“Ow, this makes my brain hurt!”
If you’ve read books like Thinking Fast, and Slow or The Power of Habit, you know our brains rely on gut instinct, visual cues, or habit to make quick decisions. We’re collectively terrible at tasks that require us to do math, or be logical, or solve problems based on objective evidence only. Instead we jump to conclusions and take the easy way out.
Marketers are very happy about this and they exploit it every day. They know you are more likely to buy something that’s $19.95 rather than $20, or that you’ll add more things to your cart to qualify for “free” shipping. They know you’ll take the “buy one get one free” deal at $60 rather than “buy one at $40 and get the second one half price.” (Hint, you’re paying the same total price either way.)
They know you’re far less price sensitive in a convenience store than you are in Dollar General. They know you’ll spend double the price in an airport than you would tolerate in that convenience store.
These are small outlays though compared to travel expenses. You have to actually fight false pattern recognition, fight instinct, and fight the urge to let the lazy part of your brain make money decisions. Otherwise we could be talking hundreds or thousands of dollars overspent.
Here are some areas of travel that require extra diligence.
You need to compare the entire ticket price (plus ground transportation)
Quick, which of these is cheaper: a $149 flight on Spirit or a $199 flight on Southwest? I don’t know the answer to that for sure, but if you’re packing any bags the second flight is probably cheaper. That’s because Spirit will charge you for selecting a seat, bringing any bag (even a carry-on), a drink of water, printing a boarding pass, and anything else they can get away with. With Southwest the ticket price is the total price.
Which of these is cheaper in Europe: a $99 flight on RyanAir or a $149 train? The lazy part of our brain will say the first one, by 50% of course, but again you’ve got the extra fees and then the important question—how are you getting to your hotel or rental apartment? Trains typically go to the city center. Many airports that budget airlines use are an hour outside. If you have to get a taxi or Uber it will easily eat up the difference.
I’m not trying to criticize budget airlines though. I fly on Allegiant quite a bit. Even adding all their fees, the flights are often half the price of what I’d pay on a legacy carrier. Plus from where I live it’s almost always a direct flight. Time is money.
Note the extra charges at hotels too. If one is $10 more but doesn’t charge for parking, Wi-Fi, local calls, or drinking water, then you’re probably better off with that one. If one’s by a metro and the other requires taxi rides, another difference to factor in.
Know the real value of airline miles
Our tendency to be easily manipulated, fooled, bamboozled, or confused is beloved by credit card companies and their airline partners. Hundreds of thousands of people will pay an annual fee for a credit card that earns them mileage without ever pulling out a calculator to figure out whether they will actually come out ahead or not. Here’s how you know. A mile is worth about a penny. So after the first year when you get a big sign-up bonus, if you spend $75 for an annual fee, you must charge $7,500 in one year just to break even.
The wise thing to do would be to take the deal, use the card for a year, then cancel it unless you are going to rack up a lot of charges on it in year two. As more people have woken up to this strategy though, the airlines have added more perks. So now it’s a different calculation for some of them. Does that credit card get you a checked bag fee waiver? Then that can make the card pay for itself in just a few segments. Some let you check one for your companion too. Kaching! Some give you a discount on food/beverages ordered and let you board earlier so you have easy access to overhead bin space.
But should you gift or buy miles? Almost never, unless you are just topping off an account to get to what you need for redemption. For example here’s one offer I got by e-mail: “Transfer miles between accounts and help a loved one reach a reward travel goal. For a limited time, receive up to 50,000 bonus miles when you can transfer your miles to another account.”
Yea, something for free, right? No not really.
At American Airlines if you want to transfer the 35,000 miles it would take for a short-haul international flight (at a minimum), that transfer would cost you a staggering $1,068. Sure, you get 15,000 miles “free” on top, but that means you just spent more than 2 cents per mile, for a commodity that’s really only worth a penny per mile. Then you’d pay taxes upon booking for that “free” flight.
Thanks for playing suckers! Next up, the ring toss game!
Might I suggest buying a round-trip ticket instead? It will probably cost you less than that and you’ll earn miles instead of paying to give them away.
What are the travel alternatives?
A $120 luxury castle hotel in Portugal
Sometimes you can’t make a good choice for your travels unless you do the hard math, looking at every possibility. That starts with destinations. So many people do this backwards, ruining their chance at a good deal before they even start. If destination A (let’s say Spain) has equivalent flight prices to neighboring destination B (let’s say Portugal), the neophyte may assume that the whole vacation will be roughly the same price, If fact though, prices on the ground in Portugal are frequently 30-50% less than Spain’s, from food to wine to lodging and more.
The price difference can be even greater on other continents: between Singapore and Indonesia, Nicaragua and Costa Rica, Bolivia and Chile. Even within the USA, New York or San Francisco can easily cost you double what you’d spend in Nashville or Portland.
Then there’s train vs. plane vs. driving. There’s rental car vs. Uber. There’s hotel vs. apartment vs. home exchange or house sitting. There’s book a tour ahead vs. booking one on site. Eating in the tourist zone vs. eating in a residential neighborhood. Paying retail or paying Groupon. Going to random museums or using CityPass.
Yeah I know, doing math is harder than following your gut, but the bit of extra effort can save you a fortune on travel spending.