping 7.5 cents per mile for 500 miles. And because you’re simply transferring existing miles instead of buying new ones, you have to factor in the value of the transferred miles (at least 1.5 cents per mile). This makes it a very expensive transaction at any purchase level. You are always better off using your MileagePlus miles to book an award ticket for a friend or family member instead of transferring miles.
The Wrap-Up:
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 miles speculatively as it is a very expensive way to acquire miles especially without a discount or 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! Click here for United’s award charts, to review award availability and to book award travel.
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