Burn miles or spend cash? Some considerations

My post last week about 2 ways to book award flights to Hawaii brought some unexpected heated comments about the value of mileage redemptions vs. just paying cash. This is a topic that we’ve written about in the past, but it’s a good one to revisit.

As a miles and points collector, when does it make sense to just pay cash instead of using miles/points? When is using miles and points a “bad deal” or bad value? Several websites have cash vs. miles calculators you can use. But, contrary to what some people may think, there is no right or wrong answer to these questions. And, it’s not all about the math. Here are some things to consider.

Cents Per Mile (CPM) or Cents Per Point (CPP)

CPM and CPP are math calculations that bloggers and hobbyists like to use to determine if spending miles or points is a good value. Take the cash price of the flight (or hotel) and divide it by the number of miles or points you’d have to pay. For example, if the flight costs 25,000 miles but the cash cost is $600, you’re getting 2.4 cents per mile of value. If that same flight has a cash price of $300, you’re only getting 1.2 cents per mile.

What is a good CPM or CPP? It depends on the miles or points currency. This article assigns a value to each airline, hotel and bank miles/points based on the average cost of award bookings. Other blogs/websites make their own valuations that are slightly different. So, if you see an award flight and you wonder whether it’s a good deal or not, you can calculate the CPM and compare it to the average value from the chart in the article to see if you’re getting a good value.

CPM/CPP is a good number to help you determine if you would get a better value out of booking the flight/hotel through a bank’s travel portal. For example, if you own the Chase Sapphire Preferred card, you can book travel at a value of 1.25 cents per point. If that’s more than what you are getting by transferring those same points to an airline, you may want to use the Chase travel portal.

The trouble with using CPM or CPP is that it doesn’t take other factors (that I will mention below) into consideration. And, you could talk yourself out of many award bookings if you’re always trying to hit a certain number.

Cost Threshold

Some travelers will only spend miles/points on high dollar flights and hotels and use cash for low-cost travel. For example, a $49 flight on Frontier may not be worth spending your Capital One miles to erase the purchase if you can easily fit it in your existing monthly budget. I tend to pay cash for any flight or hotel that is $100 or under. Why $100? No reason, it’s just my number.

Cancellation Options

Often, award flights offer more cancellation flexibility than cash flights. Many award programs will refund your miles if you cancel your flight but only give you a flight credit if you cancel a flight paid with cash. This is a huge advantage to using miles over cash to pay for a flight.

Last month, when I canceled a cruise due to sickness, I received a refund of my AA miles (booked with miles) but only a future flight credit for my Spirit flight (paid cash). I have to book a flight within 90 days to make use of my Spirit flight credit.

Amount of Miles/Points you Own

If you own a lot of miles in a certain currency and/or those miles will expire soon, you may want to find a way to use them even if the value is a bit lower. For example, my husband and I recently acquired 200,000 Lufthansa miles. These miles expire after 36 months, and none of the flexible points (i.e. Chase, Amex, Citi, Capital One) transfer to the Lufthansa program. We acquired these miles quickly and cheaply, so I’m not as picky about how we spend them.

Other Trip Costs

Some trips have high entertainment or food costs. For example, both Hawaii and Switzerland have high restaurant prices. And, when my family travels on longer trips, our pet sitting costs really add up. When we know we will have large cash expenses on a trip, it may make more sense to use miles and points where we can, even if the CPM/CPP is lower than ideal.

Future Travel Goals

Maybe you’re planning to book award travel for a major international trip. If you’re trying to accumulate and save miles/points for an important future trip, it may make sense to pay cash for shorter/less significant trips.

Current Expenses/Bills

Perhaps you are paying off hospital bills or trying to afford car insurance for teenage drivers. Or, you are saving up for a major purchase. If your cash needs to go for other expenses, spend your miles/points! That’s what they’re there for.

Bottom Line

Sometimes, it makes more sense to use cash to pay for travel. Other times, miles and points are the way to go. Or, you can use both by paying cash and paying yourself back with a flexible currency like Capital One miles. This isn’t a cut and dry decision. Personally, I use miles and points much more often than cash. After all, saving cash is the main reason I got into this hobby in the first place! But whatever you do, prioritize whatever makes you happy. As Leana wrote in a previous post, the most important calculation is HPP (Happiness Per Point).