Looking at my set of IHG Accelerate offers for 2016, I need a minimum of FIVE paid nights to earn the full 55,000 bonus IHG Rewards Club Points. To take advantage of the offer partially, I can also choose to stay TWICE at a Holiday Day Inn Express for 17,600 bonus IHG Rewards Club Points. It's not too bad but let's take a look at how much do I have to spend.Read More
Credit cards provide mile collectors a wide range of earning opportunities base on the category of expenditure. Whilst many has turned to simple to manage credit cards that promote cash backs (e.g. UOB One Card), the rest of us dwell in an ominous area of points or miles maximisation. Mile collectors know that 1,000 miles can fetch approximately $20 in the virtual black market which is equivalent to 8% cash back at optimal earning capacity. In the case of redeeming a First Class or Suites ticket, this value increases drastically.
For example, a return ticket from Singapore to Paris costs $12,300 ($13,062.10 incl. taxes) on Singapore Airlines some time in April. It costs 215,000 miles to redeem the fare portion of this ticket ($12,300). However, redeeming for miles online gives you a 15% discount on total miles required. Essentially this equates to requiring only 182,750 miles. Simple mathematics will value 1,000 miles in this scenario at roughly $67.31.
Neglecting conversion fees, this is equivalent to 26.9% cash back at optimal earning capacity for almost all credit cards. In fact, some credit cards targeted at extremely high spenders or high income earners (e.g. American Express Centurion) can earn up to 7-8 miles per $1 when spending at platinum partners (almost doubling the aforementioned cash back rate!).
To put it in another perspective for the same example, you would need to spend $372,727 on a credit card (giving you 3.33% cash back) in order to have $12,300. Whereas if you were earning miles at an average optimal rate (where $1 = 4 miles), you only need to spend $45,688.
That being said, air miles are only valued the most with the redemption of First/Business class tickets. It's a arduous journey for many of us and it's easy to lose sight of things when you are bent on maximising miles. Unless you're willing to strategise and spread categorical spending across different banks and credit cards, it is best to stick to one or two cards for ease of payment and usage. After all, most would agree that credit cards are supposed to make your life easier and not become an instrument for making money out of it.