Ridiculous or not? Paying a ransom to rescue your frequent flier miles

Not so long ago, your frequent flier miles were gone when they expired. But not anymore.

Airlines are willing to rescue your delinquent bonus points — for a price. Cricket Moore recently received a series of emails from US Airways about 15,688 miles that had vanished after she failed to redeem them in time. If she wanted them back, it said, she could either apply for an affinity debit card that charged an annual fee, or pay $100.

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“I didn’t pay up,” she says.

In the past, most airlines made offers to save old miles on a case-by-case basis. But in a series of emails sent to Moore by US Airways and other passengers, it has become clear that this is being done in a systematic and automated way. Other airlines, including most notably United Airlines, have reportedly been making similar overtures to their delinquent frequent fliers.

“When their miles expire, consumers are between a rock and a hard place,” says Tim Winship, editor of the site Frequentflier.com. “On the one hand, allowing the miles to simply disappear feels like submitting to a robbery. On the other hand, paying as much as one cent per mile to reactivate expired miles feels like… well, submitting to a robbery.”

Indeed, US Airways’ fees are little steep. It charges $50 to salvage up to 4,999 miles and $300 to save between 50,000 and 99,999 miles.

“For airlines, it’s a huge win,” says Winship. “Any revenue generated from reactivation fees is virtually all profit, since there’s no real cost to them to undo the expiration.”

Ironically, many of those rescued miles will never be used, a study suggests. Americans accumulate approximately $48 billion in rewards points and miles annually, according to new research by Colloquy. At least one-third of the points, representing $16 billion in value, goes unredeemed by consumers.

Put differently, the average household that is active in loyalty programs earns $622 a year, but does not redeem $205 of those rewards. That’s enough to buy an airline ticket or two, outright.

Moore says the ransom was too high for her. Besides, she just doesn’t like US Airways.

“It doesn’t go to most of the places I fly to,” she told me. “So it’s always a lose-lose for me.”

But many others will take US Airways up on its offer, coughing up between $50 and $400 or more to retrieve their miles.

Not all airlines are taking the same flight path. Recently, both Delta Air Lines and Southwest stopped their miles from expiring, a move which was widely applauded by their customers. But other carriers see mileage rescue fees as a goldmine and they’re stepping up their efforts to monetize their expiration policies.

True, there are probably easier and cheaper ways of getting miles than forking over money for your old miles at an above-market rate. But if there’s a market for this scheme, then why shouldn’t airlines take advantage of it? Isn’t that what free enterprise is all about?

At the same time, these mileage rescue offers are almost always a bad deal for consumers. They leverage their ignorance and compulsion, inviting them to pay for something that they might not even use. Shouldn’t there be a law against that kind of predatory behavior?