How to decide whether to use cash or miles for airline tickets
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My family collects airline miles for a few different reasons. Often, we redeem miles for flights we otherwise couldn’t comfortably afford to buy with cash, to make certain flights far more comfortable by sitting upfront or for spontaneous trips that creep up whether for fun or obligation. However, not all flights we take are paid for with miles, so we have to decide which ones get paid for with points and miles and which ones get paid for with cash.
In the age of COVID, airline ticket pricing is interesting. You may see incredible deals such as $21 one-way fares on full-service carriers or incredibly low-priced cross-country tickets. But, that’s only part of the story in 2020. Airlines are also reducing capacity at certain airports and leaving others altogether. So, from some markets, airfare prices may be higher than what you’ve paid in the past. Your mileage will vary depending on the airports you fly from.
Sometimes when cash prices are very high or very low it’s easy to decide when to use miles versus cash, but sometimes it’s a much harder decision. Here are the things we consider when deciding whether to pull out our credit card, frequent flyer number or credit card points when it comes time to book flights.
Check award availability and prices
Using miles is only an option if there is decent award availability at a good price. Before you anguish over whether to use miles or cash, check to see if there is award availability when and where you want to travel. The more flexible your travel dates, the greater chance you will find saver award availability. However, with airlines increasingly moving to dynamic award pricing, “saver awards” may be less of a thing going forward, and you simply need to see what the award price is since it will vary day to day.
Also, check the cash price for the flight. I like to use Google Flights to quickly spot airfare prices over a given period. Note that Southwest flights will not appear in Google Flights.
Check your cash and points balances
Once you know the prices for flights using either cash or miles, it’s time for a reality check. Is spending the cash right now even an option for your budget? Or, do you have enough miles to cover the flights? If your cash budget is tight, the scales may tip to using miles. On the flip side, they may tip to using cash if you are running short on miles or are saving them for a future big redemption. Even if it is otherwise a relatively poor mileage redemption, if you don’t have the available cash to pay for the ticket, miles might be the right call — and that is OK!
Calculate the cents per mile
Once you know the selling price of the ticket in both dollars and miles, and assuming that you have the luxury of choice when it comes to book, you need to do some calculations. Most people who have been in the miles and points world for a while have a minimum amount of value they like to get for their airline miles. However, TPG makes it easy by providing monthly valuations to give you a sense of what you should hope to get for your miles.
Miles are not all worth the same amount. A United mile might be worth 1.3 cents while an Alaska Airlines mile is worth 1.8 cents. But — here’s how to do your own math and make a decision.
If you want to book a domestic round-trip airline ticket that is available for 25,000 airline miles and the selling prices is $500, you’re getting about 2 cents per mile in value if you book that award. That’s typically a good deal. ($500 divided by 25,000 miles). However, if the same ticket was $250 or the same 25,000 miles to book, your return is only 1 cent per mile. In that case, I would probably rather buy the ticket, save the miles and earn both redeemable and elite qualifying miles on the trip. To get specific valuations, you also need to account for the taxes and fees charged to the awards, but that’s splitting hairs on a domestic trip most of the time.
While TPG has point valuations, it helps to decide your own values. One quick way to get a decent idea of how much you value your miles is to decide how much that 25,000 miles domestic round-trip economy ticket would have to cost for you to use miles instead of cash. Is it $500? $150? $350? If for you the answer is around $350, then you might be valuing your miles at 1.4 cents each. This calculation is trickier when redeeming for international or premium cabin travel since most of us would never be able to pay for a $5,000 to $10,000 ticket with cash.
If you are working with airline points in a fixed value program such as Southwest or JetBlue, this decision gets a bit easier as the points already have a relatively fixed value within those programs so you might as well use them most of the time unless you are working toward elite status.
Does elite status matter?
If you care about earning airline elite status by flying a certain number of paid miles each year, then factor that into the equation. It should be a close call based on the cents per mile, but if you need to keep racking up elite status, that may tip the scales to a paid ticket.
Sometimes I use cash to buy my own airline tickets and use miles for the rest of the family to keep the overall cash price lower. This means we aren’t on the same reservation, so that can make some things harder, but it is a strategy I use from time to time.
Are you saving for something big?
Even if the math works in favor of using miles, think through whether that would impact any of your long-range plans and dreams. Many times, there are ways to spend cash to take shorter domestic trips, even if that means flying Spirit Airlines. However, outside of using miles, there aren’t a ton of budget-friendly ways to take that big, fancy international business or first-class flight.
If you are working toward a big redemption, consider sticking with that plan rather than bumping yourself back down further from the goal line with smaller redemptions.
Use companion tickets
Another thing to consider when deciding how to pay for a given trip is whether you might have a companion ticket available. For example, each year I get an Alaska Airlines companion fare from $121 ($99 fare plus taxes and fees from $22) via my Alaska Airlines Visa Signature credit card that allows someone to fly for me for a little over $100 — even to Hawaii.
We used that companion certificate this summer to fly home from Hawaii. Paid tickets wouldn’t have made sense normally, but did when factoring in the discounted ticket. We’ve done similar things with the Delta companion fares. Frontier Airlines also offers Kids Fly Free deals as well as periodic Friends Fly Free offers on paid tickets that should weigh into these decisions.
Best of both worlds: Fixed value points
When you just can’t decide whether to spend miles or cash, the right answer might be Option C: none of the above. Many credit cards award fixed-value points that you can use to book your airfare. This allows you to take advance of good prices while keeping your money safely in your wallet. You will still earn progress toward elite status and then aren’t tied to award availability restrictions.
For example, you can book a paid fare with your Capital One® Venture® Rewards Credit Card and then use your miles to pay for all or part of that statement charge at a value of 1 cent per mile. That allows you to pay for a great fare deal but still not burn cash.
A final thought: Flexibility
A final element to consider when deciding whether to use miles or cash is whether using miles might provide more flexibility than cash. Perhaps you have elite status that allows you to chance award reservations without penalty. Or, maybe you can book via a program that doesn’t charge big fees for award flight changes or cancellations.
For example, if you book an American Airlines operated award flight with British Airways Avios and you need to cancel, you’ll just lose the taxes paid, which can be as low as $5.60 (just cancel before 24 hours out).
If you book via Southwest Rapid Rewards and your plans change (or the price drops), you can refund or modify your award reservation without fees or penalties. Even cash reservations via Southwest can be modified without fees, but they aren’t going to just give you your money back if you are canceling or changing to a less expensive reservation. Instead, you’ll get a voucher in your name to use for future travel.
There isn’t always a perfect answer on whether to use miles or cash for a given ticket, but these are some of the things my family considers when making that decision. How do you decide when to use cash, points, miles or a combination of all of the above?
Featured image by Gades Photography/Unsplash
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