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We posted this math lesson a few months back. It is very relevant again, now that Barclays increased the sign up bonus to 50,000 A+ miles on the Arrival plus card. This card also earns 2 points per dollar and has an interesting award redemption structure. When you redeem these miles for travel, they are worth 1-cent per mile, and you get a 5% rebate. The minimum redemption for travel is 10,000 miles, or $100. Confused yet…?
This redemption structure can be frustrating – After redeeming miles for a large travel expense, you will likely be left with some amount of miles under 10,000, due to the 5% dividend. These miles are effectively “held hostage” until you can earn enough for another minimum redemption. Follow along with our math to make sure you optimize your redemptions and minimize the amount of miles “held hostage.”
The strategy in this article will help people who do not intend to use their Arrival+ card after redeeming their current A+ mile balance. There are plenty of better “2 percent” cards, including the Discover IT and Citi DoubleCash for daily spending. The Arrival+ is not a great card beyond the initial sign up bonus. Get the most out of your initial bonus, and move along.
Here Comes the Math
An optimal mile redemption will leave exactly 10,000 miles in your account, for a minimum redemption after your next travel booking. Anything under that, and you will be unable to redeem without earning more miles. Anything over that will leave a larger rebate balance, which essentially goes to waste. To solve for the ideal redemption number, let’s think of this as a word problem (remember those from elementary school??):
Billy has an A+ mile balance of 56,000 points. He purchases an airline ticket for $600. If Billy wants to be able to redeem 10,000 miles for a future travel purchase of $100, how many miles should he redeem toward his airline ticket?
Go ahead and take a stab at this one… I’ll wait… … … got it? Did you come up with 48,631 miles? Did you show your work? Haha. Ok, how did we reach this number? For the math nerds among us, the equation sets up like this:
CurrentBalance – X + 0.05X – FuturePurchase*2 = 10,000
X = [(10,000 – FuturePurchase*2) – CurrentBalance]/-0.95
X = [(10,000 – $100*2) – 56,000]/-0.95
X = 48,631
I put together a simple spreadsheet, so you can calculate your own number.
What does this all mean? In this scenario, if Billy redeems exactly 48,631 miles, and subsequently purchases $100 worth of travel, he will have exactly 10,000 miles left. He could then redeem these miles to offset the $100 travel cost. He will be left with a small remainder of 500 miles after this redemption.
If Billy had redeemed all 56,000 miles against the $600 Airline ticket, he would get 2,800 miles back from the dividend. These miles would be “held hostage” until he spent another $3,600 on the card! Sounds terrible!
Use the spreadsheet linked above to calculate your ideal redemption, so your award miles don’t get stuck. Unfortunately, Barclays only allows redemptions in increments of 5,000 miles, so select the redemption option just below your ideal number. This concludes our math lesson for the day. Good work class!