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Tip: Know When to Use Points & Miles vs. When to Use Cash

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Aside from frequent flying and devoting yourself to a particular airline, there are other great ways to rack up points, such as applying for a credit card with great sign-up bonuses. Once you’ve accumulated enough points and miles, the question then becomes when to redeem them and when to use cash. We’ve tried to make the process simple by posting points and miles valuation posts monthly, but the best way to understand is by using an example.

Example:

Let’s suppose I’m planning a trip from New York (JFK) to Los Angeles (LAX) with American Airlines. For a booking in the beginning of December in the Main Cabin, the cost of a one-way fare is $192, and the AAdvantage miles needed to redeem are 30,000.

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Let’s suppose I’m flying on December 5, 2016, with a sticker price of $192 or 30,000 miles.

Now, with TPG’s 1.5 cents per mile valuation, you multiply the value (.015) by the miles needed (30,000), and you end up with a value of $450. In other words, for it to make sense for you to use 30,000 miles, the cost of the ticket would have to be greater than $450. You can dig in a bit deeper, by calculating the miles you’d earn from the flight and taxes paid for the award, sure, but clearly, in this case, it makes sense to purchase the ticket outright with cash. Of course, there are exceptions like if you’d rather avoid spending cash altogether — but note that you won’t be getting maximum value out of your points and miles.

Read more on the topic in TPG’s post, “When Should I Pay Cash Rather Than Redeem Points?

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  • Earn 50,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $625 toward travel when you redeem through Chase Ultimate Rewards®
  • Named Best Credit Card for Flexible Travel Redemption - Kiplinger's Personal Finance, July 2016
  • 2X points on travel and dining at restaurants worldwide & 1 point per dollar spent on all other purchases.
  • Earn 5,000 bonus points after you add the first authorized user and make a purchase in the first 3 months from account opening
  • No foreign transaction fees
  • 1:1 point transfer to leading airline and hotel loyalty programs
  • Get 25% more value when you redeem for airfare, hotels, car rentals and cruises through Chase Ultimate Rewards. For example, 50,000 points are worth $625 toward travel
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Intro APR Regular APR Annual Fee Foreign Transaction Fee Credit Rating
N/A 16.24%-23.24% Variable Introductory Annual Fee of $0 the first year, then $95 0% Excellent Credit