Tomorrow is the Last Day to Purchase Starwood and Southwest Points at a 25% Discount

Both Starwood and Southwest have a promotion where you can purchase their respective points at a 25% discount. Both promotions end tomorrow, May 31, 2014. Both promotions can definitely be valuable and I suggest taking a look at them to see if purchasing points can actually help you generate a cheaper hotel stay or flight.

Starwood Promotion:

You can purchase SPG points at either a 10% 15%, 20%, or 25% discount. 

• Buy 500–9,500 Starpoints: save 10% ($31.50 for each increment of 1,000 points)
• Buy 10,000–14,500 Starpoints: save 15% ($29.75 for each increment of 1,000 points)
• Buy 15,000–19,500 Starpoints: save 20% ($28.00 for each increment of 1,000 points)
• Buy 20,000 Starpoints: save 25% ($26.25 for each increment of 1,000 points)

So this means that if you go all in it will cost you $525 to purchase 20,000 points. While I would not suggest to just purchase points out of the blue, if you do the math for a particular upcoming hotel stay, you might actually find that purchasing and redeeming points might be cheaper then just paying for the hotel outright.

Some things to know with this promotion:

• The maximum number of points you can purchase in a calendar year is 20,000 points (but you can transfer points freely between members of the same household)
• You can purchase points in increments of 500
• Points take up to 24 hours to deposit into your account
• Your Starwood account must be activated for at least 14 days – if you are new to the program and looking to make a purchase make sure to create an account now
• Purchase points here

Now remember, last year Starwood went through a devaluation of their Cash & Points redemption and increased the point requirement of many of their hotels. While this promotion can be extremely great for certain properties, it is definitely not as lucrative as it used to be.

An example of where this can play out well:

• Le Meridien Chiang Mai or Le Meridien Chiang Rai – Both are a category 2 hotel and typically always available for cash + point redemption. This will require you to redeem 2,000 points + $35. The cost of the points plus the “cash” portion of the redemption will only cost you $87.50. However, if you have plans on staying on a weekend, you can redeem just 3,000 points for a free night, which will cost you $78.75. Typically, a room at this hotel typically costs at least $120/night.

Pros/Cons of Redeeming Points:

• You will still get stay/night credits even when redeeming (pro)
• You will not get the points (con)
• If there is a bonus at the time, you will be ineligible when redeeming points(con)
• If you are using all points, you will not have to pay any taxes (pro)
• If using cash + point, you sometimes need to pay tax on the cash portion, but since this is on such a smaller amount you will not have to pay the full tax on the regular rate and at some resort and city locations this can be extremely high (pro)
• At some hotels, you do not have the pay the resort fee if using points to redeem for your stay (pro)

So unless there is some unbelievable promotion going on, or the cost of purchasing points is close to the cost of actually paying for the stay, definitely use points when it is cheaper.

Southwest Promotion:

Southwest is selling their points at a 25% discount and there are some scenarios where it might be worth it to purchase the points through this sale.

Without the promotion, the cost to purchase points is a flat 2.06 cents per point. Points can be purchased in 500 increments (starting at 2,000 points), so every 500 points will cost you $10.31. This is actually cheaper then some promotions in the past were you get a 25% bonus instead of 25% off. You are able to purchase a maximum of 60,000 points.

As mentioned above, Southwest has a fixed redemption where each point is worth 1.43 cents per point. So to buy points for more than they are worth is definitely NOT a good value. However, if you are close to redeeming for a flight and shy a few points, do the math to see if purchasing points will ultimately be worth it to redeem for a free flight.

Example 1: Let’s say you have 5,000 points and the number of points you need to redeem for a free flight is 8,000 points. This means you’ll need to purchase 3,000 points for that free flight. The cost to purchase those 3,000 points will be $61.88. In this particular scenario you are overpaying for the flight by $17.10 ($0.02 per point to purchase the points – $0.0143 per point to redeem = $0.0057 x 3,000 points = $17.10). It really depends on if you fly Southwest often and can continue to accrue points to have enough to redeem for a free flight or just trying to deplete your account and prefer to pay less for a “free” flight.

Example 2: Now, there is one scenario where it actually might benefit you to purchase points and actually get a flight for cheaper than the advertised flight. As I mentioned about a year ago, Southwest and AirTran allow you to transfer points and credits back and forth freely, allowing you to redeem for a free flight regardless of price.

When you purchase points, these points can be transferred to AirTran credits or back to Southwest credits – giving you the opportunity to redeem for a “free” flight on either airline.

Transferring Southwest points to AirTran credits: 1,200 Rapid Reward points = 1 A+ Reward credit (*you need 8 A+ Reward credits for a free one way ticket, 16 A+ Reward credits for a round trip). So you need to accrue 9,600 Southwest points to earn a free one-way flight on AirTran. With this promotion, you can purchase 10,000 points for $206.25. So if an AirTran flight you are looking to purchase is more than $207 one-way than it is worth it to purchase the points to redeem. However, keep in mind that AirTran free tickets are capacity controlled so you will need to call them in advance to see if the flight you are looking at is available for free ticket awards. Many times, from personal experience, AirTran representatives will override availability for you as long as it is not a black out date. They will also put the ticket on a 24 hour hold for you.

Transferring AirTran to Southwest: Credits: 1 A+ Reward credit = 1 Rapid Reward credit. So once you transfer your Southwest points to AirTran, you can then transfer them back to Southwest. Similar to AirTran, it requires 8 Southwest Rapid Reward credits to redeem for a free flight. It will cost you the same $206.25 to “purchase” a one-way flight, so see if the flight you are looking at is more than this and it could be worth it to take advantage of this promotion.

Ultimately, this probably is not a good promotion for most of you, however, there are a select few that will see the benefit. Also remember that you will not earn points (for Southwest) or credits (for AirTran) when redeeming free flights, so take that into consideration. With Southwest, the points earned from a paid flight can be thought of as 8.5% back to use on a future flight.

Purchase Southwest points here and it will require you to sign into your Southwest account.

Anyone able to benefit from these two purchasing point promotions?