Travel rewards cards can be kind of confusing these days. There are some that give you frequent flyer miles and others that give you “miles” that are actually more like cash back points. So what’s the difference? That’s what we’re about to go over. It doesn’t help that some cards give you “points” that are actually miles (thanks, Southwest) and other travel cards give you “miles” that are actually points (we’re looking at you, Barclay). So first, let’s lay out some definitions.
What’s a mile?
A “mile,” for the purposes of this post, is a true-blue frequent flyer mile that counts towards one or more airlines’ programs. Airline cards give you, for example, miles that count towards their specific frequent flyer program. Other travel cards let you transfer reward miles to an airline partner. A frequent flyer mile can’t really be priced. Its value depends on what you redeem it for when you cash in your miles for “award flights.” When redeeming for a domestic or coach flight, a mile is often worth up to 2 cents or slightly more. If you’re cashing in for a business class, first class, or long international flight, each mile’s value can reach 8 to 12 cents!
What’s a point?
On the other hand, a “point” has a fixed value. Usually this fixed value is 1 cent per point. However, there are some exceptions. For example, the American Express Blue Sky card utilizes a rewards program that lets you redeem 7,500 points for $100, making each Blue Sky point worth 1.3 cents. It pays to verify the value structure with each individual program. Travel rewards cards that give you these “fixed value points”, or “non-loyalty points,” allow you to redeem them for any travel expense from any source. Just book your travel, and then redeem the points, which show up as a statement credit reimbursing you for the travel expense. That means you aren’t limited to one or a handful of airlines, and you are free to purchase through travel discount sites such as Kayak or Priceline.
So which one is better?
So, how to pick which type of card to put expenses on? It depends. Here are some rules of thumb.
- If you love business or first class travel, go with the miles program every time. That’s the best value, hands down. The rest of the bullet points are for those who are only interested in coach.
- If it’s between getting 1 mile per dollar or 1 point per dollar, go with the mile, unless you know that you can’t travel during low-demand times. That means taking flights at inconvenient times, usually during working hours, or during the off season. As you can see with our analysis, if you must travel during high demand times, it’s very possible that you will get a rate of less than one cent back on each mile, in which case it would have been better to just get the one point (one cent) and pay for the flight with cash.
- If a category bonus on a miles card offers you 2 miles per dollar, go with that one, unless a fixed-value card offers 5 points per dollar spent. You can find fixed-value or cash back cards that offer 5x bonuses on categories such as gas, dining, or rotating categories.
- If it’s between getting 1 mile per dollar or 2 points per dollar, then it’s a toss up. Miles can trade for over 2 cents, or under. It all depends on the type of award flight, so know your travel habits and capabilities.