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One of the more advanced elements of this travel hacking hobby is determining when to spend cash for a flight / hotel stay and when to use miles or points. Each individual’s circumstance is different, which means that there is no simple answer. But in general there are two extremes.

Person A might think…

My miles and points are completely free, so any time I can spend them and save money is good!

Person B might think…

My miles and points are hugely valuable so I’m going to save them until I can receive outstanding value for them!

Most people fall somewhere in the middle – and both hypothetical Person A and Person B are wasting something valuable – but here are a few things to keep in mind when deciding whether to spend cash or miles/points.

What are my Miles & Points Worth?

This is the most important place to start. Most people have a fundamental understanding of how much £100 is worth, since they know which goods and services can be bought with them. Far fewer people understand what 10,000 miles are worth. If you don’t have enough experience to decide for yourself, then read what the experts have to say. InsideFlyer UK’s perspective can be found by clicking here.

With a clearer idea of value, then you can do some simple math. If a British Airways Reward Flight Saver return ticket to Europe costs 15,000 Avios + £30 and you apply a value of 1p per Avios, you arrive at a total “cost” equivalent to £180.

If a cash ticket will cost less than £180 (don’t rule out alternative airlines/airports), then you should lean towards paying cash. If the cash ticket costs more, then you should lean towards using miles.

Scarcity Value of Miles / Points

Besides the basic value of a miles or point, your decision should be guided by the relative abundance or scarcity of those miles/points to you personally.

For example, if you have a balance of 500,000+ Avios, you should be inclined to spend Avios whenever you can receive a value of close to 1p. You have more than enough Avios for any aspirational reward, so just start spending them already… You don’t want to wait around for a devaluation that would reduce the value of your stash.

If you are building up your balance with a specific objective in mind, you probably will be much more inclined to hold out until you can receive a value in excess of 1p. You don’t want to waste Avios, then not have enough the next time you desire a long-haul reward flight in First or Business Class. But at the same time, there are ample opportunities to buy Avios at close to the 1p price point, so don’t just save Avios automatically if you have an opportunity to spend them wisely. (i.e. spend Avios today, and them back tomorrow if necessary…)

Cash is King

The most avid travel hackers will treat 10,000 Avios as practically identical to £100. However these same travel hackers probably have several multiples of £100 sitting in their savings account, or arriving every month in the form of an above-average salary. If that weren’t the case, then £100 in the bank, which could be spent on any number of goods or services, is clearly more valuable than 10,000 Avios that can only be spent on the relative luxury of a reward flight.

If this argument sounds contradictory to the previous ones, you’re right… this hobby isn’t always so straightforward.

But when I have the option of converting my Topcashback funds into £££ or into Avios, instead of immediately thinking “more reasonably-priced Avios”, I’m usually thinking that cash in my bank account is a much better idea…

Differential Treatment of Paid Flights / Stays Versus Rewards

Here’s where the nuances truly begin. At its most basic, you are still receiving a plane ticket or a hotel stay, irrespective of whether you pay with cash or with miles/points. But there are secondary factors to consider.

For a paid flight, you are going to earn redeemable miles and status miles (or Tier Points). So, when deciding whether to spend miles or buy a paid ticket, you should also factor in the miles you would receive from the paid ticket. If you are aiming for elite status with a specific airline programme, you are going to tend towards paid tickets.

In an interesting circular logic, those with airline elite status are more likely to have higher mileage balances, because they simply fly more often. However it becomes “harder” to actually use those miles. Why? Because when comparing the relative of a paid and reward ticket, a member with elite status is going to earn far more miles from the paid ticket! (i.e. a bonus of 100% of miles flown for a Gold member with British Airways Executive Club) So, the so-called “opportunity cost” of booking a reward ticket is that much higher.

With hotels, most major chains no longer distinguish between paid and reward stays when determining whether the member qualifies for elite status (World of Hyatt is the most notable exception). Nonetheless, a paid stay is going to earn points, qualify for promotional bonus points, in many cases cashback, etc.

So, even if I have decided that an IHG point is worth 0.4p, I still might decide to spend £90 for a hotel night at a Holiday Inn, even though the hotel would only charge me 20,000 points (£80 equivalent). Why? Because that paid night might qualify for any number of Accelerate targets and I could earn substantial bonus points…

Flexibility

One of the frequently understated benefits of rewards is that they are almost always flexible. In the case of flights, there is usually a cancellation penalty, which can vary from the meaningless to somewhat abusive (i.e. airlines in the US).

For hotels, most reward nights are fully flexible and can be cancelled at any time up to the hotel/chain’s cancellation window of 24/48 hours in advance.

For paid flights, most reasonably priced fares are non-refundable. You might be able to claim a refund of the tax element, but that’s it – your money is gone forever. For hotels, most of the cheapest rates involve prepayment or no-cancellation.

Irrespective of what the mathematics might say about the hurdle rate for using my miles, am I going to buy an expensive flight 9 months in advance? Am I going to make a prepaid hotel booking? Not a chance! I’m going to use miles / points in case my plans change…

Conclusion

Deciding when to spend miles and when to spend cash is as much of an art as it is a science. But instead of ranting about Avios or some hotel programme being a scam – perhaps because you tried to spend your miles on an economy long-haul reward and paid nearly as much in taxes/surcharges as the cash fare would be – you should pause to consider the value of your miles, and use them accordingly.

But don’t obsess over the value of your miles and points. As long as you aren’t blatantly wasting them, remember that cash is king!