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.
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.
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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