When you should use your miles and when you should pay cash
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It’s vacation season, and for some, that means setting off to a new state or country.
But we here at Marketplace know the value of a dollar, so when it comes to travel, we try to find ways you can spend your money strategically and not get ripped off.
We turned to Mark Orlowski, who does a lot of travel as the founder of the Sustainable Endowments Institute, to find out when to use your points and how airlines are starting to devalue their miles. Below is an edited transcript.
Sabri Ben-Achour: We are in the middle of summer travel season and some of us are lucky enough to go on trips. You have to weigh whether to use points or cash for your flights, right? And that’s not a straightforward question. How do you know what to use?
Mark Orlowski: It depends on how much money the ticket would cost if you were to pay cash. And it also depends on how many miles you have. If you have many millions of miles, practically no matter what the cost may be, it’s probably best to spend your miles because they only sort of go one way in value. They slowly depreciate over time, whereas if you maybe are like most folks, and only have a smaller number of miles, you need to weigh whether it’s a good use of those limited miles depending upon the cash price of the ticket.
Ben-Achour: What’s the trick for figuring that out?
Orlowski: You want to look at the price that the ticket currently costs if you were to pay cash versus the number of miles required if the ticket is available using miles. And generally speaking, if you can get at least about two pennies per point in value from redeeming your miles instead of paying cash, I would encourage you to consider redeeming your miles unless you’re saving them for a very special trip.
Ben-Achour: It seems like airlines have been sort of steadily depreciating and devaluing the worth of their miles. Will this long march of devaluation ever stop?
Orlowski: Certainly the existing short- and long-term trend is towards a continued sort of devaluation. Take, for example, United Airlines, which just recently announced a major devaluation that’s going to go into effect starting November 1. Now, United should be applauded for giving everyone around a four month advanced notice. But the United news certainly means that in more and more cases, the equation of when it makes sense to use cash and when it makes sense to redeem your miles shifts further and further in favor of looking to use cash because the value of those miles continues to go down.
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