Signing up for an airline’s frequent flyer program is a no-brainer. You can earn points or miles each time you fly or swipe your credit card, and once you save up enough points, you can cash them in for a free ticket. But getting an award ticket for “free” doesn’t always mean you’re getting a good deal. Airlines (and hotels) have designed their programs in a way that it’s not always easy to understand the true value of your points. Here’s a helpful guide on when to use your points or miles versus when to save them and use cash instead.

The Cents-Per-Mile Calculation

When deciding whether to pay for a flight with cash or points, travel experts say to start with a simple math equation to calculate the value of your redemption in cents per mile (CPM). This helps you understand the redemption value you’re getting from a specific trip. To do this, follow these steps:

• Start with the price of a ticket if you were to pay in cash. 
• Next, subtract any taxes or fees you would have to pay if you used points. (Typically, award tickets have mandatory taxes that cannot be covered with points.)
• Take that total and divide by the number of points you’d have to use for that ticket if you were to pay that way instead of cash.
• Multiply by 100.

Say a flight from L.A. to Denver costs $400 round-trip in cash or 20,000 points plus $20 in taxes. In this case, the value of the redemption would be 1.9 cents per mile. 

So, what determines a “good” use of your points in terms of cents per mile? The majority of points and financial experts — from The Points Guy to NerdWallet — say to aim for at least 1.5 to 2 cents per mile (or greater). The above example, then, would be a good opportunity to use your points. However, if the cost of the award ticket were 40,000 miles instead of 20,000 miles, the CPM would be around 1 cent per mile. In that case, it’d probably be smarter to save your points for a better redemption. 

When It Makes Sense To Use Points

Of course, there are other things to consider, too. While the CPM equation is a good starting point, ultimately there’s no one-size-fits-all answer for whether you should save or use your points. That comes down to a number of individual factors, from your vacation budget to your travel habits and how many points you have saved up in your accounts. Some people employ an “earn and burn” strategy, using their miles as soon as they have enough for a ticket so they minimize the amount of cash they’re spending on tickets. Others like to save up their points for specific redemptions.

Speaking to the latter, often one of the best ways to use points is for first- or business-class tickets on international flights, because you can often get more value from these types of redemptions. A cash ticket for business class can easily be 10 times the cost of an economy ticket, while the spread in points is often less. 

For example, during a recent search, we found a $970 fare from Chicago to London in coach on United. The same ticket cost $6,995 in business class, which is over seven times more expensive. Using MileagePlus miles, however, the economy ticket was 40,000 points, and the business-class ticket was 200,000 points (five times more expensive). While not everyone will have enough points in this situation, if all else is equal, it’s a better deal to use the miles for business class — you’ll get around 3.5 cents per mile, versus around 2.4 cents in economy class. 

Flexibility is another factor. Most cash tickets aren’t refundable unless you pony up for a higher fare. On the other hand, most airline programs let you change or redeposit an award ticket for free or for a nominal fee. So, if you think your plans may change, it might be a good idea to use points instead of cash.

Another consideration is whether your points are expiring. With some programs, your points never expire, but with others, you may lose them after a year or two of account inactivity. It’s always a good idea to periodically keep tabs on all your points balances; if you’re sitting on a large pile of points that are expiring soon, you should use them before you lose them, even if the redemption value is less than ideal. 

When Paying Cash Might Be Better

In general, you’re better off paying cash for inexpensive tickets. Once you do the math, these tickets often represent a poor redemption rate of around 1 cent per mile or less. And by paying cash for cheaper tickets, you can save up your points for a more valuable redemption — for example, a special trip to Europe in business class. Those types of tickets offer great value compared with paying cash, but they also often require a substantial number of points, so you’ll want to save up as much as you can by not using them for shorter, inexpensive tickets. 

It might also pay to choose cash if you’re chasing elite status with a particular airline program. Typically, award tickets do not count for elite qualification, so you’ll need to pay cash to rack up enough spend to qualify for status. There are some exceptions, however, like Delta’s SkyMiles program, which counts award tickets toward Medallion Status.