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This week’s episode is part of our new series called “This or That,” where the NerdWallet Travel team compares different ways to travel.
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Our take
If you have a lot of credit card points, airline miles or hotel points, you might be weighing whether to redeem your points or pay in cash for your next trip. One of the biggest mistakes is to save your points indefinitely. Hoarding points is a bad strategy because airline miles and hotel points generally devalue over time as loyalty programs gradually increase the number of points it takes to book a flight or hotel night.
As soon as you have enough points for award travel, you should calculate the redemption value by dividing the cash price by the points price or use a calculator. That will give you a cent-per-point value of your redemption. Then compare it with NerdWallet’s baseline values of how much each point should be worth.
If your redemption value is the same or higher, you are getting a good deal for your points. Also, note that you may be able to transfer your credit card points to an airline or hotel loyalty program and spend fewer points using that program than you would booking through the credit card’s travel portal. You might want to consult another calculator to help you figure out this step.
On the other hand, if the redemption rate you calculate is low, pay with cash instead if you can afford it without going into debt. Paying with cash has several advantages, including allowing you to earn elite status credits and more points on your booking. You should also pay with cash if you are trying to meet the spending requirement for a credit card sign-up bonus.
Our tips
- Always calculate the cent-per-point value of your redemption. If a flight costs $500 or 50,000 points, divide $500 by 50,000. Then compare that value with NerdWallet’s baseline values of how much your points are worth. If your redemption value is higher, book it!
- Check whether transfer partners have a better redemption value. If you have a travel credit card or are considering getting one, check whether you have opportunities to book with a transfer partner for fewer points instead of booking through the credit card’s travel portal.
- You don’t want to hoard points. Earn them and then use them as soon as you can before your points devalue.
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The article Smart Money: ‘This or That’: Booking With Points vs. Cash originally appeared on NerdWallet.
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