What is the cut-off in cents per mile at which it’s better to buy the ticket than redeem frequent flyer miles for it? My specific issue is whether I should redeem 55,000 miles for a free ticket or spend $800 to buy it (at $0.0145 per mile). Thanks.
Let me begin by commending you for posing the question, which suggests that you have doubts about the conventional wisdom on the issue. That’s a good starting point.
In my regular conversations with other frequent flyers, there are two dominant schools of thought, neither of which I believe to be wholly sensible.
First, there are those who cling to the old maxim that you should redeem miles for tickets with a cash value such that you’re getting a minimum value of $0.02 per mile. Applying that rule in your case, you would save those miles for an award ticket with a value of $1,100 (55,000 miles x $0.02) or more, and charge that $800 ticket to your airline-affiliated credit card.
At the opposite end of the spectrum are those who advocate using miles for whatever trip happens to coincide with their having enough miles in their account to get it, no matter how cheaply they could purchase a comparable ticket.
Applying the “live for today” advice, you have carte blanche to use 55,000 miles for a ticket that could be purchased for $800 (or, for that matter, for a $200 ticket).
I’m going to come down squarely on the side of a balanced approach, which recognizes that miles have more or less value depending on how they are used, but which also takes into consideration non-financial variables.
From a value standpoint, $0.0145 per mile is indeed somewhat less than the $0.02 rule-of-thumb value often used as a benchmark. But it’s not so much less that I would dismiss it out of hand.
On the other hand, a relative of mine recently used 25,000 miles for a ticket she could have bought for $160—a transaction that netted her a per-mile value of $0.0064 (I have since disowned her). While there may be no per-mile value below which redemption should be rejected categorically, that certainly tests the limits of acceptability.
The non-quantitative considerations are more personal but no less important. Ask yourself the following questions:
- On the earning side, how long will it take you to replenish those miles? If 55,000 miles represents a five-year investment in mileage accumulation, I’d be inclined to want to squeeze more value out of them. But if that’s just a small portion of your annual mileage earning, then “easy come, easy go” might apply.
- Will you have another opportunity in the foreseeable future to use those miles for a more expensive ticket? If so, by all means wait. But if there’s nothing better on the horizon, take advantage of what’s at hand.
- In the current environment, there is yet another consideration: Will the airline with which you’ve earned those miles still be in business to reward your loyalty if you wait to redeem an award six, 12, or 18 months from now? And even if the airline survives, will it still operate flights on the routes you want to fly? Since no one knows the answers to those questions, travelers are left to make their best guesses, and factor in their tolerance for risk-related anxiety.
Not knowing your personal situation, I can’t answer those questions for you. What I can say is that, when it comes to managing my own frequent flyer account, I’m increasingly inclined to use miles now, rather than trust in a future that looks positively iffy.
Have a safe and happy trip, whatever you decide.