Northwest Airlines 40% Mileage Bonus--Is it a Good Deal?

I'd like to share an email I received from Northwest Airlines about a mileage promotion they're having:

"Transfer miles now through September 25, 2009 to a friend or family member with a WorldPerks account and they'll receive your miles plus an additional 40% mileage bonus.
The extra 40% mileage bonus may even give them enough miles for Award Travel."

(Visit the Northwest Airlines site to read about it straight from the source.)

Yes, this sounds like a great deal. So what's the catch? It is not free to give someone miles. Here's the fine print:

Transaction Terms:
Minimum/Maximum mileage per transaction, per recipient: 1,000 / 30,000
Mileage increments: 1,000
Rate per mile: $0.01
Processing fee per transaction: $30.00
One to four WorldPerks recipients may be included in a single transaction

So let's say you wanted to try to game the system. Let's say that you and your sister each have a World Perks account and you want to transfer miles to each other just to get the 40% bonus. Will the bonus be worth the cost to transfer the miles, and how does that cost compare to the cost of buying miles?

Let's say you each have 30,000 miles and want to go for the maximum bonus. Transferring 30,000 miles gets the recipient a bonus of 12,000 miles. At 1 cent per mile transferred, it would cost you $300 to transfer the miles, plus the $30 transaction fee, for a total of $330.

Now, here are Northwest's terms to buy miles:

Minimum/Maximum mileage purchased per transaction: 2,000 / 60,000
Mileage increments: 2,000
Rate per mile: $0.028
Processing Fee per transaction: Fee Waived
Processing Fee and rate per mile do not include applicable taxes

To buy 12,000 miles (the amount of the 40% bonus) at 2.8 cents per mile would cost you $336. There is no transaction fee, so the total cost is $336. You would save $6 by doing the mileage transfer scheme.

It turns out that what appears to be a great deal that might allow you to game the system for some free miles is actually not a deal at all. It's probably just a way for Northwest to promote the concept of transferring miles.

Also, most of us personal finance types would tell you that spending $330 (or $336) to purchase 30,000 miles is not a particularly good deal. You'd be better off signing up for the Delta SkyMiles American Express Gold Card and earning the 20,000+ bonus miles for opening the account (then canceling the card before the annual fee kicks in). (Of course, this will only work if you have good credit.) Why Delta? Because when the Delta/Northwest merger is complete, all your Northwest WorldPerks miles will be merged with your SkyMiles and you'll have one fat mileage account.

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Photo by specialkrb

Post by Amy Fontinelle