Should you use cash or American Express Membership Rewards® points to book travel?

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One of the hardest things to learn in the world of points and miles is when to book an award ticket versus when to simply pay cash. This is especially challenging if you have a rewards balance with any of the major transferable point currencies. These programs typically let you book travel directly using your points or transfer them to a partner airline. And to complicate things further, many of these popular cards award bonus points when you use them to pay for airfare directly with the participating airline.

This is particularly true with American Express Membership Rewards® points, so today we're going to provide a framework so you can help answer this seemingly simple (yet utterly complex) question: Should you book travel with cash or Membership Rewards points?

Earning Membership Rewards points

Before you can even think about making this decision, you need to actually earn Membership Rewards points. There are many cards that can help with this endeavor, but here are some of the more popular ones -- keep in mind the below offers are subject to change at any time:

• The Platinum Card® from American Express: New Card Members can currently earn a welcome bonus of 100,000 points after you use your new card to make $6,000 in purchases in your first six months, though you may be targeted for a 100,000-point offer through the CardMatch Tool (offer subject to change at any time). Plus, Earn 10x points on eligible purchases on the Card at restaurants worldwide and when you Shop Small in the U.S., on up to $25,000 in combined purchases, during your first 6 months of Card Membership. You'll also earn 5x points on airfare purchased directly with the airline or through American Express Travel as well as prepaid hotels (including Fine Hotels & Resorts) booked through Amex Travel. ($695 annual fee, see rates and fees)
• American Express® Gold Card: New Card Members can currently earn a welcome bonus of 60,000 Membership Rewards® points after you spend $4,000 on eligible purchases with your new Card within the first 6 months. You'll also earn 4x points at restaurants worldwide and on the first $25,000 in purchases at U.S. supermarkets (then 1x), plus 3x points on flights booked directly with the airline or through Amex Travel. ($250 annual fee, see rates and fees)

Related: What Credit Card is Best for You in 2020?

So ... once you've earned Membership Rewards points, how should you determine the best way to book travel? Here are the things to keep in mind.

Consider your balances

One of the first criteria you should consider involves your current balances in your Membership Rewards account and your bank account. If you're cash-rich and points-poor, consider simply using your card. If, on the other hand, you're sitting on a million Membership Rewards points — and have no immediate plans to use them — it may be worth using some of them up, even if it's not considered the "best" redemption.

You should also take into account any future travel you plan to book using your points. Many credit card members may be saving up their rewards for a once-in-a-lifetime award — like Emirates first class or Singapore Suites — so if that's your situation, paying cash may also be the best option.

If your account balances don't make the decision for you, here are other factors to consider.

What are your options?

The first thing you should do is search for your flight. Many award travelers love starting with Google Flights to get a feel for the possible itineraries before even considering the avenues for booking. Depending on your schedule, you may be locked into a limited number of itineraries, so it's critical to first investigate the possible routings that will work.

Then, when you're ready to actually book your flight, you have three options when it comes to Membership Rewards points:

1. Pay for the flight directly with your Amex card, either at the airline's website or through Amex Travel.
2. Pay for the flight using your Membership Rewards points directly through Amex Travel.
3. Transfer your Membership Rewards points to one of the program's airline partners, then book the ticket through that loyalty program.

The first two options are the most straight-forward, since you simply go directly to the airline, or you can just log in to your American Express account, click the Travel tab at the top and then search for your flight — like this option from Orlando (MCO) to Boston (BOS) in May:

Note that you could pay $128.30 for the one-way flight or use 12,830 Membership Rewards points. This means that your points are worth 1 cent apiece when used directly through Amex Travel.

However, note that redeeming Membership Rewards points in this fashion will forgo the opportunity to earn 5x points on the purchase — which in this case, is 641.5 points. This opportunity cost should be added to the redemption cost above to peg a true value to the ticket. This effectively drops your redemption value to 0.95 cents per point, well below our valuation of Membership Rewards points.

The third option is the most complicated, but in some cases, it may offer a better value for your Membership Rewards points — as we'll show you below.

Are you pursuing elite status?

However, before even considering option #3, think about whether you're going after airline elite status. In both the first and second options noted above, your ticket will be treated like a normal revenue ticket. This means that you'll earn miles on the flight, and it will count toward your elite status qualification.

Let's stick with the one-way itinerary noted above. Booking this exact flight at Delta.com would earn you the following:

• 535 Delta SkyMiles (worth $6.42)
• 1,121 Medallion Qualification Miles (MQMs)
• $107 Medallion Qualfication Dollars (MQDs)

Those redeemable SkyMiles aren't much, but the MQMs and MQDs can play a major role in helping you earn (or requalify for) Delta Medallion status.

However, any ticket booked using the third option above — transferring your Membership Rewards points to a partner program — will not earn any miles, nor will the flight(s) count toward your elite status qualification.

Is there award availability?

If you're open to transferring your Membership Rewards points to a partner airline, the first thing you'll need to do is verify that there is award availability. This requires a keen understanding of not only an individual airline's loyalty program but also the various partners it has.

As an example, let's say you needed to book a flight from Atlanta (ATL) to Seattle (SEA) on Friday August 21, 2020. You could book that directly through Amex, using either cash or points:

You could also transfer your Membership Rewards points to Delta SkyMiles and then book the flight:

Note that award prices start at 18,000 SkyMiles in Basic Economy, but even a regular economy ticket would still require fewer Membership Rewards points if you transfer them to Delta first.

However, there are two other popular programs that partner with both American Express and Delta: Flying Blue (the loyalty program of Air France and KLM, among other carriers) and Virgin Atlantic Flying Club. In order to make sure you're getting the best value for your Membership Rewards points, you should always check through these programs before you commit to transfer.

This very flight is a great example of why, since your price could drop as low as 14,500 Flying Blue miles (transferred directly from Amex):

But the winning price comes from Virgin Atlantic, which often provides fantastic value when you redeem Flying Club miles on Delta flights. In this case, you need just 12,500 miles (transferred from Amex) to book the exact same flight:

Once again, by transferring your Membership Rewards points first and then redeeming through a partner program (in this case, Virgin Atlantic Flying Club), you're giving up the chance to earn miles, and this flight won't help you attain Delta elite status. However, to truly maximize your Amex Membership Rewards, transferring to partners is the best way to go. Just be sure that the given program has award availability before you transfer, and check out our guide to Amex transfer times to make sure the transaction is processed instantly — or you may wind up losing the award inventory while you wait for the transferred points to arrive.

What other partners offer great value?

The above example is illustrative of when transferring to a partner program makes sense, but here are some other options that I'd highly recommend for your Membership Rewards points:

• Air Canada Aeroplan: This allows you to book award tickets on Star Alliance carriers like United, Lufthansa and SWISS — many with minimal surcharges. We also see semi-regular transfer bonuses from Amex to Aeroplan that could make your redemption even more valuable.
• British Airways Executive Club: The carrier's distance-based award chart has some fantastic sweet spots, and in many cases, you can book American Airlines flights at very affordable rates. BA is also a frequent target of transfer bonuses.

Bottom line

As noted at the outset, deciding whether to pay cash or redeem points for a given flight can be exceedingly challenging, so the answer to the question we initially asked is: It depends. However, the most important thing you can do to help make an informed decision is to learn more about your options. Generally speaking, redeeming your Membership Rewards points directly for flights through Amex Travel will not be a tremendously lucrative option, so take some time to learn about transferring them. You'd be surprised just how much further your points can take you.

For rates and fees of the Amex Platinum card, click here.
For rates and fees of the Amex Gold card, click here.