Should you book your trip with points or cash? How to know

Image: You are booking a trip to Europe and see two options – 60,000 miles round trip flights, or $650 in cash. Which one did you choose? Without adding numbers, this is just a guess.

That’s where you can save a day when you calculate the reward redemption value. With simple math, you can determine whether you should book or redeemed points and miles in cash.

Related: I broke the points rule but still won good awards to Europe

What is reward value?

Reward Redemption Value tells you how much points or miles a particular booked are worth compared to cash payments. At TPG, we measure this in cents per point or mile, so you can easily measure whether the redemption is worth more or less than the average.

Related: How much is Chase Ultimate Rewards Points worth?

Calculate the reward redemption value

Calculating the value of a reward requires a simple formula:

Exchange value = (Cash price – taxes and fees) ÷ points or mileage × 100

This gives you every bit or mile value.

Example: New York to Los Angeles from the Delta

Let’s put it into practice. Suppose you are booking a round trip flight from John Kennedy International Airport (JFK) in New York to Los Angeles International Airport (LAX). The cash fare is $450, or you can redeemed 32,000 Skymiles plus $12 in taxes.

Use formula: ($450 – $12) ÷32,000×100 = 1.37 cents per mile.

When to redeem rewards and cash payments

So you’ve figured out the redemption value – now it’s a big question: Should you actually use the reward or pay cash?

This is the monthly valuation of TPG.

For the above delta example, we calculated 1.37 cents per mile. Since TPG currently values ​​Delta Skymiles at 1.15 cents, this redemption is better than average, which is a strong use of your mileage.

Here is the general framework that guides your decision:

• Valuation higher than TPG: Popular with redemption points or miles.
• Valuation below TPG: Consider paying cash, especially if you want to save points or miles to use later.
• Equal to TPG: Consider your personal situation – saving cash immediately by redemption points or mileage, while paying cash can help you get rewards for future travel and work hard to achieve elite status.

Related: Why All Travelers Should Earn Transferable Credit Card Points

Reward Calculator using TPG

Don’t you want to do math by yourself? That’s why we built the TPG Award Calculator – making calculating redemption value quick and easy.

Here is how to use it:

1. Choose whether you use airline mileage or hotel points to calculate.
2. Choose a loyalty program.
3. Enter the cash price, the required points or miles, and any taxes or fees.
4. Click Calculate to view the value.

In just a few seconds you will get a detailed breakdown of redemption – just like what our Delta Skymiles example above produces:

According to the calculator, using 32,000 Skymiles plus $12 costs $450, your estimated value is $368, or 1.15 cents per mile. You can save $70 by booking miles compared to paying cash.

Whether you’re maximizing every penny or just want a quick sane check, the TPG Awards calculator can help you get the most out of your hard points and miles – no math degree required.

Related: Apps and websites that make rewards easier to find

Why taxes, fees and surcharges matter

When calculating redemption value, it is important to consider all fees – if you don’t do this, it can make a “good deal” look better than it actually is. Here is how the fees and surcharges affect the redemption value of different types of bookings:

• hotel: Taxes are usually based on cash rates, so using points can help you avoid these extra fees. However, the resort may waive or may not waive the rewards under the program. For example, the World of Hyatt exempts the reward booking fee, while Marriott Bonvoy does not.
• flight: Some airlines have added high operator surcharges to grant tickets, which may bias redemption value. For example, the Virgin Atlantic Flying Club Awards may include fees that exceed the discount on cash fare. Always include these fees in your calculations for accurate comparisons.
• Mix Points and Cash Awards: You can use the same method to combine points and cash. Subtract the cash portion from the total cash price and divide the remaining amount by the point used. This ensures that each point you calculate the true value of the reflective point part.

By including taxes, fees, and surcharges in your calculations, you will avoid overestimating the value of redemption and make smarter decisions about when to use points or miles instead of paying cash.

Related: Can you pay taxes with your credit card?

Other things to remember

Redemption value is a useful benchmark, but that is not the only factor in determining whether to use rewards or cash.

• Opportunity Cost: Paying cash can earn points for you or travel later. For example, a $300 flight could earn 3,000 miles that you can redeemed later, and if you use the reward now you’ll miss it.
• Comparable options: Not all flights or hotels are equal. If one airline charges 25,000 miles for a route and another airline offers similar flights for $100 in cash, consider which option can provide better overall value – even if the math of the first option looks “good”.
• Personal Value: Sometimes the best redemption is not to maximize cents per point. You may redeem points for a special experience, such as first-class flights that won’t pay cash even if the redemption value is low.
• Other Privileges: Using cash instead of points can help you earn elite status, earn bonus points or unlock benefits from loyalty programs that can save you money or improve your travel experience in the long run.

Related: Why the best point redemption is sometimes the most practical

Bottom line

Calculating the reward redemption value can help you cut your guesswork and make smarter decisions with rewards. The mathematics is simple: minus expenses, divide them by point and compare them with the TPG’s valuation. Even better, insert your numbers into TPG’s reward calculator for instant answers.

Remember: “Best” redemption is not always about squeezing out the last penny. Sometimes the right move is to book a trip that makes sense to you, that is, save money. But by knowing how to calculate value, you can be sure that you have gained the most from your hard-earned points and miles.

Related: How I Manage Credit Card Redemption Analysis Paralysis