Smart Money Podcast: ‘This or That’: Booking With Points vs. Cash – NerdWallet

Welcome to NerdWallet’s Smart Money podcast, the place we reply your actual-world cash questions.

This week’s episode is a part of our new sequence referred to as “This or That,” the place the NerdWallet Journey crew compares alternative ways to journey.

Try this episode on any of those platforms:

Our take

If in case you have a variety of bank card factors, airline miles or resort factors, you may be weighing whether or not to redeem your factors or pay in money on your subsequent journey. One of many greatest errors is to save lots of your factors indefinitely. Hoarding factors is a foul technique as a result of airline miles and resort factors usually devalue over time as loyalty applications step by step improve the variety of factors it takes to e-book a flight or resort evening.

As quickly as you’ve got sufficient factors for award journey, you need to calculate the redemption worth by dividing the money value by the factors value or use a calculator. That will provide you with a cent-per-level worth of your redemption. Then evaluate it with NerdWallet’s baseline values of how a lot every level needs to be price.

In case your redemption worth is identical or greater, you’re getting an excellent deal on your factors. Additionally, observe that you simply could possibly switch your bank card factors to an airline or resort loyalty program and spend fewer factors utilizing that program than you’ll reserving by way of the bank card’s journey portal. You would possibly need to seek the advice of one other calculator that can assist you work out this step.

Alternatively, if the redemption charge you calculate is low, pay with money as a substitute when you can afford it with out going into debt. Paying with money has a number of benefits, together with permitting you to earn elite standing credit and extra factors in your reserving. You also needs to pay with money if you’re making an attempt to fulfill the spending requirement for a bank card signal-up bonus.

Our suggestions

  1. At all times calculate the cent-per-level worth of your redemption. If a flight prices $500 or 50,000 factors, divide $500 by 50,000. Then evaluate that worth with NerdWallet’s baseline values of how a lot your factors are price. In case your redemption worth is greater, e-book it!

  2. Verify whether or not switch companions have a greater redemption worth. If in case you have a journey bank card or are contemplating getting one, examine whether or not you’ve got alternatives to e-book with a switch associate for fewer factors as a substitute of reserving by way of the bank card’s journey portal.

  3. You don’t need to hoard factors. Earn them after which use them as quickly as you may earlier than your factors devalue.

Extra about factors and miles on NerdWallet:

Episode transcript

Sean Pyles: You have got a visit developing and are sitting on a pile of factors. Must you use them to e-book your journey, or are you higher off utilizing money as a substitute? Welcome to the NerdWallet Smart Money podcast, the place you ship us your cash questions and we reply them with the assistance of our genius Nerds.

I am Sean Pyles. On this episode of our “This or That” journey sequence, we’re inspecting paying with factors. Extra particularly, when do you have to redeem your factors? Must you pay with money more often than not and save your factors for an enormous redemption? Or do you have to simply use your factors in your subsequent journey, even when it is not very costly?

Right here to inform us about it’s Meghan Coyle. Meghan is an editor on NerdWallet’s Journey crew, and he or she’s one of many individuals who helps crunch the numbers on how a lot your factors are price. Meghan, welcome to Smart Money.

Meghan Coyle: Thanks for having me, Sean.

Sean Pyles: So to begin off, let’s be actually particular about what sorts of factors we’re speaking about right here. Vacationers can use airline factors to e-book a free flight or resort factors to e-book a free resort keep. They will additionally use bank card factors to e-book each flights and inns.

So when individuals are making an attempt to resolve whether or not to make use of factors or money to e-book, is the calculation completely different for several types of factors?

Meghan Coyle: That is an ideal query, Sean. There are such a lot of several types of journey rewards on the market. The excellent news is that the tactic for deciding between factors and money is identical regardless of which kind of factors you are speaking about, however the precise worth of the factors is completely different.

So, for instance, resort factors normally aren’t price the identical quantity as airline miles. And even inside inns, sure resort manufacturers have factors which might be price completely different quantities. So it will probably get sophisticated actually quick.

Points are a forex. So principally, what we’re making an attempt to do is convert them into the identical forex as money to find out which is best. It is like you may’t evaluate apples and oranges, so we want two apples or two oranges.

Sean Pyles: So that you attempt to boil them down into U.S. {dollars}.

Meghan Coyle: Precisely. So the best manner to do that is take the money value and divide it by the variety of factors it will take to e-book the identical reservation.

Sean Pyles: OK. And for these of us like me who aren’t keen on doing math like this, you’ve got accomplished a variety of this math already, right?

Sean Pyles: So based mostly on what you’ve got found, how can individuals decide whether or not the purpose worth is sweet? Is half a cent per level good? Is it 1 cent per level frequent or is that higher? What do you assume?

Meghan Coyle: Yeah, so NerdWallet publishes a listing yearly of how a lot your factors are price. Mainly, my crew seems at hundreds of flights and resort stays, and we try this math, that calculation I used to be simply speaking about. And we give you a baseline worth, which is how a lot some extent is price in {dollars}.

However let’s be actual right here — they don’t seem to be price that a lot. It is normally some quantity of cents, perhaps even lower than 1 cent. So principally, each time you search for a flight or a resort keep, it’s a must to take the worth you’ll pay in money and divide it by the variety of factors and then you definitely’ll get this worth.

Whether it is greater than baseline worth, then you need to e-book it. Which means you bought an ideal deal. But when it is much less, then you need to in all probability pay with money.

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Sean Pyles: And we have now a calculator that may assist individuals decide this as properly, right?

Meghan Coyle: Yeah, completely. You do not need to do all this math your self. I take advantage of the calculator on a regular basis.

Sean Pyles: We are going to hyperlink to that in our present notes put up. Of us can discover that at

Properly, you’ve got been gathering information on factors and their values for just a few years now. Have you ever observed any patterns in how a lot factors and flights are price and when individuals ought to use one versus one other?

Meghan Coyle: Yeah. Costly redemptions typically supply greater worth. In order that’s why individuals typically advise reserving enterprise class flights as a result of your factors are price a lot if you try this. That is true, however when you do not fly enterprise class quite a bit or that is too many factors, that also won’t be the precise reserving possibility for you.

One other essential level is that factors usually devalue yearly. Mainly, each program step by step raises award costs. And so a flight that prices 10,000 miles one yr may cost like 11 or 12,000 the subsequent yr. And so it goes up, and up, and up.

Sean Pyles: So inflation will not be restricted to the grocery retailer; it is also coming on your flights and factors as properly.

Meghan Coyle: Precisely. So it is normally an excellent technique to make use of your factors as quickly as you’ve got sufficient for a visit you are going to take quickly. As a result of when you sit on an enormous stack of factors, these will turn out to be price much less and fewer. Think about you are sitting on a pillow, and the pillow simply begins deflating. That is principally what’s taking place to your factors.

Sean Pyles: And so that you mentioned it is good to make use of them after you have sufficient. I am questioning how individuals can decide what sufficient is. Is that simply the flight that they need to take this spring break doubtlessly, or is that going to be a flight in six months from now? How do you assume individuals can decide what meaning for them?

Meghan Coyle: Completely. It is type of as much as you. However I might say if there’s an upcoming journey you’ve got inside the subsequent yr, and it prices 30,000 factors, then I would not attempt to hold incomes way more than that. I’ve heard of individuals having one million factors within the financial institution and no plan to make use of it. Proper?

Meghan Coyle: So that is what you need to keep away from.

Sean Pyles: All proper. So that you talked about that the worth factors can erode over time, the best way that the facility of the greenback is eroding amid inflation. However inflation has truly had a type of optimistic impact on factors and made them higher for reserving up to now yr or so, is that proper?

Meghan Coyle: Yeah. I imply, all of us want some excellent news out of all of the inflation information popping out, and right here it’s. Flight costs are up greater than 25% yr over yr when you’re taking a look at December costs.

And so that you would possibly discover that you’re getting higher redemptions which might be over that baseline worth we have been speaking about as a result of the costs are simply so costly in money, and the factors value hasn’t risen as a lot because the inflation.

Sean Pyles: OK. One factor I am interested by is that completely different airways and inns have very completely different valuations, and a few are fairly excessive-worth. Are you able to discuss which of them are perhaps higher than others?

Meghan Coyle: Yeah, so among the worldwide airways did rather well in our evaluation. I do know as you recognize, U.S.-based vacationers, you are pondering United, American, Delta, perhaps Alaska. However you actually should not miss out on a few of these worldwide airways which have factors which might be price quite a bit. For instance, Air Canada. Air Canada is a part of the Star Alliance, so you may truly e-book United flights together with your Air Canada Miles.

Sean Pyles: That is fairly helpful. As I used to be listening to you say that, I used to be pondering, “I sometimes fly out of Portland. I am undecided if Air Canada flies by way of there that a lot.” So it is good that they are at the least partnered with different airways, so you might use them on, as you mentioned, United.

Meghan Coyle: Completely, or every other worldwide airline of their alliance or any of their different companions. So that you even have a variety of choices.

Sean Pyles: OK. Are there every other standout level programs that people ought to find out about?

Meghan Coyle: Sure, one in every of my favorites is Hyatt. They’re a switch associate of Chase, and their factors are price a whopping 2.8 cents per level. In case you evaluate that to all the opposite resort loyalty applications like Marriott and Hilton, that are price like 0.7 cents or is 0.5 cents in Hilton’s case, 2.8 cents per level is a superb worth. And far greater than what you would possibly get when you e-book by way of the Chase journey portal.

Sean Pyles: Yeah, that is fairly candy. And are Hyatt factors versatile as properly, which means that you need to use them for different inns or different enjoyable issues like that?

Meghan Coyle: So Hyatt’s obtained a variety of completely different manufacturers below them. So they have Hyatt Place, a few of their all-inclusive resorts. They’ve opened just a few of these up to now few years.

So there are a variety of completely different inns, however I ought to point out that Hyatt can be the smallest resort program. They do not have almost as many inns as Marriott, so they’re a bit limiting in that manner.

Sean Pyles: So perhaps they’re greater worth as a approach to entice individuals to make use of them versus a bigger chain.

Sean Pyles: Properly, for U.S.-based vacationers who perhaps aren’t going overseas fairly often, what could be one of the best ways for them to earn one thing like Air Canada Miles? Have they got to fly quite a bit internationally, or can they only fly domestically?

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Meghan Coyle: Yeah, in order that’s the place a variety of journey bank cards are available in. A lot of the main bank card rewards applications like Chase, Amex, Capital One, Citi, all of them have switch companions. These are normally airline or resort applications that you could switch your bank card factors to. And that is the place this math will get actually difficult as a result of these bank card applications additionally all have a journey portal.

So for instance you’ve got a Chase Sapphire card — you might use these factors that you simply earned with Chase and simply e-book immediately of their little portal, within the app or on the web site. However if you use your factors that manner, they’re solely price perhaps 1 cent. If in case you have a Sapphire, they may be price 1.25 or 1.5 cents every.

So you are like, “Oh, that is fairly good.” However when you switch your Chase factors to Air Canada, then they’re extra probably price about 1.9 cents. So you may see the way it type of compounds if you recognize the precise approach to e-book.

Sean Pyles: Yeah, it’s a must to know the way to recreation the system just a little bit.

One fast disclaimer: NerdWallet is companions with these numerous banks that Meghan simply talked about, however that doesn’t have an effect on how we discuss them.

OK, properly again to the do you have to pay with money or factors calculation. It isn’t so simple as, do you have to simply pay with factors or money. It is, do you have to pay with bank card factors, or resort factors, or airline factors, or money, proper? There’s a variety of various things to issue and calculate and evaluate all of sudden.

Meghan Coyle: Yeah. Actually, it is a variety of work. That is why we do all this work. I normally suggest that people who find themselves making an attempt to go on a visit the place they have already got a vacation spot in thoughts, simply lookup an article about, what are one of the best methods to make use of sure miles, or what’s one of the best ways to get to Japan, or to New York with miles and see what comes up. As a result of lots of people have already accomplished the legwork for you.

Sean Pyles: Proper. Whereas some individuals like you’re very into gaming the system, getting tons of factors and even making an attempt to earn elite standing. Are you able to clarify what it means to earn elite standing and the way that will come into the choice of whether or not to pay with factors or money?

Meghan Coyle: Yeah, so incomes elite standing can get you all kinds of perks on an airline if you’re loyal with them. It might additionally do the identical for inns.

I might say the most important perk is getting an improve. You would possibly hear about individuals, oh, they obtained upgraded to enterprise class and all they paid for was an economic system seat at the back of the aircraft. In order that’s why individuals attempt to earn elite standing.

And the issue is when you pay with factors, more often than not you will not be getting these elite standing credit. So these are the issues it’s good to accumulate in an effort to earn elite standing for the subsequent yr. In order that solely applies when you’re utilizing airline miles or resort factors, however there are methods round that.

For instance, some bank cards supply elite standing incomes or quick monitoring to elite standing as a good thing about the cardboard. So that you would possibly need to prioritize hitting that minimal earlier than you begin paying with factors on your subsequent journey.

Sean Pyles: Properly, Meghan, I’ve to say I’m a reasonably lazy traveler. I’ve a money-again bank card that I take advantage of for just about all the pieces, and I do not dabble an excessive amount of within the airline factors recreation. I might love to listen to the way you method reserving a visit if you do have some factors or perhaps you’re an elite standing member. How do you do it personally?

Meghan Coyle: Properly, I try this calculation I used to be speaking about. I lookup how a lot it will value in factors with my most well-liked airline. I’ve elite standing with one, so first I lookup there. And I will evaluate it to the money value, and I will normally use these miles to e-book a flight. And I principally hold my bank card factors in a significant bank card rewards program, and I’ll switch these if I ever need to e-book something.

I principally by no means e-book something within the journey portal. As a result of after all of the analysis I’ve accomplished, that is usually not one of the best ways to get probably the most worth out of your factors. However I do know it is simpler for some individuals.

Sean Pyles: Yeah. How lengthy does all of that take you?

Meghan Coyle: Oh, man. It may take some time. I might say I in all probability lookup perhaps three or 4 flights each time I am about to e-book. So I am doing that calculation a number of instances. However like I mentioned, the simplest approach to save time on all of that is to simply lookup what are among the finest methods to journey to sure locations together with your factors and miles. And that manner, you may simply piggyback off of different analysis with out having to do it your self.

Sean Pyles: Yeah. It additionally makes me take into consideration how, when individuals are doing the money versus factors calculation, it helps to know your self just a little bit, too. Like I discussed, I am simply straight up too lazy to do all of these issues that you simply simply described doing, and I am completely satisfied to get a good amount of money again on my bank card simply by shopping for my flights by way of that.

However you recognize what to do, you understand how to earn factors rather well and use them to their best potential. And so for you, all of this work is totally price it, proper?

Meghan Coyle: Completely. I imply, I’ve saved hundreds of {dollars} and hundreds of factors by doing all of this work. However positively do not low cost your technique, both. No less than you are utilizing your factors, in order that’s a very powerful factor. Each time anybody asks me what’s one of the best ways to make use of it, I am like, “So long as you are utilizing them, that is all that issues, actually.”

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Meghan Coyle: I imply, in any case, these are primarily nearly free flights and resort stays that you simply in any other case would’ve needed to pay for.

Sean Pyles: One factor individuals may also need to take into consideration is the truth that past factors depreciating in worth, a few of them may expire. Are you able to discuss how factors do expire? As a result of that may actually catch individuals unexpectedly.

Meghan Coyle: For certain. Each resort and airline has their very own guidelines round when factors expire. A few of them do not expire in any respect anymore, which is wonderful.

However usually the rule of thumb is that it’s good to have some exercise in your account in a sure time frame, like a yr, perhaps 24 months, some period of time that you have traveled and used that loyalty program.

However “utilizing that loyalty program” is such a broad time period. There’s a variety of completely different actions you are able to do to maintain your account energetic. For instance, you should buy one thing by way of their procuring portal, like all the foremost airways have a procuring portal the place you may actually purchase a Nike T-shirt or sneakers or one thing. And when you purchase it by way of the portal, you earn just a few miles alongside together with your buy.

In order that’s one approach to hold it energetic. Utilizing the bank card, truly touring with any of these corporations. There’s a variety of issues you are able to do. So attempt your very hardest to not allow them to expire.

Meghan, lots of people are huge followers of bank card signal-up bonuses, and for lots of oldsters, that may be their finest single shot at getting an absolute boatload of factors. How do you assume that elements into whether or not somebody ought to use factors or money?

To me, it looks as if when you get that signal-up bonus, it is a no-brainer. You higher use that for a visit as quickly as you may.

Meghan Coyle: Completely. That is a type of locations the place it actually does assist to know the way a lot your factors are price. So you may truly evaluate bank card provides that manner.

For instance, when you’re like, “Wow, that bank card has an indication-up bonus of 100,000 factors.” And then you definitely lookup the worth, and you are like, “Oh, these factors are price half a cent; that is solely price $500. Whereas I might get one other journey bank card, and perhaps you solely get 80,000 factors, however that is price greater than $1,000 of journey.” In order that’s the place you actually need to do the maths earlier than getting a card.

After which precisely such as you mentioned, you need to actually prioritize incomes the bonus as a result of these factors are price a lot. As soon as you recognize that they are price $1,000, you are going to attempt quite a bit tougher to hit the spending minimal and get that, you do not need to miss that vast chunk of factors. As a result of typically within the span of getting a bank card like that, normally the most important chunk of factors that you’re going to earn all of sudden is in that signal-up bonus. So you actually do not need to miss that incomes alternative.

Sean Pyles: Yeah. Properly, I do should say as a former debt author at NerdWallet, that if you’re utilizing one in every of these bank cards that offers you a ton of factors, and perhaps has a profitable signal-up bonus, you higher just be sure you’re paying off your stability month-to-month as a result of the curiosity on these bank cards tends to be fairly excessive. And that may just about erode any worth that you’d get from one in every of these bonuses. And that is not even to say annual charges that these playing cards can have.

Meghan Coyle: Yeah, that is a very good level, Sean. Particularly if you’re excited about, “Oh, ought to I spend $1,000 on one thing?” However then when you understand how a lot the factors are price, you are like, “Do I have to spend $1,000 to get 10 factors?” If you cannot actually afford $1,000, it helps you finances that manner, I might say, too.

Sean Pyles: Properly, Meghan, do you’ve got every other ideas that people remember after they’re deciding whether or not to make use of factors or money on a visit?

Meghan Coyle: The No. 1 factor I will say is that there is not any proper manner to make use of your factors. Once more, it is extra essential to maintain utilizing them so your pillow would not deflate, and have enjoyable. These are journeys, and so they’re for you.

Sean Pyles: Yeah. Properly, are you able to please give us your takeaway suggestions?

Meghan Coyle: Certain. So first, all the time calculate the cent-per-level worth of your redemption. If a flight prices $500 or 50,000 factors, you need to divide that 500 by 50,000, then evaluate that worth to NerdWallet’s baseline worth of how a lot your factors are price. If the redemption is greater, e-book it.

Second, turns on the market’s a ton of various level currencies. If in case you have a journey bank card or are contemplating getting one, search for alternatives to e-book with a switch associate, perhaps a global one, for much less factors.

And lastly, you do not need to hoard factors. Earn them after which use them as quickly as you may earlier than your factors devalue.

Sean Pyles: Nice. Thanks a lot for speaking with me, Meghan.

Meghan Coyle: Thanks for having me, Sean.

Sean Pyles: That’s all we have now for this episode. Do you’ve got a cash query of your personal? Flip to the Nerds and name or textual content us your questions at 901-730-6373. That is 901-730-NERD.

You can even e mail us at [email protected] Go to for more information on this episode. And keep in mind to comply with, charge and overview us wherever you are getting this podcast.

This episode was produced by Meghan Coyle. We had enhancing assist from Tess Vigeland. Kaely Monahan blended our audio. And an enormous thank-you to the professionals on the NerdWallet copy desk.

Right here is our transient disclaimer. We’re not monetary or funding advisors. This nerdy data is offered for basic instructional and leisure functions and will not apply to your particular circumstances. And with that mentioned, till the subsequent time, flip to the Nerds.

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