We’ve just got great travel tips and tools flying at you guys these days (Great Travel Tool: Get a Credit Card with a Chip, Credit Score Crash Course etc…). Next up is the litmus test for that question of: “should I book with points or pay with cash?” or “should I transfer AMEX points or use AMEX travel for my booking?” I created this for my own personal use as I was tired of pulling out the calculator every time I needed to run the calculation.

Here is the calculation going on behind the scenes:

1. First you’re finding a suitable award ticket and noting the price of the award and the taxes/fees you’re being charged (this is the “32,000 miles” and “$600 taxes/surcharge” in the example)
2. Then you should go and price out a flight on similar dates on Kayak.com, Orbitz, Expedia etc… and note the price and miles that you could be earning (“$1,500 flight” and “8,000 forgone miles”).
3. If you’re earning any additional miles/points from being an elite member of a program you should include these (“2,000 *bonus* forgone miles”)
4. This will give you a Price / Divided by miles calculation which returns the value you’re getting from the award booking in cents/point.

Very basic rules of thumb (these are all highly subjective):

• If the return is 2+ cents per point/mile, you’re OK to book with points, anything less and you should consider booking with cash.
  • This goes for American Express Membership Rewards points, Chase Ultimate Rewards points, Hyatt Gold Passport points, etc…
• For Starwood points, I generally look for a return of closer to 3 – 4 cents/point.
• You might be a little cash poor right now (hey, even the rich and famous have some “cash flow” issues every now and then), in which case you might be satisfied with a lower return of, say, 1.5 cents/point.
• Also, many hotel programs have their points at a level where a return of much less than 2 cents/point or much more than 2 cent/point is acceptable.
• Why the 2.0 cents per mile/point threshold? Basically, because there are a number of cash back reward credit cards out there that give you 2% cash. So, if you’re usually getting < 2 cents/point on your AMEX points, you should consider one of these cash back cards. It will allow you to get a fixed 2 cents/point AND you won’t have to use complicated award booking sites but will instead be able to EARN miles/points while staying/flying/riding (the train).