When To Use Miles Vs. Pay Cash For Flights

Some people view miles as being “free,” and think that if they can redeem miles for a ticket, they should always do so. I don’t want to say that’s necessarily a bad approach (at the end of the day, everyone should use miles in a way that works for them), though personally I view miles as a currency, just as I would cash.

I put a value to all of my miles, and then when I consider redeeming them, I perform some basic calculations to decide whether to pay cash or redeem miles. Sometimes the math is straightforward, and sometimes it isn’t.

In this post I wanted to provide an explanation of how I go about deciding whether to pay cash or redeem miles for an airline ticket. There’s nothing terribly complex here, though there are a few things that I think many people overlook, that could be worth considering. In a separate post, I wrote about how to decide whether to pay cash or redeem points for hotel stays.

Decide how much you value points currencies

When deciding whether to pay cash or redeem miles for a ticket, the first thing is to consider how much you value a particular mileage currency. I publish my valuations of major mileage currencies, and as you can see, I value them at somewhere around 1.0-1.7 cents each.

I try not to redeem my miles if the amount I’m saving is less than my valuation of miles. Let me acknowledge that other people understandably take a different approach:

• Many people view the miles they earn as their travel fund, and just don’t want to pay cash for tickets whenever possible, even if the redemption value isn’t amazing; that’s totally fine, since for many people the acquisition cost of miles is low
• Over time we might not follow our own rules around mileage valuations; you might redeem miles at a less-great value if you don’t have much cash to spend on travel, while you might not want to redeem miles even if it’s a good value if you’re saving up for a particular award and don’t have enough miles yet

Subtract the points you’re forgoing by redeeming miles

On the most basic level, the math is pretty straightforward as to whether you should redeem miles or pay cash. You compare how many miles a ticket would require to how much that ticket would cost in cash. You divide one number by the other, and you then decide if that cent per mile value is more or less than what you value the mileage currency at.

Say you want to book an American Airlines ticket. I value AAdvantage miles at 1.5 cents each, so let’s say a ticket would cost either 10,000 AAdvantage miles or $150. Does that make this a “breakeven” redemption? Not quite. You also have to consider the miles & points that you’re forgoing by redeeming rather than paying cash.

When I look at the cost of airfare, one of the first things I do is discount the airfare by 5.1-8.5%, as that’s what I value the rewards that I earn through credit card spending on that purchase. There are some great credit cards for airfare spending:

• The Platinum Card® from American Express (review) offers 5x Membership Rewards points on airfare purchased directly from airlines (you’re capped at earning 5x points on up to $500,000 per calendar year, and then 1x); I value Amex points at 1.7 cents each, so to me, that’s like a return of 8.5%
• The Chase Sapphire Reserve® (review) offers 3x Ultimate Rewards points on all travel purchases, which includes airfare purchased directly from airlines, as well as airfare purchased through online travel agencies (which isn’t covered on the Amex Platinum Card); I value Chase points at 1.7 cents each so to me that’s like a return of 5.1%

On top of that, you have to consider the miles you’d earn directly with the frequent flyer program. As an American AAdvantage Executive Platinum member, I earn 11x AAdvantage miles per dollar spent on airfare.

In my situation, when I pay cash for my American Airlines ticket with my Amex Platinum, I earn 5x Amex points (which I value at an 8.5% return) and 11x AAdvantage miles (which I value at a 16.5% return). In other words, I’m earning a 25% return on my American Airlines airfare spending.

So using the same example as above, I would apply a 25% discount to that American Airlines ticket (in terms of what it’s really costing me), so that $150 ticket really costs ~$113. That changes the breakeven math on a an AAdvantage redemption as well.

Decide if elite status is a consideration

This is something that’s potentially tougher to quantify. Most airline loyalty programs only count revenue flights toward elite status, and not award flights (there are some exceptions). When you redeem miles, you’re generally forgoing the activity that counts toward elite status that you’d earn if booking a ticket with cash. The reason this is tough to quantify is because for many people, elite qualifying miles are worth nothing:

• If you’re not going to qualify for status, then elite qualifying miles don’t get you anything
• If you’re overqualifying for status, then with many programs the incremental elite qualifying miles don’t get you anything

My valuation of elite qualifying miles doesn’t necessarily come from how much I’d be willing to spend on airfare to earn status (in other words, what I’d be willing to pay for a mileage run), but rather how much I’d be willing to pay for the status with no redeemable miles associated with it. That can still be hard to quantify, though, but is something that should be considered.

Flexibility is an important consideration

I think the pandemic has given many of us a new appreciation for having flexibility with travel plans. We’ve largely seen airlines eliminate change fees on tickets, which is a fantastic development. However, there’s still a subtle but important distinction between paying cash for a ticket and redeeming miles.

When airlines don’t have change fees on revenue tickets, you can generally reuse the value of the ticket for some amount of time. However, you can’t generally get a refund. This isn’t an issue if it’s an airline you often fly with, but if it’s an airline you fly with less often, you could lose out there.

Meanwhile award tickets are generally refundable, which is to say that the full value of the miles can be returned to your account. In some cases there’s no cost to refund miles, while in other cases there’s a modest cost.

Still, I think at the end of the day this is a great advantage of redeeming miles over paying cash. For example, if I were planning a trip to Africa and were going to travel with Qatar Airways, I’d rather have the ability to redeem American AAdvantage miles and have them redeposited for free, rather than having a ticket credit with Qatar Airways that I can use in the future.

Consider your bigger picture mileage goals

Rather than just considering the value of a particular award redemption, I think it’s worth looking at the big picture of what your goals are with miles & points. Is there a specific trip you’re saving up for?

In other words, say you have 140,000 AAdvantage miles. You might say to yourself, “well, I could use these for an award to Hawaii, and the math checks out.” However, is there a better option down the road? Are you considering a trip to the Maldives, where you could later redeem these for Qatar Airways business class, which would cost way more if paying cash?

In general, you’re going to get the most value for your miles if you’re redeeming for first & business class on international flights. That’s not to say that those are the only good uses of miles, but if you do want to travel that way at some point, saving up your miles for that is the way to go.

Bottom line

It can sometimes be tough to decide whether to redeem miles or pay cash for a ticket, as there are lots of factors to consider.

The good news is that there’s not an absolute right or wrong answer as to what constitutes a good use of miles. Regardless, there are definitely some things to consider — decide how much you value miles, consider the rewards you’re forgoing by redeeming miles, think about whether you care about elite status, and also keep your overall travel goals in mind.

And if you’re someone who just views miles as something “free” that you’ll redeem toward your next trip regardless of the value, that’s totally fine too.

What’s your approach to deciding whether to pay cash or redeem miles for a ticket?