There is no question about it, especially in this climate that is facing airlines switching to revenue based programs for earning miles – the easiest way to accrue a lot of miles and points is through credit cards. It is also true that it is a channel for taking on debt. If you are not careful in how you treat credit cards, you can end up paying more in fees and interest than if you purchased that premium class ticket outright instead of using miles. Whenever I do one-on-one consultations with people, I always emphasize the need to be careful and exercise restraint with credit cards, especially if they are new to reward cards. When used properly, these cards and their bonuses can give huge benefits. The flip side is also true – when misused, it can cause a lot of grief.
I say that to those who would say that banks are giving us miles already in exchange for taking on debt, but that is not true if you continue to pay your bills on time. Now, there are the offers that come around, like with the US Airways card offer in the past, that offers you additional miles for taking a balance transfer. I have never encouraged anyone to do that, even if they just pay it back the next month, because you are paying a 3% fee for those miles. In other words, you are paying about 1.3 cents per mile more than they are worth.
But that is the banks. They do not, as a whole, market outright to get you to take on debt in exchange for miles. When it comes to airlines, airlines actually have offered the opposite – miles in exchange for opening investment accounts. I may have missed it but I have not see any airline try to get you to take on debt (or consolidate debt) for miles.
Until now. Spirit Airlines, the sort of oddball in domestic carriers, wants to give you miles to borrow money! The e-mail said that you can borrow up to $35,000 and you will earn 1 mile for every $2 borrowed (a max of 18,000 miles). The fixed rate varies from 6.73% – 35.36% for the loan – in other words, way more than Spirit miles are even worth! Considering that they were giving out 8,000 miles to everyone who hated on Spirit already this year, I find it hard to believe that anyone would consider taking a loan just to get Spirit miles. Of course, the miles are just to swing people in the direction if they are already looking for a loan, but still…
Did I miss it? Does any other airline offer miles directly in exchange for you taking a loan? In case I haven’t already made this clear, please don’t do this! 🙂