When does it make sense to buy points and miles?

Many loyalty programs will sell you their program's points or miles currency with no strings attached.

You can jump online, log in to your account and buy points or miles with a credit card and a few clicks. These programs usually have generous purchase limits, meaning you could top up your balance with a six-figure amount in minutes.

What's the catch? Well, the cost. The purchase price per point or mile is usually much higher than TPG's valuations.

The good news is that programs occasionally run promotions to buy points and miles. During these promotions, you can often snag points and miles for about half their typical cost.

However, you may not want to buy points and miles even when they're on sale. So, in this guide, I'll discuss when it makes sense to buy points and miles.

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When should you buy miles?

It makes sense to buy miles when you can obtain more value for redeeming them than it costs you to purchase them. Say you were looking at a flight that would cost $500 in cash or 20,000 points plus $50 in fees and taxes. If you could buy those 20,000 miles for 1 cent each during a bonus promotion, then the cost of that airfare with your purchased miles would only be $250 (20,000 x .01 + $50) rather than the $500 for a standard cash fare.

That would be a great deal.

But there are caveats.

The calculation above assumes that you can redeem the miles for the airfare you want, at the redemption rate first quoted. The first problem with this assumption is that redemption availability constantly changes. The seat that may have been available today when you considered buying the points and miles might not be available tomorrow when you have purchased the points and miles and try to use them.

The second issue is that the number of miles you need could increase. Most programs increase mileage requirements from time to time — this is called a devaluation, as the miles become less valuable. Some programs will give members warnings before changes happen, but programs have also devalued miles overnight without notice.

If you're confident you can redeem the miles for the purpose you bought them for at the price you are happy with, it can make sense to buy miles.

It can also make sense when you are a few thousand points or miles short of a big redemption, such as first-class flights for your honeymoon. Even if the miles aren't on sale, it can make sense to buy the last miles you need so you can go ahead and lock in your redemption.

Related: How to decide whether to use cash or miles for airline tickets

When shouldn't you buy miles?

Obviously, if it's cost-ineffective, you shouldn't buy miles.

You should also keep in mind that when you are buying miles, you are subject to the cost of the miles and the taxes and fees associated with booking your award tickets. For example, Virgin Atlantic only requires 20,000 miles for a round-trip flight from New York to London. With the current promotion, you could buy 20,000 Virgin Atlantic points for around $350. But before you think that you've effectively found a $175 one-way flight to London, you need to understand the fee structure associated with this type of ticket.

First, you'll need to pay a $33.50 transaction fee to buy the miles. Then, when booking your ticket, you'll pay $365 in taxes and fees. In this case, the taxes and fees alone are more expensive than the cost of the miles. Suddenly, your ticket looks closer to $750. You might be able to do better by paying cash outright for a paid fare.

Also, when you are traveling on miles, you are almost always unable to accrue airline miles or earn status.

It rarely makes sense to purchase miles if you don't plan to redeem them immediately — known as purchasing them "speculatively." This is because you can't guarantee their value in the future when you decide to use them because of devaluations and other ways loyalty programs can change their programs.

Related: Why points and miles are a bad long-term investment

Bottom line

You can get some amazing deals by buying miles and points in the right circumstances. Over the past decade, I've bought more than a million points and miles in different programs. That is because, at the time, I had immediate uses for them and could (and did) really maximize my travel.

If you are considering buying points or miles, know that it's unlikely those points and miles will ever be worth more than they are right now. After all, now that travel is back, points and miles devaluations are on the rise. So, if you're buying speculatively, it's possible your newly purchased points and miles could drop in value before you use them.

Additional reporting by Kyle Olsen.