Family Guide to Almost Free Travel by Leana Storts - HTML preview

The Family Perspective on Miles vs. Cash Back Dilemma

Let’s look at when mileage cards are a better deal. There is no question, it is worthwhile to get an airline credit card with a 50,000 miles bonus and spend the minimum amount to get that bonus, usually $2,000 or $3,000 in 3 months.

What do you do after that? If a family already has a mileage earning card and a basic Fidelity Amex 2 percent cash back card, which one should they choose?  There are normally two scenarios when a mileage card makes more sense: when you are trying to top off an account for a specific award, or when you are trying to save up your miles for business or first class.

 There are exceptions which I will cover in another chapter, but overall for a family, cash back is usually the winner. First, it is almost impossible to get more than 1 or 2 business class seats on a flight, and it would take an obscene amount of time to collect miles needed. Second, you most likely will not get more than 2 cents per mile in value in economy (remember, we are measuring against a 2 percent cashback card for simplicity).

I am always amazed how many people in this hobby value the mile at 2 cents apiece. But when miles are on sale for 1.6 cents apiece, they don’t want to buy them. How come? That is a pretty hefty discount. I doubt many people actually value miles at 2 cents apiece, although some probably do.  Suppose, a person puts all of his spending on a mileage card and reaches the 100,000 miles needed for a business class seat to Europe.  They feel really good about getting their free flight.  However, they actually paid $2,000 because they have foregone 2 percent cash back on the same amount of spending through Amex Fidelity card.

This award is a pretty good deal, depending on the time of the year, but it’s not free. Let me give you an example of the best redemption I have made to date, and we will crunch the numbers.  A few years ago, I redeemed miles for 3 economy seats from USA to Europe. The miles were earned through some flying and credit card bonuses. The award price was 50,000 miles per person for a ticket that would have cost me approximately $1,350. I paid $250 tax, so I got $1,100 out of 50,000 miles. That’s 2.2 cents return per mile. Pretty good, right?

But remember, I have foregone the 10,000 miles I would have earned by getting an award ticket instead of a paid one. So I have to deduct about $100, which is the value of the miles at 1 cent apiece.  By that math, I got 2 cents per mile. The thing is, though, since then, the award price for the same ticket has gone up from 50,000 to 60,000 miles. There is always a risk of devaluation when you are dealing with miles. You are very much at the mercy of the airline.

Plus, I had to go when the award seats were available, costing me flexibility.  You can’t use miles for paying your bills, unlike cash.  Even in my best redemption, I could not get more than 2 percent back. My average redemption is closer to 1.5 cents per mile. That is why it usually makes no sense to continue charging everything on a mileage card for a family like mine.