When To Use Miles Vs. Pay Cash For Flights

When To Use Miles Vs. Pay Cash For Flights

10
In the interest of full disclosure, OMAAT earns a referral bonus for anyone that’s approved through some of the below links. These are the best publicly available offers (terms apply) that we have found for each product or service. Opinions expressed here are the author's alone, not those of the bank, credit card issuer, airline, hotel chain, or product manufacturer/service provider, and have not been reviewed, approved or otherwise endorsed by any of these entities. Please check out our advertiser policy for further details about our partners, and thanks for your support!

Some people view miles as being “free,” and think that if they can redeem miles for a ticket, they should always do so. I don’t want to say that’s necessarily a bad approach (at the end of the day, everyone should use miles in a way that works for them), though personally I view miles as a currency, just as I would cash.

I put a value to all of my miles, and then when I consider redeeming them, I perform some basic calculations to decide whether to pay cash or redeem miles. Sometimes the math is straightforward, and sometimes it isn’t.

In this post I wanted to provide an explanation of how I go about deciding whether to pay cash or redeem miles for an airline ticket. There’s nothing terribly complex here, though there are a few things that I think many people overlook, that could be worth considering. In a separate post, I wrote about how to decide whether to pay cash or redeem points for hotel stays.

Decide how much you value points currencies

When deciding whether to pay cash or redeem miles for a ticket, the first thing is to consider how much you value a particular mileage currency. I publish my valuations of major mileage currencies, and as you can see, I value them at somewhere around 1.0-1.7 cents each.

I try not to redeem my miles if the amount I’m saving is less than my valuation of miles. Let me acknowledge that other people understandably take a different approach:

  • Many people view the miles they earn as their travel fund, and just don’t want to pay cash for tickets whenever possible, even if the redemption value isn’t amazing; that’s totally fine, since for many people the acquisition cost of miles is low
  • Over time we might not follow our own rules around mileage valuations; you might redeem miles at a less-great value if you don’t have much cash to spend on travel, while you might not want to redeem miles even if it’s a good value if you’re saving up for a particular award and don’t have enough miles yet
Decide how much you value various mileage currencies

Subtract the points you’re forgoing by redeeming miles

On the most basic level, the math is pretty straightforward as to whether you should redeem miles or pay cash. You compare how many miles a ticket would require to how much that ticket would cost in cash. You divide one number by the other, and you then decide if that cent per mile value is more or less than what you value the mileage currency at.

Say you want to book an American Airlines ticket. I value AAdvantage miles at 1.5 cents each, so let’s say a ticket would cost either 10,000 AAdvantage miles or $150. Does that make this a “breakeven” redemption? Not quite. You also have to consider the miles & points that you’re forgoing by redeeming rather than paying cash.

When I look at the cost of airfare, one of the first things I do is discount the airfare by 5.1-8.5%, as that’s what I value the rewards that I earn through credit card spending on that purchase. There are some great credit cards for airfare spending:

On top of that, you have to consider the miles you’d earn directly with the frequent flyer program. As an American AAdvantage Executive Platinum member, I earn 11x AAdvantage miles per dollar spent on airfare.

In my situation, when I pay cash for my American Airlines ticket with my Amex Platinum, I earn 5x Amex points (which I value at an 8.5% return) and 11x AAdvantage miles (which I value at a 16.5% return). In other words, I’m earning a 25% return on my American Airlines airfare spending.

So using the same example as above, I would apply a 25% discount to that American Airlines ticket (in terms of what it’s really costing me), so that $150 ticket really costs ~$113. That changes the breakeven math on a an AAdvantage redemption as well.

Subtract the value of miles you’re forgoing

Decide if elite status is a consideration

This is something that’s potentially tougher to quantify. Most airline loyalty programs only count revenue flights toward elite status, and not award flights (there are some exceptions). When you redeem miles, you’re generally forgoing the activity that counts toward elite status that you’d earn if booking a ticket with cash. The reason this is tough to quantify is because for many people, elite qualifying miles are worth nothing:

  • If you’re not going to qualify for status, then elite qualifying miles don’t get you anything
  • If you’re overqualifying for status, then with many programs the incremental elite qualifying miles don’t get you anything

My valuation of elite qualifying miles doesn’t necessarily come from how much I’d be willing to spend on airfare to earn status (in other words, what I’d be willing to pay for a mileage run), but rather how much I’d be willing to pay for the status with no redeemable miles associated with it. That can still be hard to quantify, though, but is something that should be considered.

Delta SkyMiles is the exception by counting award flights toward status

Flexibility is an important consideration

I think the pandemic has given many of us a new appreciation for having flexibility with travel plans. We’ve largely seen airlines eliminate change fees on tickets, which is a fantastic development. However, there’s still a subtle but important distinction between paying cash for a ticket and redeeming miles.

When airlines don’t have change fees on revenue tickets, you can generally reuse the value of the ticket for some amount of time. However, you can’t generally get a refund. This isn’t an issue if it’s an airline you often fly with, but if it’s an airline you fly with less often, you could lose out there.

Meanwhile award tickets are generally refundable, which is to say that the full value of the miles can be returned to your account. In some cases there’s no cost to refund miles, while in other cases there’s a modest cost.

Still, I think at the end of the day this is a great advantage of redeeming miles over paying cash. For example, if I were planning a trip to Africa and were going to travel with Qatar Airways, I’d rather have the ability to redeem American AAdvantage miles and have them redeposited for free, rather than having a ticket credit with Qatar Airways that I can use in the future.

Award tickets usually give you the most flexibility

Consider your bigger picture mileage goals

Rather than just considering the value of a particular award redemption, I think it’s worth looking at the big picture of what your goals are with miles & points. Is there a specific trip you’re saving up for?

In other words, say you have 140,000 AAdvantage miles. You might say to yourself, “well, I could use these for an award to Hawaii, and the math checks out.” However, is there a better option down the road? Are you considering a trip to the Maldives, where you could later redeem these for Qatar Airways business class, which would cost way more if paying cash?

In general, you’re going to get the most value for your miles if you’re redeeming for first & business class on international flights. That’s not to say that those are the only good uses of miles, but if you do want to travel that way at some point, saving up your miles for that is the way to go.

How I like to redeem my miles, if at all possible

Bottom line

It can sometimes be tough to decide whether to redeem miles or pay cash for a ticket, as there are lots of factors to consider.

The good news is that there’s not an absolute right or wrong answer as to what constitutes a good use of miles. Regardless, there are definitely some things to consider — decide how much you value miles, consider the rewards you’re forgoing by redeeming miles, think about whether you care about elite status, and also keep your overall travel goals in mind.

And if you’re someone who just views miles as something “free” that you’ll redeem toward your next trip regardless of the value, that’s totally fine too.

What’s your approach to deciding whether to pay cash or redeem miles for a ticket?

Conversations (10)
The comments on this page have not been provided, reviewed, approved or otherwise endorsed by any advertiser, and it is not an advertiser's responsibility to ensure posts and/or questions are answered.
Type your response here.

If you'd like to participate in the discussion, please adhere to our commenting guidelines. Anyone can comment, and your email address will not be published. Register to save your unique username and earn special OMAAT reputation perks!

  1. iamhere Guest

    I think much like for hotels, this has to make sense. Why redeem 1000,000 points for a $1200 ticket when I can redeem 12,000 for a $600 ticket on some airlines. Status is less important with priority pass and if you fly business. Much like with hotels keep in mind airlines are constantly devaluing it.

  2. Kyle Guest

    My primary use of miles is for business class international travel. I would never buy this type of ticket in cash, so I don't consider the cost of the miles/spend I am giving up by not doing so. If anything I'd apply that calculation to the cost and earnings of an economy ticket only. But I don't, because I think some of the more complex calculations of value ignore the fact that miles devalue over...

    My primary use of miles is for business class international travel. I would never buy this type of ticket in cash, so I don't consider the cost of the miles/spend I am giving up by not doing so. If anything I'd apply that calculation to the cost and earnings of an economy ticket only. But I don't, because I think some of the more complex calculations of value ignore the fact that miles devalue over time.

    A mile spent today is generally worth more than one spent tomorrow. So when I find a redemption that gets me where I want to go in comfort, I don't really worry about whether an algorithm tells me I'm getting maximum value. All I care about is not wasting the points on truly poor redemptions, and that's much easier to figure out.

    1. TranceXplant Member

      My thinking is similar to yours. As someone who has to pay his own way, there are very few examples of international J tickets I'm willing to pay for outright. But, like everyone, I do enjoy flying in that part of the plane. So I generally only compare what I'd realistically earn in PE to the mile cost for J. Also, with AA's new system generating so many more redeemable miles than the old one...

      My thinking is similar to yours. As someone who has to pay his own way, there are very few examples of international J tickets I'm willing to pay for outright. But, like everyone, I do enjoy flying in that part of the plane. So I generally only compare what I'd realistically earn in PE to the mile cost for J. Also, with AA's new system generating so many more redeemable miles than the old one (at least for me), I don't need to be as mindful of mile costs as long as I stay off AA metal.

  3. Davisson Guest

    Majority of folks are better off just redeeming miles whenever they can. The FFP are made in such a way that it’s super hard work and requires tremendous amount of flexibility or planning to get max value. Folks like us can, but we are literally the 1%. Teaching folks on how to redeem is harder since they all have better or more important things to do in life.

  4. axck Guest

    Something else to consider with miles is that they are rapidly devalued by the very airlines that hand them out. They are a currency that can only be redeemed at one store; that store is also the entity who determine what the value of that currency is, and can change them on a whim!

    As we’ve seen before, mileage programs consistently get devalued every 2 years or so. There’s limited reason to not spend...

    Something else to consider with miles is that they are rapidly devalued by the very airlines that hand them out. They are a currency that can only be redeemed at one store; that store is also the entity who determine what the value of that currency is, and can change them on a whim!

    As we’ve seen before, mileage programs consistently get devalued every 2 years or so. There’s limited reason to not spend your miles as soon as you are able. You can’t invest them or accrue interest on them like actual currency - they can only lose value because the store that takes them has a vested interest in you not spending them for high value.

    1. yoloswag420 Guest

      Miles have zero value until you redeem them is how I think. So rather than waiting for the perfect bona fide opportunity, I tend to use most of mine as they come.

  5. Tom Guest

    You also have to subtract the cash "copay," i.e., how much cash you have to pay along with the miles. For domestic US flights, that's negligible. For trips in and out of (let's say) LHR, it's real money.

  6. derek Guest

    Old algorithm: Business travel is paid for and miles redeemed for economy class vacations if the airfare seemed instinctively high. Results: too many miles accumulated.

    New algorithm: burn miles on all vacations.

    Most recent economy class trip between Canada and the US was simple to swallow. Cost 20,000 miles. Airfare would have been over US$600.

  7. D3kingg Guest

    You can upgrade some mileage rewards now on AA. I had a 8K mile ticket or so on EWR-DFW-IAH and got a $150 upgrade on EWR-DFW which was a 4 hr flight plus dinner on a full flight. Let alone how foolish it is not to just fly United non stop ewr Iah and just sit in 30E versus being delAAyed like all the time. Y’all making me late to work. Good morning reads.

  8. Wayne Y Guest

    I agree with your point that if you're not going to qualify for status, then EQM don't get you anything.

    Recently I was looking for a one-way ATH-PDX ticket. Unfortunately all the "sweet spot" award BC ticket availability for one-stop options had dried up, and paying cash was pricey. Then I stumbled across a ATH-EWR-PDX option with United. Cash price was $1,900, but only 70k UA miles + $59. At roughly 2.8 cents per...

    I agree with your point that if you're not going to qualify for status, then EQM don't get you anything.

    Recently I was looking for a one-way ATH-PDX ticket. Unfortunately all the "sweet spot" award BC ticket availability for one-stop options had dried up, and paying cash was pricey. Then I stumbled across a ATH-EWR-PDX option with United. Cash price was $1,900, but only 70k UA miles + $59. At roughly 2.8 cents per mile, a no-brainer to burn a good chunk of UA miles I had hoarded because I could never find good redemption rate.

Featured Comments Most helpful comments ( as chosen by the OMAAT community ).

The comments on this page have not been provided, reviewed, approved or otherwise endorsed by any advertiser, and it is not an advertiser's responsibility to ensure posts and/or questions are answered.

Tom Guest

You also have to subtract the cash "copay," i.e., how much cash you have to pay along with the miles. For domestic US flights, that's negligible. For trips in and out of (let's say) LHR, it's real money.

2
iamhere Guest

I think much like for hotels, this has to make sense. Why redeem 1000,000 points for a $1200 ticket when I can redeem 12,000 for a $600 ticket on some airlines. Status is less important with priority pass and if you fly business. Much like with hotels keep in mind airlines are constantly devaluing it.

1
TranceXplant Member

My thinking is similar to yours. As someone who has to pay his own way, there are very few examples of international J tickets I'm willing to pay for outright. But, like everyone, I do enjoy flying in that part of the plane. So I generally only compare what I'd realistically earn in PE to the mile cost for J. Also, with AA's new system generating so many more redeemable miles than the old one (at least for me), I don't need to be as mindful of mile costs as long as I stay off AA metal.

0
Meet Ben Schlappig, OMAAT Founder
5,163,247 Miles Traveled

32,614,600 Words Written

35,045 Posts Published

Keep Exploring OMAAT