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American Airlines is running a sale on the purchase of their miles through Thursday, April 30, 2015. You can buy up to 100,000 American Airlines miles during the sale and get up to 60,000 bonus miles.
American Airlines miles cost 2.95 cents each plus a 7.5% excise tax, and every purchase has a $30 processing fee. The cheapest purchase on a per-mile basis is 160,000 miles (100,000 + 60,000 bonus) for $3,201.25 or 2.00 cents per mile.
Math
The cheapest miles cost 2 cents each during this promotion, and that requires shelling out $3,200. I value American Airlines miles around 1.8 cents each, so there is no way I would buy these miles speculatively for 2 cents. The only way it could possibly make sense to buy miles at these prices is if you had an immediate high value use for them.
To figure out if you have a high value use, use this simple expression:
(A – B) / (C + D)
- A: Value of the award. Important: this is the lesser of the cash price and your subjective value.
- B: Taxes on the award
- C: Miles used on the award
- D: Miles you would earn if you purchased the award ticket with cash
This will spit out the dollar value you are getting for your miles. If that number is greater than 0.02, and you can book the dream award now, buy during this promotion. Otherwise, don’t buy.
Bottom Line
You can buy 160,000 American Airlines for $3,201 or 2.00 cents each. That’s way too high to buy speculatively. Hopefully cheaper sales come along.
Just getting started in the world of points and miles? The Chase Sapphire Preferred is the best card for you to start with.
With a bonus of 60,000 points after $4,000 spend in the first 3 months, 5x points on travel booked through the Chase Travel Portal and 3x points on restaurants, streaming services, and online groceries (excluding Target, Walmart, and wholesale clubs), this card truly cannot be beat for getting started!
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The comments section below is not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved, or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all questions are answered.
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