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Dear Cashing In,
I just saw on Southwest’s website that it is
offering 40 percent bonus points when you buy 5,000 or more points. Is that a
good deal? – Jennifer
From time to time, you will see deals like
this. Sometimes, reward programs will sell their points at a discount.
Sometimes, they will give you extra points for free when you buy a certain
number. The details will vary.
In the case of Southwest, the airline had an
offer on its website in January 2018 that read: “New year, new travels: Get a
40 percent bonus when you buy 5,000 or more points.” The offer expires today (Jan. 23, 2018).
Just remember that except for rare
circumstances, buying points directly is almost never a good deal. When the
price of those points goes on sale, it is not as horrible of a deal, but … it
is still almost never a good deal.
Calculating the difference between cash and points
Let’s look at how those numbers work in the
case of this Southwest offer. Even if you don’t fly Southwest, it is still
instructive to learn how poor these offers really are. You’re usually better
off just paying money for a flight than buying points at any price they are
The short analysis is that Southwest sells its
points at a cost of 2.5-3 cents per point, depending on how many you buy. But
when you go to redeem them, they are worth closer to 1-1.5 cents per point – often
less than half as much. Even with a 40 percent bonus, you’re still worse off
than just buying the flight outright.
Let’s say you’re planning to fly from San Diego
to San Jose in February, on Valentine’s Day. The cheapest fare is $49 or 2,304
points. But if you were to buy the points, 2,000 points costs $60, so you’re
better off just paying $11 less ($49) for the flight.
Discount falls short
OK, you might say, well that doesn’t take
advantage of the 40 percent bonus for buying 5,000 points or more. Fine.
look at the same flights but assume you want to fly business class. The fare on
those flights is $243 or 25,560 points. But buying almost as many points –
18,000 points, plus 7,200 bonus points, for a total of 25,200 points – costs
$495 – or $252 more than simply buying the business-class ticket.
You’d be a
fool to pay more just for the sake of paying in points. You are not going to find
an example where buying the points, even at a discount, is cheaper than just
buying the flight directly.
There are some circumstances in which it might
make sense to buy points. For instance, if you were just a few points short of
the points needed for a free flight, and you didn’t want to pay actual money
for the fare, then you might consider topping off your frequent-flyer balance
by buying a small number of points. But remember that you are paying a premium
Overall, it’s best not to get too excited about
sales of reward points. They hardly ever make financial sense.
See related: Rack up extra reward points with gift cards
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