Paying With Rewards Points or Cash: How to Choose?

NBC Rewards Points Program, RBC Avion, AIR MILES, Aeroplan or … Cash?

In the Milesopedia Facebook community, we’re often asked whether it’s better to use reward points for a booking or whether it would be more advantageous to pay in cash. There isn’t just one right answer, as each case is different.

In this guide, you will find the information you need to make the right decision for your situation.

Valuation of Reward Points

When we talk about reward point value, we’re talking about the value you’ll get when you redeem reward points to book a hotel night, buy a plane ticket, treat yourself to products or purchase gift cards.

To help you, we regularly update our reward point valuation estimate for dozens of loyalty programs. But I’ll explain how to calculate all this.

Calculation of Reward Points

To calculate the valuation, 3 parameters must be taken into account:

• Total price: Total cost of reservation (including taxes) when paying in cash;
• Points : Number of reward points required in exchange for booking;
• Taxes and surcharges: Taxes, other fees and surcharges that must be paid in addition to points to make a reservation.

The calculation is done by dividing the amount saved (Total price – Taxes and surcharges) by the points needed:

Valuation = (Price – Taxes and surcharges) / points

Example 1: Aeroplan Points

Let’s take an example of a flight on Air Canada between Montreal and Paris, in Privilege Economy class, with Aeroplan points or in cash:

789 – 67 / 46,200 = 1.6 cents per point

This results in a valuation of 1.6 cents per point.

Example 2: Hotel Reservation

Let’s take an example of a hotel room, with Marriott Bonvoy points or cash:

For the flexible points rate:

201 – 0 / 10 000 = 2 cents per point

This results in a valuation of 2 cents per point.

For the flexible rate in exchange for Cash + points:

201 – 81 / 4,000 = 3 cents per point

This results in a valuation of 3 cents per point.

In the Cash + Points option of Marriott Bonvoy, be aware that the expense will be based on the currency of the country where the hotel is located. So, I have two tips for you, because you can either use:

• The Marriott Bonvoy^® American Express^®* Card to earn 5 Marriott Bonvoy points per dollar on your hotel reservation, but with a 2.5% foreign currency conversion fee if used outside Canada;
• Scotiabank Passport Visa Infinite + card to earn 1 Scene+ point per dollar (equivalent to 1%) and pay 0% foreign currency conversion fee if used outside Canada.

Selection Bias

By using our rewards points we have access to hotels or airline seats that we probably couldn’t afford if we had to use cash. When calculating the price of a reservation, you must be careful not to overestimate the value.

Here are 2 common mistakes:

• Use the same flight on the same airline for the evaluation.

But would you really pay $140 more to fly Air Canada instead of Air France?

• Use the same rate class for evaluation

But would you really pay $3,400 for a 7-hour one-way flight in business class? You might be satisfied with a flight in economy privilege class that costs $800. Right?

Debating Between Reward Points and Cash

To make the right decision, it’s important to consider not only the value of reward points, but also the benefits of each option.

Benefits that Apply ONLY when Using Reward Points

Cancellation Policy

Cancellation and modification policies for reservations paid in points are often more favourable than those that apply when paid in cash.

For most hotels, cancellations when using points can be made without charge up to a few days before the arrival date. For an equivalent cash policy, it’s necessary to compare with a refundable rate.

Baggage Fees and Seat Selection

Better baggage allowance and seat selection are sometimes included when using points.

For example, for a ticket on Air France, the Light fare does not include baggage or seat selection when paying in cash.

While seat selection and baggage will be included when redeeming Flying Blue miles:

So if you’re planning to take a checked bag, it’s not with the Light fare ($614) that you should make your comparison, but with Air France’s standard fare ($689).

Fifth Night Free

When using points to book hotel nights with Marriott Bonvoy and Hilton Honors, the fifth night is free.

This is a great advantage when you stay 5 nights in the same hotel.

Resort Fees

A little-known benefit for Hilton Honors hotels is that resort fees do not apply when the reservation is paid for with Hilton Honors points.

Check out this example for a hotel near Disney World:

Between the fifth night free and no resort fees, it makes using Hilton Honors points a great option.

One-Way Tickets

With most airline programs, you can book a one-way ticket for half the number of points/miles required for a round trip.

When you pay for your ticket in cash, the one-way price is often much higher than the round-trip price divided by 2.

For example, for a round-trip flight Montreal – Paris with Air France, you need to meet several criteria to qualify for the round-trip fare.

This allows for a mix of loyalty programs, airlines and airline alliances. For example, you could fly out with Star Alliance on Air Canada using Aeroplan points, and return with Skyteam on Air France using Flying Blue miles.

This feature also offers the advantage of being able to book award tickets for the outbound flight without waiting for the return ticket to be available for booking.

This is very useful when you want to secure seats on a flight that doesn’t offer many award tickets.

Adding a Stopover on a Route

With some companies it is possible to add one or more stopovers either free of charge or with a small supplement.

This is the case, for example, with the Aeroplan program, which adds one stopover for 5,000 Aeroplan Points. See Aeroplan Flight Rewards Rules.

Benefits that Apply ONLY when Paying in Cash

Flight Availability

With the exception of a few airlines such as Air Canada for Aeroplan, the number of award tickets available per flight is limited.

We are talking about a few seats (often 3-4) being available on each flight. This is an important constraint when travelling on fixed dates or when travelling with family.

Building Towards a Status

Several hotel programs (Hilton Honors, Marriott Bonvoy) count nights paid with points towards a higher status.

But it’s quite the opposite for airline programs that don’t calculate segments and miles flown using award tickets. No points are earned when you pay with points!

Moreover, when one of the status criteria is the amount spent during the year, it’s clear that a booking made with points doesn’t contribute to reaching that goal.

Consider the Aeroplan 25K Elite status, which requires $3,000 in Status Qualification Dollars (SQD), or the Marriott Bonvoy Ambassador status, which requires $20,000 in annual expenses.

Eligibility for Promotions

Some promotions offering bonus points, double nights, or point multipliers require that the entire or part of the booking be paid with cash to be eligible.

Other promotions for reward points or those offering a discount are only available on cash transactions.

It is therefore important to read the detailed rules before using your Reward Points. Sometimes it pays to pay in cash!

Tips for Taking Advantage of the Possibilities

Buy Points

Many programs offer you to purchase points, which can be used to take advantage of the benefits of paying in points.

And it’s not uncommon to see promotions up to a 100% point gain on their purchase.

• Aeroplan
• Hilton
• Bonvoy
• Word of Hyatt
• Alaska Mileage Plan

This becomes really interesting to earn the number of points needed to get 5 nights for the price of 4 at hotels in the Hilton Honors or Marriott Bonvoy programs. Or to sleep comfortably in business class on an overnight flight.

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If you’re just a few points short, some programs will offer you the opportunity to purchase the missing points when you pay.

One example is Aeroplan, which offers to use fewer points when booking and pay the rest in cash:

Redeem Your Reward Points for Gift Cards From the Company

Many programs offer the option to convert reward points into gift cards for the company. They are applicable on a booking, which can allow you in this case to take advantage of the benefits of payment with cash.

An example with Air Canada:

This is a very good option when the valuation you would get by using your Aeroplan points for flying is below 1 cent per Aeroplan point.

Another example with Best Western:

This is a great option when the valuation you would get using your Best Western Rewards points is below 0.66 cents CAD per point or 0.5 cents USD.

Bottom Line

The key is to weigh the pros and cons according to your situation.

With a little thought and calculation, you’ll find the optimal strategy for getting the most out of your points… and enjoying yourself at the same time. After all, the important thing is to enjoy your points!

Join the Milesopedia community to discuss this topic.

How do I redeem my NBC Reward points?

The best way to reward yourself is with travel! Read our step-by-step tutorial on how to use your NBC rewards points.

How do I earn points?

Check out the loyalty programs you frequent. Then collect points from your favourite program by paying with a credit card, to earn points or cash back from your credit card at the same time. The golden rule is to pay off your card balance at the end of the month.

For example, read our article on the best combinations of rewards programs and grocery store credit cards.