When Should You Pay For A Ticket Or Redeem Miles?

by on February 23, 2014 · 3 comments

in Points Guy Pointers, Sunday Reader Questions, Video Blog Post

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TPG reader Todd tweeted me this week:

@thepointsguy Do you have a rule of thumb for when it’s economical to pay for a ticket with miles?”

A lot of factors come into play here. The first is your budget. If you’re really cash-strapped but need to get somewhere and have a ton of miles, why not put them to use? Even if it’s not the absolute best, highest-value redemption, if you get where you want to go and it makes you happy and enhances your life, do it!

There’s no hard-and-fast rule that says your miles must be worth at least this amount. What counts is being able to use them when you need them – being able to do so is winning in my book.

Of course we all want to maximize our miles and get the most possible value out of them, but sometimes, especially for last-minute emergencies, where you might not have too many options, just do it.

Another factor to consider is if you’re aiming for elite status since any award flights you book won’t count towards earning it. So while you might want to redeem miles to go to Asia in first class, you won’t be earning any award miles or elite-qualifying miles on those flights. So if elite status is part of your strategy, you do need to figure out the trade-off between booking award travel and paying for certain tickets and/or upgrades in order to accrue the mileage you need to qualify. I recommend that you should spend money on tickets when you can afford it and earn the elite credit on those flights.

There are a lot of factors when deciding whether to pay or redeem miles.

There are a lot of factors when deciding whether to pay or redeem miles. Photo: Getty Images.

If I had to place a concrete value proposition on mileage redemptions, I try to get at least 2 cents per mile in value when I redeem my miles. If you’re not getting at least 2 cents per point/mile in value on your credit card purchases, then you might want to think about a card that gives you a fixed return rate that’s at least that high, like the Barclaycard Arrival, whose redemption return rate is 2.27% when you redeem for travel, or the Capital One Venture‘s 2% return on travel and cash back. So that’s something to consider if traditional miles and points aren’t working out in your favor.

So in general, 2 cents per mile is a good benchmark, but if you can redeem for the travel you want, then you’re doing okay. Above all, it doesn’t make sense to hoard miles because they won’t gain value over time, as we’ve seen from all these recent devaluations, so you should be putting them to use.

Let me know if you have any other questions by messaging me on FacebookTweeting me or emailing me at [email protected]

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  • SL

    TPG, you mentioned 2 Cents per mile with regards to redemption of miles with PTS. However with my AMEX RES. Card, I’m getting 1 mile per dollar spent. Dumb question, therefore does that change your thinking when using miles earned via the Delta AMEX Card VS. converting PTS to miles with a “traditional” rewards card?

  • pcg

    I use the 2cpm rule of thumb as well, and I love TPG’s exhortation that it is ONLY a rule of thumb. If you get 1.75cpm but are able to spring for your whole family to go on a trip together, I’d argue that’s still a great use of points.

    The other question to consider: “Would I ever consider paying *cash* for this redemption?” I would not have paid $3k per person for my family to fly to South America in business, though I might’ve paid $1200 per person for us to fly econ. So for me, the econ cash outlay would have been a better decision than an econ points redemption, but the points redemption was the ONLY option for business.

  • LXZ

    i think it’s more of an opportunity cost scenario. Taking trying to spend 25k to gain elite status out of the equation, you’re giving up the chance to earn 2.2% cashback via Barclay or 2% cashback via Amex Fidelity by using the AMEX reserve at 1 mile per dollar. If you’re not getting around 2% in redeeming those miles, then you should be using the higher cashback cards for ur credit card

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