Does the US Airways share your miles promo make a case for cash back?

Through October 15th, US Airways is offering a 100% bonus on shared miles.  During the promo, when you transfer miles from your US Airways account to another person, US Airways will give the recipient twice as many miles (up to 50,000 bonus miles).  And, it should be possible for the recipient to turn around and share miles back to you.  As a result, this is a fantastic way to buy US Airways miles cheaply.

USAirways_ShareMiles_100_FrequentMiler

Miles are shared for $0.01 per mile plus a processing fee of $30 and a tax recovery charge of 7.5%.

Due to the fixed $30 processing fee, the lowest per mile cost is to transfer the maximum of 50,000 miles.  The cost to do so would be: $500 + 7.5% + $30 = $567.50.  The person receiving the miles then gets 100,000 miles so this is like buying 50,000 miles for $567.50.  That’s a cost of 1.135 cents per mile.

If you’re planning an international trip and need the extra miles, this can be an amazing deal.  For example, if you can find Star Alliance award space to North Asia in business class, you can get there and back for 90,000 miles.  At 1.135 cents per mile, that’s like paying only $1,215 per person for this round trip business class award.  Similarly, once could fly international first class round trip to Australia for 140,000 miles.  At 1.135 cents per mile, that’s like paying only $1,890.  In both cases, the cost for business or first class would be substantially less than a similar paid flight in coach.

A quick couple of notes about this promo:

  1. Accounts less than 12 days old are not permitted to Buy, Share or Gift miles, so if you need to create a new account for this, do it right away.  You only have until Oct 15 to do the transfer.
  2. The charge for the transfer comes from Points.com, not from US Airways.  So, you will not get bonus points from cards that offer them for travel or airline spend.  Also, you won’t be able to get reimbursed for this with the Barclay Arrival card as a travel expense.  Instead, use whatever card you have in which you need to meet minimum spend levels or the best card you have for non-bonus spend.

The case for cash back

When choosing rewards credit cards or online shopping portals, there is often a trade-off to be made: earn miles or cash back.  Often cash back rates, as a percent, are higher than miles earned per dollar.  For example, most mile earning credit cards default to 1 mile earned per dollar whereas there are some cash back credit cards that offer 2% cash back on everything.  See “Best rewards for everyday spend” for examples.

I don’t see anything wrong with choosing miles over cash back as long as you understand the trade-off you’re making.  I often choose miles over cash myself.  For those that prefer miles, though, this US Airways promo shows that you could actually end up with more miles by choosing cash back!

Let’s compare one of the best cards for earning miles on everyday spend to a 2% cash back option.  The Starwood SPG Amex card gives 1 point per dollar, but allows you to transfer points to miles at a favorable rate when you transfer 20,000 points at a time.  For the sake of making math easy, let’s assume you spend $40,000 on either card:

SPG

  • $40K spend becomes 40K SPG points. 
  • 40K SPG points becomes 50K airline miles (with many airline programs).

 

2% Cash Back card, 100% transfer promo

  • $40K spend becomes $800
  • With current US Airways promo, $567.50 becomes 50,000 miles
  • With the 2% cash back card you have 50K miles and $232.50 left over (that’s 40% of the way towards purchasing another 50K US Airways miles!)

 

2% Cash Back card, 100% buy miles promo (when available)

    • $40K spend becomes $800
    • With double buy miles promo (which is run every other month or so), miles cost 1.88 cents each
    • $800 becomes 42,500 miles

As you can see above, if you prefer miles over cash, the SPG card is better than a cash back card most of the time, but with the current US Airways transfer promo, you’re much better off having earned cash back (assuming you kept the cash and can use it to buy miles through this promo!).  Of course, this assumes that you’re happy getting US Airways miles.

Maybe SPG is better after all?

In a way, the current promo may be the exception that proves the rule.  We’ve seen this transfer miles promo before, but only about once per year.  So, most of the time, the SPG card is a better option for earning miles on non-bonus spend.  And, SPG has a huge number of transfer partners so you’re not limited to Star Alliance round-trip awards as you would be with US Airways.

What do you think?  Points or cash?  What do you prefer?

About Greg The Frequent Miler

Greg is the owner, founder, and primary author of the Frequent Miler. He earns millions of points and miles each year, mostly without flying, and dedicates this blog to teaching others how to do the same.

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Comments

  1. I just got an e-mail from Barclays/US Airways…cardholders now get a 25% rebate on all redemptions through the end of November (up to 30K miles). This makes a roundtrip business class award 78,750 miles (110K-5K redemption reduction-26.25K discount) to South Africa from the United States for cardholders! Hard to beat that, especially because AA was charging 75K each way. Now hopefully I can get them to add on a free one way at the end 🙂

  2. As your example shows, in regular times using the SPG card is like buying a choice of many airline miles at 1.6 cents per mile, plus the cost of the annual fee, after which it is 1.73-1.86 cents per mile, depending on whether you think your annual spend is $20K or $40K.

    That is a price that I personally believe to be too high, given the availability of card sign up bonuses, category spend bonuses and promos, miles acquisition promos like the USAir transfer,the general devaluation rate of miles, the availability and work factor involved in getting award seats, and fees.

    For most people who are interested in a couple of great trips a year, the card sign up bonus/category spend promos and bonus/miles purchase promos trinity are the most efficient way to acquire the necessary miles for those 2 trips at well below 1 cent per mile. Any spend apart from those categories should just go on the 2% cash back cards.

    The rare group who want more than 2 trips a year might consider having an everyday miles card, but only realizing that they are paying the approx 1.8 cents per mile. So, a business award ticket to Tokyo with a stopover in Paris might be a great deal at $1,900 (in miles and fees at 1.8cpm through SPG spend) relative to retail price, but you are still clearly paying $1,900. Since you are going to have a decent chunk of cash expenses on that kind of trip anyway, why not pay $900 or less for the same ticket by ramping up the trinity approach if you have that much spend available to get enough miles through the SPG card anyway?

    To summarize:
    Until you have enough miles/points for 2 years of trips, do
    1. card signups with bonuses
    2. category spend bonuses or promos
    3. miles purchase promos at prices below 1 cpm
    Only IF you still don’t have enough miles/points for your anticipated trips and you are ok with the other cash expenses of these anticipated trips, go with SPG Amex. If you have enough after the trinity, just go with no annual fee Fidelity Amex or USBank Flexperks.

    Thoughts, FM?

  3. Here’s something that might be worth exploring, too…. does the promo make it valuable to actually use the “bad” 1% cashback option on Chase and Amex cards and then use that money to “convert” those points to US miles, especially if also targeted for a 50% miles-back promo from US (in other words, say I have 50,000 miles, then I cash out 56700 points from Chase/Amex to cash to buy 50,000 more miles, then I book a 100,000-mile business class roundtrip and get the 50,000 back. So I got a business class ticket for only 56700 UR or MR points).

  4. Could I set my AmEx platinum airline fee credit to US Airways then be reimbursed for the first $200 of the share miles transfer fee?

  5. Oh, I misinterpreted something… my example above would end up with you getting only 30,000 points back, which changes the equation some and makes it much more of a question, at least for me.

  6. @ Chris:The 5000 miles redemption reduction only applies to US Airways flights only, not partner airlines. Last month, when I redeemed miles for a trip to Japan and Australia for three people, I did not get the miles redemption reduction per ticket.

  7. @globetrotter you are correct I forgot the discount only applies to US flights…so it would be 25% off 110,000 which is still a pretty good deal

  8. I saw Topcashback offer CB for points.com, at the rates of 4% for Miles Purchase (Includes; Gift miles purchase and Share miles purchase) and 2% CB Partners Miles Purchase (Includes; US Airways, Virgin America, Alaska Air, Hayatt, Air France, IHG, Air France KLM, JetBlue, Amtrak, Starwood, Virgin Atlantic, SouthWest.), respectively. Although I didn’t understand what do these categories mean, I tried clicked the links at topcashback.com to initiate my Share Miles transactions. Still waiting for update.

  9. Whether miles or cash back is better ultimately depends on your marginal use for additional miles. It’s easy to construct a scenario where miles are extremely valuable and spending on the SPG Amex is better than a 2% cash back card. And there are also people with hundreds of thousands of miles sitting around they aren’t using that will only get devalued over time. Another thing people often leave out of their calculations is that if you buy a ticket, you earn miles, and contribute towards status, whereas if you redeem miles, you don’t earn miles or status and still have to pay something, even if you avoid the airlines that charge large fuel surcharges (a mileage ticket to Europe that is $700 on BA might still be $200 on AA or DL). You’re also going to have a harder time finding mileage tickets at a good price if you have an inflexible travel schedule.
    My advice? Take the low hanging fruit of signup bonuses for miles/points, which are usually much more generous than cash signup bonuses, then use a cash back card unless you’re getting a category bonus or you know you’re working towards a redemption that will give you high value for your points. It depends how much you travel, but for many people signup bonuses from AoRs provide enough miles/points for the trips where they can get good value for those miles/points, and they would be better off using the cash from a cash back card to buy the others (e.g. a domestic flight that could be 25,000 miles or $300). And don’t fall into the trap of valuing a business/first class redemption at its cash price unless you actually would have paid that cash value. Decide what the most you would be willing to pay for that ticket is and use that to value your miles.

  10. Instead of buying miles with this promo I am reducing my devaluation risk. Also a good opportunity to consolidate miles from A to B at no cost, e.g. have C (who wants 100K) share 50K from A to B and pay share fees, then pay share fees to share 50K from B to C.

  11. In the last few days, I got few targeted offers in my email.

    I got offer from Citi to use my citi aa amex to earn 2 miles per dollar for online purchases up to 2500 miles.

    I got 5 US airways miles per dollar at gas station & restaurant purchases up to 2500 miles.

    I can easily do the US airways card promo but wonder how to do the Citi one? If I buy gift cards online wiht my citi AA amex card, it may not work to earn 2 miles per dollar?

  12. Questions, questions:
    Opened US Air Dividend Miles accounts for both of us in time to take advantage of the transfer 2x deal. No miles in either account. Is it worth it to transfer from SPG and then transfer to each other? I am flush with miles now and really need hotel points more. However, never wanting to pass up a deal….what is everyone’s advice?

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