Are we wasting our time or worse, our money, with frequent flier miles and credit card points?

Every month I give my miles, points and rewards update.  Often, I get comments commending the impressive number of HiltonHonors points, or MBNA WorldPoints that I have amassed.  But is it something worth commending?

I had a conversation with a friend recently, who professed, "if you want to be rich, look at what the rich do."  Good advice.  No argument here.  She continued, "millionaires don't worry about frequent flier miles and credit card points."  Essentially, as she saw it, the miles, points and rewards programs are marketing tools (true) to encourage customer loyalty and get you to spend more.  18% more to be precise.  The former I agree with.  There's a reason my Hilton Honors American Express card is my card of choice.  The points created customer loyalty.  The latter may or may not be the case.

How do they get you to spend more money?  Well, two ways.  First, you justify purchases in your mind because you are earning points or miles.  Obviously, you're not going to go out and ring up thousands on the charge card just for the points.  But if you are on the fence about a purchase, it may be the tipping factor.  Second, given two choices, you may opt for a more expensive option for the points.  Sounds ridiculous, but I assure you people do it every day.  "We're only going to be there one night, and the Hilton Garden Inn is only twenty bucks more than the Holiday Inn Select.  Besides, it's nicer and we get the points.  Ahh, what the heck.  Let's stay at the Hilton."  Bingo.  Some points, which probably won't get you a tenth of a stay, just cost you twenty bucks.

Of course, my response was that I'm going to save hundreds of dollars (maybe over a thousand bucks) on my honeymoon by using my Hilton points.  I understand the potential traps, but I'm aware of them and make an effort not to get suckered.  But am I really the sucker?  It this a case of overconfidence, as I wrote about in my Boglehead "Mastering Your Emotions" review?

Is my friend right?  Do millionaires avoid the use frequent flier programs and credit card rewards (being careful to pay the card off every month, of course)?

Comments

[Flexo]

Nah, millionaires have their businesses pay for the trips (or write them off as business expenses) and the miles accumulate so that they can take their personal vacations for free.

[BD]

Not that business travelers are millionaires, but there are some pretty wealthy people who are obsessive about points. Management consultants, for instance. Most will stay loyal to an airline or luxury hotel brand even if the flight times/hotel locations are a little less convenient. And then they take free vacations with the points.

[Robert Cote]

HHonors points are innocuous. A recent Embassy Suites stay "required" signing on to get free wireless. "Free" being a slippery word eh? Me and the family scarfing down a half dozen complimentary breakfast omlets were "free" as well. Believe one, believe both.

[lamoneyguy]

Business travelers, yes. But are they typically millionaires? How about the "millionaire next door?"

I agree with RC that HHonors is innocuous, but what about the contention that on your next trip you will be more inclined to stay at the Embassy Suites over the Travelodge to get the points? Perhaps the Travelodge is not comparable. Let's say the Courtyard by Marriot is twenty bucks cheaper. Comparable hotel, similar amenities. Do the points and the brand loyalty that it creates lead you to the Embassy Suites?

[TFB]

Do the points and the brand loyalty that it creates lead you to the Embassy Suites?

Yes! That's what the loyalty program is all about. It creates a differentiator. It makes you familiar with the brand and be comfortable using it. You may very well justify it by saying to yourself that the Courtyard is $20 cheaper but it is not as nice when it actually is as nice or even nicer. The quality of a hotel is really subjective in many ways.

So, if you travel on business paid by someone else, by all means sign up for these programs and earn some points. When you pay for your own trips, forget about the points and use the low cost provider.

[bluntmoney]

Eh, the people I know that I'm pretty sure are millionares DO use rewards cards (and pay them off in full each month of course). But they don't "worry" about them, or choose have the rewards be the tipping point in where to stay/what to buy. They just make sure to use whatever rewards card where they want to buy takes.

[Dave the H.]

I'm not a millionaire, really, but since I do pay off my credit cards in full every month, I figure I might as well get something back.

That's why my first card of choice gives me cash back...nothing better than cash. But after that reaches its annual $300 cash back limit, I switch to my Amazon rewards card, since there's generally something sold there that I want for myself, my wife, or as a gift.

Much more shopping flexibility with an Amazon reward than with any other retailer.

[Living Almost Large]

Well how do you think they became millionaires in the first place? By being frugal enough to stretch a dollar as far as possible. Now really wealthy people who have lots of millions, talking bill gates types, probably don't care. Although I hear Warren Buffet is still thrifty.

[Charles Turner]

We view our miles as a perk for what we would have done anyways. The majority of our house remodel was put on credit cards that were paid off monthly. The same goes with our business expenses. We rake in the miles but don't let them rule our lives. We pay for airline tickets if free miles can't get us where we want to get to when we want. Spend where necessary (coach).

We travel and use our miles. We've found that coach class tickets can be tough to come by for desirable flights so we'll fly first class as they seem to be more available. That in itself is quite a reward (going back to coach sucks).

Don't travel and are racking up miles? Donate them to the Make-A-Wish Foundation. They use miles to grant wishes for children with life threatening illness (the majority of wishes are Disney related). Presumably they have IRS donation value- check with your accountant.