When do you use airline miles versus cash? How do you know if it is a good redemption or a devalued route? There's a simple formula for when to use your airline miles and when to pay cash.
Divide the monetary value of your flight by the number of miles required to redeem. This gives you the CPM (cost per mile). To check the latest monetary value of your points, use The Point's Guy's Monthly Valuations.
Formula: Ticket Price / # of Miles to Redeem = Cost Per Mile (CPM)
You want that CPM (Cost Per Mile) to be greater than or equal to the average value, such as:
American: 1.4¢; United 1.4¢ Delta: 1.2¢, JetBlue 1.3¢, Southwest 1.5¢
If that's less than the average value/mile, it is a bad redemption (bad cost-per-mile). If it's greater than the average value/mile, use your miles.
For example, American Airlines miles are currently valued at 1.4 cents per mile. Let's imagine a RT fare to Europe for 80,000 miles or a cash fare for $800. $800/80,000= 0.010 (1.0¢ cost per mile) In this case, this is lower than the 1.4¢ average, so it would be wise to save the miles and buy the ticket using cash or a points card that acts like cash.
Now let's imagine a RT fare to New Zealand for 80,000 miles or a cash fare of $1,500. $1,500/80,000 = 0.018 (1.8¢ cost per mile) In this case, the 1.8¢ CPM is better than the 1.4¢ CPM average so book with miles!
No Need for This Equation with Bank Cards
When you use flexible points programs like the Chase Sapphire, American Express, Capital One Venture, or Barclay cards, the points required are always in-line with the market value of the fare. So, this calculation is only required for airline mile programs.