Those of us who have been in the miles and points “game” or “hobby” for a long time and have amassed large balances in our miles and points accounts can sometimes struggle to spend them. We all have/had visions of the “perfect redemption” sometimes with very specific flights, routes, aircraft, even specific seats in mind. This is great if you can get it but don’t let perfect get in the way of very good. USE YOUR MILES!!!
This post is intended to remind us all that in all situations of booking travel we should seek out to redeem miles and points FIRST if at all possible and then resort to spending cash if there are no other options. This is not only a good financial decision but also an economic one. History has proven that miles and points tend to perpetually decline in value. If we invest our cash instead of spending it on travel it should increase in value over time. This means we should always strive to use up miles and points first in most cases. Math tells us so.
I can come up with >100 exceptions to the above rule–and you should too. Buying a $200 domestic economy flight today when you have “for-sure” plans to redeem your miles (and don’t have enough to do both) for business class to Asia later can make sense in both cases. The main objective is to get you thinking in terms of using points first and then deciding if cash is a better deal because you are sure you will be using them shortly for a more cash-expensive trip. If you are doing things correctly maybe you have already booked that long haul Asia trip and currently don’t have the points available for the domestic flight. That is a good thing!
Thanks to credit card offers, spending categories, bonuses, and other perks we can earn new miles for future travel fairly easily. You earn miles and points from spending you were going to do anyway. It is much more difficult to earn and save more money depending on your own personal situation. You have to find the right balance for you that achieves both your financial and travel goals in tandem.
The idea for this post came from changing my own approach to miles and points over the past few months. Being newly self-employed, earning less money, and just getting smarter with finances has steered me to using up my amassed miles and points balances. I now think about travel (and other expenses!) in terms of having to earn those dollars again if I buy with cash. That usually pushes me towards the correct decision!
Lastly: For those out there that have far too many miles and points–you know who you are–and cannot use them up within the next couple of years should be shifting your spending over to cash back credit cards. I have personally done this–you should too. There are no annual fee options for 2% everywhere (Fidelity Rewards, Citi DoubleCash) and some with 5% bonus categories (Discover IT, Chase Freedom) and of course some points currencies that can be used as cash as well as other travel redemptions. Be sure you are not shorting yourself cash and taking in more miles you don’t really need right now. You can always shift back spending when your balances deplete.