Gifting Frequent Flier Miles Can Be Costly
By Eva Norlyk Smith, Ph.D.
November 30, 2011
I read somewhere that you can transfer rewards to friends — is this true? I’ve got enough frequent flier miles to fly abroad for free, and I would like to give them to my daughter as a Christmas gift. I thought about just buying the ticket myself and giving it to her, but we don’t know when she’d fly. — Christine
What a great Christmas gift idea. Sign me up, too!
You’re right; it is possible to use credit card rewards to get a free ticket for friends and family. However, it’s important to do it in the right way or that generous ‘free’ Christmas present could cost you dearly.
Most airlines have programs that allow you to gift or transfer airline miles. But the programs tend to be pricy.
The rate per mile transferred runs from one cent to five cents per mile, depending on the airline. In many cases, you also pay a processing fee per transaction, which can run as high as $30 or higher if you’re transferring a large amount of miles.
If you do the math, transferring, say, 60,000 miles for an overseas trip can cost you as much as $600 to $3,000, plus any applicable fees. (Yes, I can hear you gasp!)
Purchasing miles you haven’t yet earned isn’t much better. For that privilege, it’s not unusual for the cost to be three to four cents per mile gifted, before the fees have been added in.
To evaluate offers for transferring or gifting miles, always do the math to translate the miles into real dollars and cents. As a rule of thumb, the redemption value for rewards miles is one cent per mile. Of course, it’s possible to get a better deal on occasion, but it’s rare.
So if you’re paying three cents to gift a mile, you’re essentially paying three times as much as that mile is worth. Even at one cent per mile transferred (plus fees), you are paying the full redemption value of those miles. You might as well just buy a ticket for that kind of money.
Generally, the only time it makes sense to transfer existing miles or buy new ones for a gift is if the person receiving the miles is just a few thousand miles short of having enough for a rewards ticket.
Occasionally, some airlines will also offer special bonuses on transfers — for example, by giving you a 50 percent bonus when you transfer miles. In that case, transferring may make sense, depending on the circumstances and the offer.
So, is there a way you can gift the miles for that overseas trip to your daughter without paying through the nose? Yes, but it will involve coordinating with her. You can redeem your miles at any time for a ticket issued in her name—without paying an extra cent.
So, for now, write up a generic gift certificate for that “Any Place, Any Time” dream trip to give to your daughter at Christmas. When she decides on the specifics of her travel plans, that free ticket is just one phone call to you away.
And, hey, that will give you another occasion to get updated on her plans and share in her excitement—an extra benefit that comes without fees and charges.