10 Ways NOT To Use Your Frequent Flyer Miles and Points

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I can't tell you how often I meet people who say things like, "I'm a points expert - I just redeemed a million points for a charcoal grill!" Each time I hear this sort of thing, I die a little inside, picturing all those points (or even miles) basically going down the tubes.

Although I often say that the best award redemption is the one that makes you happy, when it comes to airline miles, hotel points and credit card points, the best redemptions tend to be high-value airline or hotel awards. However, airlines in particular have gotten a lot sneakier about making it seem like other redemption options are the best and/or easiest way to redeem your miles, and that you must do so before your miles expire and you risk losing them altogether.

If you redeem miles for any of the things you'll see on this list, remember that you might as well be setting your money on fire. On the other hand, when people redeem for silly things, that just means more miles for those of us who are savvy!

1. Redeeming miles for merchandise. I find that, even on relatively cheap coach redemptions, I can usually squeeze a few cents' worth of value out of each and every mile I redeem, thanks to strategic redemptions and a little dose of expertise. However, when you redeem for merchandise, in most case you'll be hard-pressed to get even one cent per mile. For example, the Delta SkyMiles Marketplace offers a 60" Sony Bravia LED HDTV for 361,400 miles.

But you can get it direct from Sony for $1,799:

And even as low as $1,449 from other stores, so you're only getting about 0.4 cents per mile - bad even for Delta SkyPesos!

2. Auctions. While redeeming points and miles for experiences, rewards-portal sections like Chase Experiences or SPG Moments can be good value propositions; it really pays to calculate out the value of the packages you're redeeming for and see whether you are getting sufficient value out of your miles to justify them. For instance, a current Delta SkyMiles auction is dinner for four people at Girl & the Goat in Chicago.

Bids are currently up to 191,000 for a package that includes a $350 gift certificate to be used at the restaurant (that's what pays for your dinner!), a kitchen tour and an autographed cookbook by the chef, Stephanie Izzard - a book that's currently on sale for $20.99 on Amazon. So you're getting $371 in value for 191,000 miles - less than 0.2 cents per mile! Better to just pick up the check on your Sapphire Preferred and earn double points.

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3. Transferring miles to others. A lot of people make a big rookie mistake by transferring their miles from their own account to someone else's, figuring that if that person wants to book award travel for themselves, they need their own miles in order to do so. However, this is just not the case. With few exceptions - for instance, when you pool your miles in a British Airways Household Account - you can book an award for just about anyone else. After all, you can pay for someone else's ticket with money, why shouldn't you be able to redeem miles for it?

When you transfer your own miles into someone else's account, you end up paying about 1 to 2 cents per transferred mile plus a processing fee of $20-$30 per transaction - effectively wiping out the potential value of your transferred miles. But it does sometimes make sense to transfer your miles into someone else's account, as in the case of US Airways' periodic 100% Share Miles bonuses, like the one that was announced earlier this month. You're essentially sharing miles for 0.57 cents each, or creating new miles at the fantastic rate of 1.1 cents each. Either way, that's a good deal, but when the bonuses are closer to 20%, 30% or even 50%, you have to look much harder at the price versus the value of the redemption you're going for, and decide from there. Often, it's not worth the cost - especially if you have the miles to book the award in your account and don't need to consolidate.

4. Using airline miles for hotel stays. I wrote an extensive post about using airline miles for hotel nights and car rentals, so I won't go into a huge amount of detail here, but suffice it to say that this is rarely a good idea. Looking at the options from American, Delta and United, I found that you are getting values of at most 1.2 cents per mile on these package redemptions, and it's usually much closer to the 0.8-cent mark.

Take American's Car & Hotel awards, for example. Two nights at Hilton's Universal Studios hotel in Los Angeles in May will cost you 33,350 miles per night.

But you can book the same hotel for just $214 a night.

That's just 0.64 cents per mile - way too low to tempt me to redeem my valuable American miles. Note that you generally get better rates as an elite - closer to 1 cent per mile - but that's still not usually tempting enough to make this a better redemption than flights, where you can get values that exceed a hotel redemption in multiples.

5. Statement credits. It's always nice to save a few dollars here and there, but it pays to be clever about it. Whereas some kinds of points are designed for cash back in the form of statement credits (like the DiscoverIt, where you can getup to 20% cash back on certain purchases), some points and miles are put to better use otherwise.

Case in point: I just took a look at my Amex Mercedes-Benz Platinum statement and Amex offered me the opportunity to redeem points for each of the charges including the $475 annual fee. The rate? 79,167 points. That's just 0.6 cents per point. Considering that I can transfer Amex points to miles on 17 different airline partners and a variety of other redemption options, I'd have to be crazy to do this!

Specifically in the case of Amex points - you have to pay an excise fee of .06 cents per point you transfer to US airlines including Delta, as you can see above. Amex offers you the ability to use points to pay this excise fee - but at the measly rate of 0.5 cents per point, way below my standard valuation of 1.8 cents that I give to Amex points thanks to their versatility. There's no way I would redeem my hard-earned points this way.

6. Airline club lounge access. Some airlines let you use miles to pay for annual club membership. For example, Delta will charge general SkyMiles members 110,000 miles for an annual membership with elites requiring fewer miles – as few as 80,000 miles for a Diamond member. Even so, you're only getting a value of 0.87 cents per mile as a top-tier elite, so this option is no good. American charges between 80,000 miles (instead of $550) for general members and 55,000 miles (instead of $400) for Executive Platinums for membership. This is a terrible use of points since even high-level elites are getting far less than one cent per mile worth of value.

7. Points trades and exchanges. A lot of people ask me how they can turn one kind of point or mile into another - for instance, Delta miles into Alaska miles - and while there are ways, you generally end up losing a lot of their value in the process.

For example, Points.com facilitates points and miles trades and exchanges. Trades are where one member trades another a certain amount of one kind of points or miles for a certain amount of another. Exchanges are where you put your miles in one program up for exchange with miles in another. Sometimes this makes sense - like with the current Aeroplan/US Airways exchange rate where you exchange 100,000 Aeroplan miles and end up with 84,000 US Airways miles. But for the most part, these are terrible deals. Consider the fact that while at the moment it would only take you 59,500 Aeroplan miles to end up with 50,000 US Airways miles, it would take you a whopping 151,765 American miles (which will eventually be the same thing, thanks to the merger), 92,750 Amtrak points (which you could get by transferring Chase Ultimate Rewards), or 316,000 Hawaiian Miles.

While I might be willing to lose about 15% value from my Aeroplan miles (which I could transfer in from Amex Membership Rewards), there's no way I'd take a 67% cut to my American miles or a 46% cut to my Chase Ultimate Rewards points via Amtrak, just to top up my account.

8. Using peak amounts of miles for cheap flights. Just because there are only peak-amount awards available for flights doesn't mean that seats are scarce or you can't get a good deal. Often, the amount of award availability and airfare doesn't correlate at all. That can work to your advantage when you need to book a super-expensive last-minute flight, but conversely, sometimes cheap flights require a lot of miles if you want to book an award.

For instance, this itinerary from LAX to Denver in July was only available at peak pricing - 50,000 miles roundtrip. However, purchasing the ticket would only cost $281. For a value of just 0.56 cents per mile, that's a no-go. Always double check the airfare you'd be paying instead of redeeming your miles, and remember that it might be worth taking cheap flights and paying for them because you won't earn miles on award flights and that will affect your elite-status strategy. Remember, airlines also open up awards at the last minute on otherwise expensive flights, so keep checking back to see if the flights you want become available.

9. Letting them expire! A lot of readers write in with concerns about mileage and point expiration - especially when airlines and hotels send them alarming letters with expiration deadlines and calls to redeem their miles. However, miles and points expiration is a lot more flexible and easier to stave off than that. Often, all you have to do is earn as little as a single point or mile in order to keep your points active and reset the expiration clock, and you can do that by using a co-branded credit card or even buying a $1 iTunes song through an airline or hotel shopping portal. Check out this post for airline mileage expiration policies, and this one for hotel points expiration policies and strategies for keeping your points and miles active.

10. Flights that have huge fuel surcharges. One of the most frustrating uses of your airline miles is saving them up for a specific redemption in order to save money only to find that you'll end up having to shell out hundreds or thousands of dollars out on even award tickets thanks to taxes and carrier-imposed fuel surcharges like those imposed by European carriers like British Airways and Air France. The BA itinerary above only costs 40,000 Avios for a roundtrip JFK-London award in economy, but you'll have to pay $705 on top of that!

This roundtrip Air France economy award from JFK-Paris is also priced out decently in terms of miles, but the fuel surcharges are nearly $300. What's the points in spending all that money on top of the miles it'll cost you to fly?

What are some of the worst mileage redemption mistakes you've ever heard - or made? We'd love to hear about your experiences.

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