Is it worth using miles earning credit cards?

Miles make it insanely easy for points addicts to travel in comfort for free. But given the plentiful devaluations over the past few months, some of you must be thinking whether it’s worth going to 2% cashback.

My answer to that question is that it’s complicatedThat’s a horribly ambiguous answer, but it’s the truth.

Using Cashback?

The value of my redemption of points is the maximum of the price it costs OR the price you’re willing to pay. The latter is much more difficult to define given that everyone has a different willingness to pay. So I go by the maximum price the award costs.

This is where a lot of bloggers tend to overvalue their awards. They go and say, oh – a Cathay Pacific First Class oneway ticket is  8000 bucks, and you only paid 67,500 AA miles, which means your miles are worth 11.8 cents!


I could not disagree more with that statement, because your miles are NOT worth 11.8 cents. Here’s how I look at it. I ask myself this:

What is the maximum amount of money it would cost if I tried to buy it?f

For a person with absolutely no miles/points knowledge at all going through expedia to purchase the ticket, it would cost $8,000. But given that we are fairly intelligent, I know that we can buy miles directly from AA. In fact, they’re having a promotion on purchased miles right now.

The cost of 67,500 miles is just under $1700.

Cost to buy 67500 AA Miles

Cost to buy 67500 AA Miles

There is absolutely no way that you can say your points are worth 5 cents apiece when you can buy them for 2.4 cents apiece. That’s why the idea that “I use credit cards because I can know I get at least 5 cents in value from my miles” is a fallacy, in my opinion.

In this scenario, that means that 67,500 miles and $1638 USD is the same thing when it comes to getting that first class redemption on Cathay Pacific. So if you spend $67,500 on your credit card at 1$/mile, those 67,500 miles are worth 1638 in this extremely simplified scenario. You’re getting a 2.4% return on your credit card spend.

But as I said, that’s an extremely simplified scenario. There’s tons of other possibilities that could work out such as if you had shared US Airways miles at 1.15 cents apiece. If you managed to share exactly 120,000 miles over several transactions, that would have cost you just under $1400 roundtrip. With a 2% cashback card, you’d only need to spend $70000, versus $135,000 on your AA-earning credit card at 1$/mile.

There’s also the other possibility of spending a significant amount on category bonuses at 2miles/1$. That again changes the math within the scenarios.

It gets even more complicated with hotels, because there are even more options. If you use 20,000 Hyatt points for a category 5 property which is currently retailing for $550, but there’s a similarly ranked luxury property that goes for $390 with an FHR rate which includes benefits like upgrades and a complimentary dinner, does that mean your points in the redemption were valued at 2.75 cents? Not necessarily.

On top of that, cash doesn’t devalue subject to the whim of loyalty programs, it doesn’t expire, and it’s fully transferrable.

That’s why it’s complicated. There’s no absolute answer telling whether you should use cash back cards.

Hedging Yourself

I think most of use would agree that Starwood points are probably the most valuable points on an absolute scale – that is, 1 Starwood point (or 10k starwood points) is more valuable than 1 AMEX Membership Reward point, 1 Chase UR point, and other airline and hotel currencies.

The latest promotion for purchasing SPG miles, which is a 25% discount on buying 20,000 SPG points, brings each point down to 2.625 cents per point. With a 25% transfer bonus to airlines, that means it costs 2.1 cent per point for most airline currencies. You’re limited to 20,000 per account, but you and your family members/friends living at the same address could purchase 20,000 points each and pool them.

Buy SPG Points

Buy SPG Points

I would like to think that I can max out the value of SPG points at 2.6 cents when I make redemptions and 2.1 cents when transferring to airlines, so at the very least, spending on SPG should be at least equal or greater than cashback cards.

I think, however though in the long-run, this is really insignificant.

How do I earn miles?

For most of us (for me anyways), the majority of our miles come from one or several of the following activities:

  • Signup Bonuses
  • Deals
  • Glitches
  • Tricks
  • Promotions
  • Manufactured Spend
  • Buy Mile Promotions
  • Signup Bonuses
  • Signup Bonuses
  • Signup Bonuses

Like milenomics, I don’t get bankrolled for any business travel because right now I’m a full-time student. So most of my travel are from award tickets, and airline elite status for the most part is not worth the cost of mileage running. Hotel status is fairly easy to get. For me, that means that I try to bring down the miles required and the cost of acquiring the miles as much as I possibly can.

My favourite example of this is Lifemiles, and to a smaller extent, Aeroplan. I can shave a significant percentage off the regular miles rate required through trick and glitches not learned from FTU’s or seminars, but through building meaningful relationships and having a passion to extract the maximum value from my miles.

Then of course there are the public promotions to purchase miles during USDM Share Miles or the Lifemiles Purchase Promotions, as well as huge mileage mall bonuses (think 40/60x luggage and 36x Nordstrom) bonuses, and promotions like the Aeroplan Star Challenge. These also constitute a larger portion of my earnings than everyday spend.

Manufactured spend, for the most part, is irrelevant of cashback spending as you’re leveraging 2x-5x category bonuses, debit cards, prepaid cards, money orders, and other secret methods to generate miles for a ridiculously low cost, and in some cases, for free.

Finally, credit card signup bonuses will amount to a significant amount of most people’s miles earnings in an year. Whether you use cashback credit cards or not, you’re still going to earn 6 figures worth of miles by churning credit cards. If you’re not, then you’re doing something wrong.

What to Do?

That’s why I think that at this point, it’s too hard to say whether to use cashback or other credit cards. Some people have it easier trying to earn miles, and other don’t. But more importantly, you have to know how to maximize your miles, learn how to redeem them effectively, and get in on cheap opportunities to accrue miles.

Today, for the first time, my miles balances of all the accounts I control fell below 7 digits.



Certain people with 5 million+ mileage balances will either be laughing at how few miles I have, or wanting to lower their accounts even more, because all of us know that all loyalty programs will devalue at some point. But I’m just grateful that I have the ability to travel like the 1% for 1% of the retail ticket price, whenever I want. You should too.

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  1. I do disagree with your value of 67,500 miles. If you take away the dream of aspirational awards – and make everything like Southwest where a point has a definitive redeemable value. Then of course no one will save enough points to fly business class if they truly have to save up 4 or 8x as much as a coach ticket.

    But when you only have to save 2x more, and receive a ticket that is 10x more; it is a great value to redeem your 67,500 miles on CX.

    • You can value it at any value you like. But the maximum I’m willing to pay is just under $1700 or whatever it costs to purchase the miles. Every time you use your credit card, you use it instead of a 2% cashback card. So you are “paying” for the miles whenever you use the card, in my opinion.

      It is a good value to redeem your 67,500 miles on CX. But I can’t put a 5 cent value on the miles.

      • Sorry, but this current fashion to say you “value” miles on what you WISH you could pay vs what it costs is complete bollocks.

        I WISH I could buy a Ferrari for twice the price of a Chevy, but wishing it so doesn’t make it so. Same for buying a seat in F on CX.

        • As I said, I can buy CX F for 120k USDM which I was able to generate through the USDM Share Promo at 1.15cpm. I’m not willing to pay a price higher than that.

  2. @Jeff – Given the relative ease of taking aspirational trips on awards, I find myself going outside the boundary of what “I would be willing to spend” quite frequently when I book awards. Plus, I find myself traveling more often than I would, so it’s not fair to say it’s capped at what you would have paid.

    Regarding valuing points at maximum of what you can buy them at, I respectfully disagree. It’s much more complicated than that since most programs apply caps to what you can buy in a calendar year (as you pointed out with SPG). In addition, you need to factor in on how you acquired your points in the first place (e.g. traditional, MS, etc). I think it’s silly when people, especially bloggers, try to put a fixed value on points (usually to push CC’s :)).

    To me, as a leisure traveler, the most important thing in this game is how quickly I can refill my balance after I expense it, not what I’m “getting out of it.”

  3. I agree that cashback cards and sites are most likely a better deal overall but I’d rather just have the points. Also not all airline spending cards are the same. I really like BA Avios which are earned at 1.25 per $1 and worth more domestically than AA miles. Some are also 2 per $1 or 3 per $1 on airline tickets. Hotel points don’t equate either as they offer bonuses, free nights, more status, etc.
    A good example is my latest AA Executive Citi card. I spent about $15k on it last month. That gave me about 17k miles plus the 100k sign up bonus. Now I’m done with it for awhile and I’ve moved on to my wife’s BA card which we need to spend another $18k to get a bonus 50k miles plus the 27k Avios for the spend and a companion pass (which is nearly worthless by the way). Then on to the next.
    I think overall targeted spending on the right card is best. For example I stay at IHG properties and almost always put this on my IHG card for the 5x points on spend. It’s just easy and I like points.

  4. Cash doesn’t devalue at the whims of loyalty programs, but if being used for travel the cash is basically being devlaued at the whims of the air fares (assuming they’re generally going up). If the points for a flight stay the same during a given period, but the fare has gone up, then cash did not protect you compared to miles. What happens more? Higher fares (or hotel rates) or devaluations?

    Perhaps it’s mind games, but I can have a guilt factor spending the cash that I don’t have with miles and points. Maybe that’s just me.

    • Mostly worthless, because you can’t use them for international business and first class. They’re useful for in-province travel or travel between expensive canadian city pairs.

  5. Great post Jeff. I couldn’t agree with you more. If you can regularly purchase miles at 1.1 – 1.8ish cents, it is pretty ridiculous to value them in the 5 to 10 cent range. But like you point out 1.1 is a sale price, and was a price even I was willing to purchase them at.

    But also as you point out, miles are not as good as cash. Airlines can take away, devalue without notice we have seen. They can not release any seats if they wish. We mileage hounds are chasing a product that the airlines would potentially be throwing away if we didn’t redeem.

    I am very worried and starting to loose my trust in the airlines. They are printing and selling miles to credit card companies that they have no willingness to honor. It reminds me of the mortgage crisis in the USA a while back. The banks were lending more money and letting people leverage more then they were worth. Eventually it all caught up and many many people lost out. Mark my words, the same thing is happening here folks with airline currency. Just think of the billions American Airlines has just released to Citi bank for 100k sign ups. AA has no way to let people redeem at saver levels for all the sign ups. Heck I am sure all the sign ups for Citi cards since January would wipe out every saver international business and first award, for the next 5 years if people redeemed.

    We may be in for some real tough times ahead soon.

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