Why I Prefer Points and Cash Back

If you never travel, then you don’t need to read this article; read this one instead.  If you do travel, however, even infrequently, then you may want to keep reading.  Those of us who gather points and miles are always doing analysis.  What provides the biggest rewards for the least spend?  The short answer to that question is credit card signup bonuses.  If you prefer to use the same one or two credit cards all the time, however, then you have to maximize your return as best as you can.  That is what today’s article is all about, specifically a comparison between bank points, airline miles, and cash back.


Suppose I want to fly from Atlanta to Newark in April of 2017.  I have some options in terms of airlines since both Delta and Newark fly direct between those two cities (I could also fly Southwest and American direct to LaGuardia, but for my purposes, Newark is better).  Let’s look at the cash price, the price using United miles, and the cost using Chase Ultimate Reward points.

Let’s start with cash for non-stop flights:


As you can see, I have nonstop flights in both directions.  My total cost is $206.20.

Now, what if I happen to have a stash of United miles?  Choosing the same flights, I get this result:




As you can see, it will cost me 25,000 United miles + $11.20 in cash.  Let’s keep going, and then we will break down the pros and cons of the different approaches.

Finally, suppose I have cards such as the Chase Freedom, the Chase Sapphire (Preferred or Reserve), the Chase Freedom Unlimited, or the Chase Ink.  All of these cards earn Chase Ultimate Reward points, which can be used to book flights (including the ones I have above).  Now, I personally have the Chase Sapphire Reserve, and when I do my search, this is what I see:


It’s the same cash price ($206.20), but here it costs 13,746 Ultimate Reward points. 


So, what do we get from this?  Well, cash is easy.  Each penny is worth exactly a penny.  Points and miles are a little different, though.  Each point or mile is assumed to be akin to a penny, but the value of the point or mile can be more or less than a penny

Consider the value proposition of using United miles.  That $206.20 flight costs 25,000 miles + $11.20.  Subtracting the $11.20, my 25,000 miles are getting me $195 in value.  That comes out to .0078 cents per point, which is significantly less than the 1 cent cash approach.

On the other hand, Chase Ultimate Reward points are worth 1.5 cents per point when redeemed for travel.  Note: the factor is 1.5 with the Sapphire Reserve; it is 1.25 with the Sapphire Preferred or Ink Preferred cards (so the trip would require 16,496 points in that case).

So, in this case, Chase Ultimate Reward points > Cash > United miles because 1.5 > 1 > 0.0078.

Now, please bear in mind that I am looking at a domestic coach example here.  For domestic coach, miles from a specific airline are becoming more of a headache to use and are becoming worth less and lessThe real value of airline miles is in international business and first class, where you will get far more value out of your miles.  You may have to look hard to find the award seats, but the value can be tremendous.  Finally, people also use airline credit cards for things like free checked bags.  It’s a nice perk for sure, but I just gate check my bag.

For domestic coach airfare, if you do want to use airline specific miles, look at Southwest and JetBlue.  Both offer a very solid program in which your miles are fixed in value at about 1.4 to 1.5 cents apiece.  Moreover, you can use the points to purchase any available seats.  No need to look for award seats.

everyday preferred

Better for earning Skymiles

delta reserve

Better for earning status


So, why do I prefer points (such as Chase Ultimate Rewards) to airline miles?  Lots of reasons:

  1. Flexibility.  For example, Delta miles can be used on Delta flights or flights operated by their partners.  I can’t use them to fly United, American, or Southwest.  With Chase, AMEX, and Citi points, however, I have a much larger array of airlines to choose from.  I can also use them on hotels and rental cars.
  2. Transfer-ability.  If I have Chase points, I can keep them in that form until I see an opportunity to redeem a specific airline’s miles for the flights I want.  For example, United is a Chase transfer partner, meaning that I can transfer my Chase points 1;1 to United.  Above, I said that United was great for international business class.  But that doesn’t mean I have to accumulate United miles; I can accumulate Chase points and then transfer them to United when I see the flight I want.  Maintaining them with Chase preserves their flexibility until I transfer them.  Similarly, if a Delta flight is what I am aiming for, I don’t have to accumulate Delta Skymiles.  I can accumulate AMEX Membership Reward points and then transfer them to Delta.  Until then, I have more ways to use them by keeping them with AMEX.
  3. Faster point earning opportunities. If I have a typical (American, Delta, United) airline credit card, then I will get 1 mile for general spending and 2 miles for each dollar spent on the airline.  By comparison, Chase, AMEX, and Citi allow me to earn points using a variety of cards with varying category bonuses.  For example, the Chase Sapphire Preferred and Reserve give respective bonuses of 2x and 3x points on all dining and travel.  The Chase Freedom offers rotating category bonuses each quarter with 5x the points per dollar.  When you put a few of these cards together, you are quickly outpacing the miles you earn with an airline credit card, AND your points can be used in lots of different ways.

So, it’s easy to see why I prefer points to miles.  Why do I prefer points to cash?  Strictly speaking I don’t; cash is king.  I prefer points because by using the right cards, my points become worth even more when I redeem them.  Let’s take an admittedly extreme example.

If I have the Citi Double Cash card, I earn 2% cash back on everything.  If I spend $1,000 I get $20 back.  Period.  Conversely, if I have the Chase Sapphire Reserve, I earn 3 points per dollar on travel and dining.  Moreover, those points are worth 1.5 cents per point.  Putting that together, I am actually getting 4.5% back on each dollar in those categories.  So, if I spend $1,000 on dining, I am getting $45 back, though it’s in travel rather than cash.  Extrapolate that over potentially thousands in travel and dining, and you have a big gap.  Now, in fairness, the Sapphire Reserve comes with a $450 annual fee, but you get an easy to earn $300 travel credit each year, so it’ effectively $150 per year.  Stay tuned…my next article will explain why big annual fee cards are becoming so popular.

The three cards below form an incredibly strong cash back portfolio.

Discover It Freedom





So, let me close with this.  If domestic coach airfare is all you ever need, and you hate applying for new cards (which breaks my heart) then a good cash back strategy can be very productive for youIf you are willing to use a portfolio of cards all the time, then you should look at Chase Ultimate Reward and AMEX Membership Reward points because you can beat the cash back return with some effort.  If you want international business or first class, then you probably will want to use airline miles for those flights, though flexible point programs can usually get them faster with the better category bonuses.  My only recommended reasons for getting airline cards are checked bags, early boarding privileges, and greater status possibilities.

So, what do you think?  Are you a cash back fan, or do you want points and miles?

And if you have questions, just ask!

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