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Loyalty points v air miles – what’s best to collect?
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By: Andrew Regan
Collecting loyalty points is big business, whether it’s while shopping at stores, in the form of air miles or as hotel points, each scheme has tens of millions of collectors in the USA. But, whether some offer better value than others is totally dependent upon your individual circumstances, especially how much you spend, and how often you travel and stay in hotels.
Air Miles was launched as an innovative loyalty scheme in 1981 by American Airlines. Originally, air miles could only be earned by flying with that particular airline but now miles can be accumulated without the need to take to the skies. Collectors can earn points through purchases as partners to the scheme, such as major stores, gas stations and by using affinity credit cards.
But how do air miles schemes work? The answer is simple – they are funded by people who are awarded miles but never actually redeem them. The scheme company buys air miles from the airline which are then awarded to their customers. The airline gets revenue from the partners for many more air miles than it ever has to redeem.
Many people typically collect a handful of points in a year or two, which is not enough to get a free flight, so would-be collectors simply forget about their miles and let them lapse. That suits the airlines as they get revenue for the miles they sell knowing that they have cash up front for seats they may have to give away in the future.
However, it is the difficulty in earning a reasonable amount of miles that encourages people to look at whether other loyalty schemes are better for them. For example, a typical hotel loyalty scheme tends to offer much better value in terms of the percentage of reward given against the amount spent; a one night stay with many of the better hotels can earn you as much as approximately 50% of the points required for a free night’s stay. So, paying for two night’s accommodation would effectively earn enough points for a one night free stay in many schemes. That’s good news if you aren’t disciplined enough to ensure that you organise all your personal spending to collect air miles, but you do enjoy the occasional weekend away or extended vacation during the year.
Of course, air miles may be best for you if you fly frequently on business. But, that doesn’t mean that you can’t also take advantage of a hotel loyalty scheme, especially if you opt to stay in a major chain’s hotels when you do travel. That way you could collect enough miles to get you to your destination for free and the hotel loyalty scheme would cover your accommodation – perfect!
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