Beginners Guide To Miles and Points: How Loyalty Programs Work

Do you have a punch card for your local coffee shop?

Participate in the loyalty program at your local supermarket?

Receive coupons via e-mail?

Why?

For most of us, the answer is "to save money, of course."

We offer our loyalty and consistent protection of a business, and in return they reward us with better prices, discounts, special offers, and other things that make us feel like a valued customer. And when we feel valued, we incentivized to spend more with the company, continuing the cycle.

It is the point of loyalty programs in general, and the airline industry is no different.

For airlines, at least in the US, their ideal customer business travelers.

They know that companies are willing to spend more on tickets for flexibility, but they also learned that some travelers may be encouraged to remain loyal to a single airline if they are equipped with the right incentives. They may even be willing to spend more on a ticket to fly with the airline they perceive to offer the best benefits.

So you see airlines offer "elite status perks" for people flying tens or hundreds of thousands mil annually, with benefits increase the more you fly. Business travelers feel rewarded when they get their free drink or free upgrade and the airline retains more of the person's business travel (and perhaps some of their personal site as well).

Everybody wins.

With that premise as a basis, the airline loyalty programs expanded dramatically over the years. It is important to remember that the bonus program itself is resultaten for airlines, regardless of the airline industry.

Why does it matter?

Because airline loyalty programs are essentially their own businesses - and what they're selling, finally, is a promise. The idea is that in exchange for your business and action now, you will receive "free" aircraft in the future. This is brilliant, in that in many cases it costs them nothing.

Today you can earn miles for almost everything, from spending money on a credit card, to be with a mileage dining program, to get a hair loss consultation or car insurance quote, to take out a mortgage. There is not a single transaction I make where I do not think about the potential consequences to earn miles.

There are literally trillions of redeemed airline miles, and while they eventually become an obligation of the airline accounts is insignificant day-to-day expenses. Afterall, around 85% of travelers redeem their miles for domestic economy ticket, which is not so expensive for the airline to begin with.

Furthermore, the economic realities in the United States, especially, has created a landscape where airlines and financial institutions have collaborated in a way that may be obscene lucrative for the savvy consumer.

The banks and credit card companies to buy billions of miles from the airlines, and offer these miles to their customers a discount on their purchases.

Some cards offer airline miles at once, while others offer points in a currency that can be transferred to airline miles in the future. We get into all the later, but the key takeaway is that credit card companies buy miles and points for a fraction of a percent.

This provides the airline with better cash flow, so that they are able to expand their route networks or make fleet renovation, or simply participate in a costly media campaign. Bank profits too, because they get a fee from the seller every time their credit card is swiped.

And you, as a consumer, you get a discount on all purchases - one that can be incredibly rewarding if you know the right tricks.

This is an important concept, and one I can’t stress enough.

At present (and this will no doubt change over time), the most lucrative way to accrue airline miles is through specific, leveraged, spend on the right credit cards. By strategizing how you pay for your everyday purchases you can really maximize the rewards you’re earning, and the miles you’re accruing.
You don’t have to spend hundreds of thousands of dollars a year, or fly every week.
You’ll certainly accrue miles faster if you’re doing those things, but most families should be able to generate enough miles for one great trip per year just by maximizing the dollars they’re already spending.
Really.