It's A Great Theory...But It Doesn't Work

Adam is considering using a credit card for airline miles in order to make it cheaper to get home to see family in the lower 48 states. Dave says it's a great theory, but it won't work.

QUESTION: Adam in Alaska is considering using a credit card for airline miles in order to make it cheaper to get home to see family in the lower 48 states. Dave says it’s a great theory, but it won’t work as well as he thinks.

ANSWER: It’s a great theory, but in practical fact, it doesn’t work. Seventy-eight percent of the airline miles are never redeemed. That means eight out of 10 of those are never redeemed. If you are one of the 22% that attempt to redeem them, you will find that about 80% of your attempts are rebuffed, and you’re reprogrammed, shifted, changed dates. You’re not going to travel when you want to travel or how you want to travel. They make it very hard to work with.

Then, if you actually did use the thing, when you spend with plastic, there are tons of studies that tell us that you spend more spending with plastic than you do when you spend with cash because cash has an emotional element to it. When cash leaves your hands, it activates the pain centers of the brain. It really does. MRI studies reveal that—an MIT study published in Carnegie Mellon Today. When you use plastic, those pain centers are not activated.

The bottom line is by the time you go through all that crap, at the end of the day, with very rare exceptions, you’re going to be better off to not accidentally get into credit card debt chasing airline miles that you can’t or won’t end up using and in the process overspend. I don’t believe in them. There are some debit card programs now that have some airline miles with it. But the thing you’ve got to remember is there is no free lunch. If this worked so well for the consumer, the credit card companies would be going out of business. I’ve never met a millionaire who said he made it all with his airline miles. It’s more of a bait-and-switch. It’s a hook to get you into something that makes them money.

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