Remember August 28th, 2013 !

I don’t want to say that  Wednesday August 28th was an equivalent of an apocalypse in a miles and points world, but it’s pretty darn close.  I wanted to wait to write a post, till the dust settled a bit. So here is the deal. Apparently, it was reported that American Airlines has decided to impose a fuel surcharge (known as YQ) on all international redemptions, even their own. Up until now, they were only charging YQ on British Airways and Iberia. And if one airline does it, the others will follow, guaranteed.

I had plans to redeem on Air Berlin to fly to Europe and add a free one way from Las Vegas, but was going to scrap it now.  Since we mostly fly economy, it would probably make such redemption obsolete for my family. Adding fuel surcharges is a sneaky way for airlines to make money on something, that is supposed to be free. Hmm, I didn’t realize that fuel is required to fly planes. Who knew?  I really detest such practice and try to avoid companies that do that, or find ways to discover loopholes and workarounds, like in the case of Avios.

Fuel surcharges can add up to 700 dollars or more roundtrip and on occasion cost more than a paid revenue ticket. I am not kidding, I’ve seen it happen myself ! I saw a ticket from LAX to London for 610 dollars, or you could redeem 50000 British Airways miles (before Avios conversion) and pay 640 dollars in taxes. They wanted a customer to pay 30 dollars for the privilege of taking his 50000 miles. How generous, no?

Fortunately this whole thing with AA  was a misunderstanding and the fuel surcharge was only to be applied to revenue tickets, not award tickets. I am disappointed though in a way,  it was handled by American Airlines. This is a PR disaster at its finest. The whole thing was discovered by Lucky, who runs www.onemileatatime.com blog. The agents apparently were misinformed and were trained poorly.

But disaster was avoided. Remember Cuban missile crisis (probably not)? It was something like that, but with no human lives at stake. But it got me thinking. My job with this blog is to apply  these sort of situations to an average family. So here is my takeaway from all of this:

1) Hoarding miles and points is not advisable. That’s obvious, right ? I made such point in my  post  “Churning with a purpose” on August 8th . I had no clue this was going to occur, yet here we are. Potential  devaluation like this can bring lots of stress to someone who has a big stash of miles. And life is full of stress already. Why complicate things? I subscribe to KISS (not to be confused with the rock band) philosophy in everything,  including miles.

2) It most likely does not make sense for an average family to accumulate miles, past the minimum spending requirements. Cash is king.  Look at my post “Best “keeper” credit cards for a family” on July 8th. There is always a possibility of any airline adding fuel surcharges. And they don’t even have to provide any notice.

Imagine you just got  a gallon of milk today for 3.50 . Tomorrow it goes up to 7 dollars. That’s exactly what it’s like , when you redeem for international economy tickets and fuel surcharge is added.  I came from a country, that had its share of devaluations of currency. It makes me leery to hoard money, miles or points. Especially the last two. But another post on that later.

3) If you do decide to focus on earning miles through regular spending, try to put it into flexible points instead. Either Ultimate rewards through Chase or  SPG or Membership rewards points through American Express. Since they transfer to a variety of programs, you have a measure of protection, in case one airline devalues its currency significantly.

I still stand by my claim, that cash back is probably better for an average family. But to each his own. I still plan to apply for Amex SPG card 30000  points bonus offer, that ends on September 3rd (see my post on August 16th for more). Originally I was going to transfer the points to AAdvantage immediately after the bonus posts. But after this little scare I think I will wait till I need to redeem the miles.

So what is the conclusion ? Remember readers, when you talk miles and points, you are dealing with “funny money”. You can’t use them to pay doctor’s bills, fix your car and so on. So next time you pull out your mileage earning credit card for non-bonus spending, ask yourself something. Are you ready to buy those  miles at 2 cents each, knowing what can potentially happen tomorrow? Because that’s exactly what you are paying. Remember August 28th, 2013.