Southwest Airlines sent me an email yesterday offering a bonus of 10-40% on purchases of Rapid Rewards points through their partner, Points.com. I’m telling you up front that this is a very bad deal. Buying points is usually a bad idea unless (1) the price is amazingly low or (2) you only need a few thousand to top off your existing balance for an award. Southwest’s promotion fits neither criterion.
There is a third possibility. I can see an argument for paying a high price for United or other airline miles because award tickets on those carriers often have more flexible refund policies, especially if you have elite status. But Southwest allows fee-free refunds on both cash bookings and points bookings, so there is no logistical advantage to booking on points. It’s just about price.
You need to buy 30,000 points or more to get the largest bonus. Buy fewer than 4,000 points and you won’t get any bonus at all. When I think of topping off an account, I think of somewhere between 0-4,000 points, so this promotion doesn’t help in that respect.
What’s left is price. Rapid Rewards offers a fixed value for its points depending on the kind of fare you want to book. The best deal is for Wanna Get Away fares, for which it takes 60 points per dollar, making them worth about 1.67 cents per point. (This is being devalued next year, to 70 points per dollar, or 1.43 cents per point.) Other fare types require even more points and are a worse deal, so I wouldn’t book them unless all the Wanna Get Away fares are gone.
Got that? 1.67 cents per point is the maximum value. If you have to pay more than that, you shouldn’t buy points unless you’re topping off an existing balance. (Update: Unless you have a companion pass. See the comments.)
Normally Southwest Airlines sells points for $27.50 per 1,000, or 2.75 cents per point.
If you hit the smallest bonus threshold, you can buy 4,000 points and get a 10% bonus. 4,400 points cost $110, or 2.5 cents per point
Let’s assume you pig out and buy enough for the largest bonus. 30,000 points receive a 40% bonus, or 12,000 points. A total of 42,000 points costs $825, or 1.96 cents per point.
Even if you maximize the value of this promotion, you are still buying points at a cost of 1.96 cents each and redeeming them at a maximum of 1.67 cents. You are losing about 15% on your purchase. And I don’t know why anyone would buy $825 worth of Rapid Rewards points. This is supposed to be a discount carrier. I have never seen an $825 Wanna Get Away fare, and I look at some pricey markets to visit family over holidays.
Please don’t buy any points if you were targeted for this promotion. Like I said, a top up should be on the order of a few thousand points. You probably won’t get a bonus, and if you do it will be a small one. You will get a better price by transferring Ultimate Rewards points. I hate to do this because I value them at 2 cents each, but it’s still better than paying 2.75 to 2.5 cents through this sale.