What's a Velocity Point Worth

[Moopere]

But ask them to accurately price the tipping point and I'd wager most would not really know what they would be prepared to pay. $500, yeh probably... $1000, no way.....$700?, $600? I dunno, maybe!

I agree. The psychology of sales eh? Its this phenomena that creates $999.99 sales tags ... $1000 is too much

 

[elemist]

Wow some really good info in the last few posts! I see what you mean about using realistic fairs that you would actually buy for comparison.

Where i struggle is with the comparison to paying out $X per year in annual fees and whether is would be better going to a low rate no rewards card with no annual fee - then putting aside the money i would normally pay on annual fees towards flights.

As was mentioned before a flight say MEL -- PER are cheap as chips to pickup a basic economy seat. So purely looking at the 20k bonus sign up vs the annual fee the figures don't stack up.

On the other hand if you can cash in rewards points to get very good deals for either Bus or First class then i can see some value in the process.

I guess the question is how do you justify whats getting rewards for you VS what's just giving free money to a bank?

 

[Moopere]

Elemist, You have to plan a bit of a strategy before plonking down money on CC's and "buying" the free points offered.

You are right to question the idea from the perspective of only buying one card and then sitting on 20K points. 20K is not enough to do much thats useful, 200$ is almost a one-way fare to MEL from PER in Y

The whole FF thing is not only a strategy revolving around points either ... its the combination of your own travel preferrences, do I like Y or J class fares? What about lounges? Do I have a champagne taste but beer budget??? (hhehehe)

There is possibly not a lot of gain to be had in collecting points and working the CC/banking/airfare system if you only intend to do 1 Y class domestic trip a year. On the other hand, if you could collect enough points for an upgrade from Y to J then your one trip a year would also include lounge access and you wouldn't need to bother with lounge membership (At additional cost)

 

[elemist]

Yeah that's what i'm working on trying to sort out the different offers available and try to get the best reward for my outlay.

I probably should mention that i'm not just attempting to jump on a few bonus point cards, i do have a reasonable spend with my business credit card approx $80-100k per year, and i've read recently on the forums about paying Tax bills via Credit Card which should be another bump in annual spend. Then i have the standard bill etc for my living expenses on my personal CC.

As you mention i've always had the taste for champagne with a beer budget (Sadly a new house is quite draining on the budget!) - thus the looking at how else i can feed the champagne lifestyle. At the moment i don't really travel a great deal due to being the sole person in my business, but at some point in the next couple of years i would love to take a couple of months off and head over to the US and Europe.

I've always had the preference of working hard now so i can holiday in style rather than the standard backpack and work your way around. Not that i have anything against that it's just not my thing.

I was mainly trying to clock up QFF points as i thought that would be the best thing, but since the re-launch of the Virgin product its made things a bit more complicated! haha Then there was the whole Westpac Altitude cards shake up which mean't i couldn't transfer my points across to QFF, so they've been in limbo until recently when i spend some and transferred the rest across to Velocity.

I guess airline wise i don't really have a preference either way, having not experienced the product its a bit hard to make a call on which is best. They both seam to have the strong points and weak points.

 

[Deleted member 29185]

Elemist, may I suggest to you that it may be wiser for you to forget the gold Velocity Amex and go for the platinum instead. It'll cost you another $150 ($349 annual fee), but you also get a complementary return flight, which depending on the ports you fly to/from, could realistically be to the same value!

If that business spend of yours can be made on the Amex plat card instead of the Amex gold card, you'd earn an extra 20 000 - 25 000 Velocity points per annum (more if you also have a DJ spend) which depending upon the points value (most tend to see that as hovering around the 1c-3c mark) that extra point value back into your wallet is between $250 and $750.

Add in your personal spend and tax bills (I never realised this one.......a change for my tax payment looms large) and you'll be jeting off to see the world a lot sooner!

Remember though, not all suppliers will accept Amex. Always good to check before you make a decision and also read the threads on AFF discussing the other CC offers first, to ensure you get the most useful product for you!

 

[Deleted member 29185]

I agree. The psychology of sales eh? Its this phenomena that creates $999.99 sales tags ... $1000 is too much

Yep! I remember a restaurant that was not pricing it's meals. They instead tried the approach that they would ask the patrons to pay what they thought their meal was worth. A few were arrogant and said it was worthless and didn't pay at all (or a token amount) but the intrpid restaurateurs found many paid more than they use to charge when the menu was priced! Was this because the patrons felt guilty, or because they genuinely thought the meal was indeed worth it........or was it simply because they really had no idea what the meal was worth to them and didn't want to be embarrassed??

 

[cityflyer369]

Elemist, may I suggest to you that it may be wiser for you to forget the gold Velocity Amex and go for the platinum instead. It'll cost you another $150 ($349 annual fee), but you also get a complementary return flight, which depending on the ports you fly to/from, could realistically be to the same value!

If that business spend of yours can be made on the Amex plat card instead of the Amex gold card, you'd earn an extra 20 000 - 25 000 Velocity points per annum (more if you also have a DJ spend) which depending upon the points value (most tend to see that as hovering around the 1c-3c mark) that extra point value back into your wallet is between $250 and $750.

Add in your personal spend and tax bills (I never realised this one.......a change for my tax payment looms large) and you'll be jeting off to see the world a lot sooner!

Remember though, not all suppliers will accept Amex. Always good to check before you make a decision and also read the threads on AFF discussing the other CC offers first, to ensure you get the most useful product for you!

I second this. When I made some credit card decisions recently, I figured out how much I would spend on the Amex cards and Master cards I was looking at and calculated the Velocity points I would get per year, for all credit card options I considered. In the case of the Amex Velocity card, I substracted the free flight from the annual fee, and what remained is the price I would be paying for the Velocity points per year.
Having done this, I calculated the value a point will have to me when spending it in the way I intend to spend my points (based on my subjective valuation of the ticket, taking into account the points I would earn from flying if I bought the ticket with my money, etc., etc., see previous posts).
In the end I chose a combination of credit cards such that the price I would be paying for the points is lower than my value of the points, and, of course, as low as possible.

 

[Deleted member 29185]

I second this. When I made some credit card decisions recently, I figured out how much I would spend on the Amex cards and Master cards I was looking at and calculated the Velocity points I would get per year, for all credit card options I considered.

Are we just analytical misfits .

I've recently been planning next years holidays and I'm finding myself basing them on the best point redemptions.........how sick is that

 

[cove]

The bargain on paying taxes today is where you use a Visa or MasterCard that earns a point a dollar to pay the Australian Taxation Office bills where you earn a point a dollar of frequent flyer points for 0.48 cents each then book a business class air fare outright or upgrade on points. You then get the lounge thrown in so travel is a tad more comfortable this way if you can do it.

 

[cityflyer369]

Yes, I was thinking something similar this morning after I posted!



This is the part I struggle with a bit. It's very hard to "price" a service that doesn't exist. I mean, most people can decide if a retail price is too high and walk away. But ask them to accurately price the tipping point and I'd wager most would not really know what they would be prepared to pay. $500, yeh probably... $1000, no way.....$700?, $600? I dunno, maybe!

I agree that this is a tricky question. For figuring this out, you have to be very honest to yourself and spend some time on thinking about it. When I try to find a value for flights, I always imagine a situation that someone would come into my room right now and would offer me that flight for a certain price. Would I say deal and pay immediately or would I hesitate? If I am willing to agree to the deal, my valuation of that ticket is at least the price of the deal, otherwise it's lower. And you can continue like that and ask yourself questions about different price levels. Eventually, if you are consistent about your valuation, you will figure out the tipping point. You might not be able to give a precise number such as $547.40, but for many situations it is sufficiently precise an indication if you know your subjective tipping point +/- 50 bucks.

BTW, the ancient Germans had an interesting method when they had to make a tricky decision. They would first discuss their decision in a meeting with all the elders of the tribe. Once they had made a decision, they would start drinking until they were completely wasted and then discuss their decision problem again. If they still felt that the decision they made when being sober would be ok, they would go for it. Otherwise, they would reconsider things. So maybe it's a useful approach to find the tipping point for your ticket and then think about it again when you're drunk.

 

[DeKa]

I'm looking for some advice on whether it is worth spending slight more to buy something (well, not taking a discount I am able to obtain elsewhere).

I'm considering buying something via Shopandearn.com.au which will net me 5700 points with the current Shop and earn double points promotion. I can also buy the same product from the same company with a discount code for 6% less ($79 saving). This puts the cost of those 5700 at $79 or 1.386c per Velocity point.

I typically redeem Velocity points by buying Flexi fares and upgrading to Business. I think at most I would be paying 0.386c too much for these, but what is the general consensus? Should I spend $79 more to earn 5700 points?

 

[serfty]

FWIW, these days it's getting harder to "purchase" reward points for less than 2¢ without actually flying, although there are still a few decent CC options out there.

On that basis you have reasonable value - of course in the end it depends upon how you intend to burn those points and the value you plan get out of that.

 

[DeKa]

Good information serfty, thank you.

 

[lobo76]

I'm looking for some advice on whether it is worth spending slight more to buy something (well, not taking a discount I am able to obtain elsewhere).

I'm considering buying something via Shopandearn.com.au which will net me 5700 points with the current Shop and earn double points promotion. I can also buy the same product from the same company with a discount code for 6% less ($79 saving). This puts the cost of those 5700 at $79 or 1.386c per Velocity point.

I typically redeem Velocity points by buying Flexi fares and upgrading to Business. I think at most I would be paying 0.386c too much for these, but what is the general consensus? Should I spend $79 more to earn 5700 points?

Do you have any domestic trips planned before the end of the year? With half-price upgrades the points have extra redemption value right now (assuming you don't already have the points needed to upgrade any intended travel)

 

[TiredOldFlyer]

I recently purchased 1 return on VA BNE to LAX in J for $6076 inc tax. At the same time I redeemed points for another seat on the same flight.
The redemption was 244,188 Velocity points plus tax of $524.
On a straight calculation the points are valued at 2.49 cents, however after considering the tax the points value drops to about 2.35 cents - but I used
points from my points Bank (AMEX) with a 15% bonus so the way I work it out is the end value of the points was 2.76 cents each. I'm happy with that as the points cost nothing, allowing for the fact that I consider the cost of the AMEX card used up in the benefits of the card.
I haven't considered any AMEX surcharge if when using the card as it is a "Business" card and most surcharges are a tax deduction and it is seldom used if surcharges apply ; but it is easy to see that if surcharges apply when using a card to earn points the value of the points can easily reduce to zero.
I do thank Wollies etc when I use may card for small purchases as every point is closer to another flight.
Think my maths are right but I sometimes worry about my calculator !!

 

[DeKa]

Do you have any domestic trips planned before the end of the year? With half-price upgrades the points have extra redemption value right now (assuming you don't already have the points needed to upgrade any intended travel)

I've already upgraded 8 sectors since September Some of them on 2-for-1 Flexi Fares. I see this as a potential easy top up to the points balance.

 

[esquire]

I just redeemed ~95K points for 2 (Y) PER - CCK- PER. Flights would have cost $2050. 2.15c a point seems good value - although more importantly I get a chance to go to the Cocos Islands

 

[dandandan]

Would it not be correct to work out the points per $ redeemed etc, by dividing points redeemed, by the fare amount that would have been paid. In your example the $6,076/244,148 works out at .0249. I calculated what it would be for my LAX-SYD trip at 94,000 points each way (188,000 total), based on the same fare price you paid and it worked out at .0323 ($6,076/188,000) which says that the points redemption in my case would be not as good when it is better by just looking at the number of points used, which are 56,148 less.

Dividing the points redeemed by what fare would have been gives the true redemption value per 40 points per dollar against 30 points per $.

244,148/$6,076 = 40.1824 points per $

188,000/$6,076 = 30.9414 points per $

I recently purchased 1 return on VA BNE to LAX in J for $6076 inc tax. At the same time I redeemed points for another seat on the same flight.
The redemption was 244,188 Velocity points plus tax of $524.
On a straight calculation the points are valued at 2.49 cents, however after considering the tax the points value drops to about 2.35 cents - but I used
points from my points Bank (AMEX) with a 15% bonus so the way I work it out is the end value of the points was 2.76 cents each. I'm happy with that as the points cost nothing, allowing for the fact that I consider the cost of the AMEX card used up in the benefits of the card.
I haven't considered any AMEX surcharge if when using the card as it is a "Business" card and most surcharges are a tax deduction and it is seldom used if surcharges apply ; but it is easy to see that if surcharges apply when using a card to earn points the value of the points can easily reduce to zero.
I do thank Wollies etc when I use may card for small purchases as every point is closer to another flight.
Think my maths are right but I sometimes worry about my calculator !!

 

[Moopere]

Would it not be correct to work out the points per $ redeemed etc, by dividing points redeemed, by the fare amount that would have been paid. In your example the $6,076/244,148 works out at .0249. I calculated what it would be for my LAX-SYD trip at 94,000 points each way (188,000 total), based on the same fare price you paid and it worked out at .0323 ($6,076/188,000) which says that the points redemption in my case would be not as good when it is better by just looking at the number of points used, which are 56,148 less.

Dividing the points redeemed by what fare would have been gives the true redemption value per 40 points per dollar against 30 points per $.

244,148/$6,076 = 40.1824 points per $

188,000/$6,076 = 30.9414 points per $

I prefer to do it this way as well. Total cost of flight in dollars divided by net cost of points

In your examples above it gives me 6076 / 244K = 2.5c / point and 6076 / 188K = 3.2c / point.

Over time I've watched these redemption / point numbers go up and down per day/per flight as they do, and am comfortable now that I should be able to extract at least 3c / point and won't redeem for less then this as a result. If redemption on a fare would give me < 3c a point I'll use cash.

 

[pshepvic]

I recently redeemed 532k points for 2 people MEL-AUH in F on Etihad one way, plus LHR-SYD (stop in HKG) in J.

Now if I'd purchased those tickets at the going rate it would have cost me $15,500 each. That works out to be about 5.8 cents value per point.

However the reality is I'd never pay $31k for two of us to fly to Europe. In fact I wouldn't pay more than $6-7k pp (whether through 2-for-1 sales pr fares though Amex). So my value of those seats is more like 2.6 cents per point (and a little less by the time I add in the SYD-MEL flight at the end, plus a AUH-somewhere flight at the beginning).

Kind of have to look at the dollar value you'd be prepared to pay, not the actual dollar amount of the flights.


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