Paying with rewards points or cash: how to choose?

In the Milesopedia Facebook community, we’re often asked whether it’s better to use reward points for a booking or whether paying in cash would be more advantageous. 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.

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 an airline ticket, treat yourself to products or get 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.

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

• Total price: this represents the total cost of the reservation (including taxes) when paying in cash.
• Points: this represents the number of reward points required in exchange for the reservation.
• Taxes and surcharges: this represents the taxes and surcharges that we must pay in addition to the points to make our 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

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

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

This results in a valuation of 1.6 cents per point.

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

For the flexible points rate only:

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. Thus, I have two tips for you:

• Either use the Marriott Bonvoy™ American Express^® Card to earn 5 Marriott Bonvoy points per dollar on your hotel reservation (especially useful in Canada)
• Either use the HSBC World Elite^MD Mastercard^® to earn 6 points per dollar (equivalent to 3%) and pay no foreign conversion fees (vs. 2.5% fee with the Marriott BonvoyTM American Express^MD Card).

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. It is therefore necessary to be careful when calculating the price of the reservation not to overestimate the valuation.

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 with Air Canada instead of Air France?

• Use the same rate class for evaluation

But, would you really pay $3,500 for a 7-hour one-way trip in business class? You might be satisfied with a flight in economy privilege class that costs $800. Isn’t that right?

To make a good decision, it is important to consider not only the value of the rewards points, but also the benefits of each option.

Cancellation and change policies for points bookings are often better than those for cash bookings.

One glaring example was during the spring of 2020 in the midst of the COVID-19 pandemic where people who had booked with points were usually able to get everything back instantly.

For most hotels, cancellations when using points can be made without charge up to a few days before the arrival date. For a cash equivalent policy, you will need to compare with a refundable rate.

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 are planning to take a checked bag, you should not compare it with the Light fare, but with the standard Air France fare.

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.

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.

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 price for a one-way ticket is often much higher than the price of the round trip divided by 2.

For example, for a round trip flight from Montreal to Paris with Air France, you must meet several criteria in order to benefit from the round trip fare.

This allows for a mix of loyalty programs, airlines and airline alliances. For example, flying with Star Alliance on Air Canada using Aeroplan points and returning with Skyteam on Air France using FlyingBlue 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.

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

For example, the Aeroplan program allows for one additional stop for every 5,000 Aeroplan Points. See Aeroplan Airline Award Rules.

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 traveling on fixed dates or when traveling with family.

While many hotel programs (Hilton Honors, Marriott Bonvoy) count paid nights with points toward higher status, the opposite is true for airline programs that do not count segments and miles flown with award tickets.

Moreover, when one of the status criteria is the amount spent during the year, it is obvious that a reservation in points does not allow one to reach it.

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

Some point bonus, double-night or point multiplier promotions require that all or part of the reservation be paid in cash to qualify.

Other promotions offer a discount but only on cash transactions.

It is therefore important to read the detailed rules before using your Reward 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 are only a few points short, some programs will offer to purchase the missing points at the time of payment.

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

Many programs offer to convert reward points into company gift cards. 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 great option when the value you would get from using your Aeroplan points for the flight 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.

We hope this short guide will help you make informed decisions when choosing between paying with Reward Points or Cash on your next booking.

The important thing is to make the most of your points! Join the Milesopedia community to discuss this topic.