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Among the most vexing questions for travel award aficionados: Should you pay for your next vacation with cash or points?
And sometimes, there’s a third option: Paying with a combination of currencies (points or miles, plus good ole money).
That third combo option is becoming increasingly common in the travel industry, but the choices can feel paralyzing.
When is it better to book a hotel with points? When is it better to book with cash? When is it better to book with cash + points?
Here’s how you’ll know which option is best for you.
Do the math to calculate the best value
The caveat: Points and miles are made-up currencies with no formal value (and their values can fluctuate wildly based on factors like location and date of stay). That said, NerdWallet analyzed more than 2,500 real-world data points of U.S.-based airline and hotel loyalty programs to come up with a comprehensive valuation of loyalty program points. Find out how much your hotel or airline points and miles are worth here.
Once you have a set value of how much your loyalty rewards are worth, the rest is a simple calculation:
Number of points needed to book * value of points = X
If X is less than the cost to book in cash, you’re getting a better value paying in points. If you’re looking solely at airfare, we’ve built a flight mileage calculator to do the work for you.
It gets a bit more complicated if you want to book with a combination of cash and points, but don’t sweat:
(Number of points needed for combo booking * value of points) + Cash portion of the booking = Y
If Y is less than the cost to book in cash, it’s generally a good idea to use your points, you’re getting good value.
Here’s an example: If your choice is to pay $500 for a room or $200 plus 25,000 points. Which is the better deal? Let’s say these hotel points are worth 1 cent each.
25,000 points * .01 = $250 value
$250 + $200 (the cash portion of the combined booking option) = $450
$450 is less than $500, making this example of a combo cash and points booking a good deal.
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Why book with a combo of cash and points?
Booking with a combo of cash and points is almost never the best overall value based on pure numbers, but that doesn’t mean paying with cash and points is a bad idea. The benefit of booking with a combination extends beyond just pure numbers.
You don’t have enough points to cover the entire cost
Let’s say you’ve run the numbers, and booking with points is the "best value." But what if you don’t have enough points? In many of the scenarios outlined above, booking with cash + points is the second-best value behind booking with all points.
Sure, you’d get a better return paying in all points. But if you can’t do that, then you can do the next best thing by utilizing cash + points.
You don’t want to hoard points
Booking with points (or cash + points) is great for people who find it unsettling to sit on a currency that’s backed by absolutely nothing. In fact, many of the points buffs will tell you to keep your bank account balance high, but to keep your loyalty program account balances low. Why?
Points devaluation: There’s not much holding back Hilton from hiking up hotel points rates on a whim. There’s no stopping Wyndham Rewards from becoming the hotel of hyperinflation.
Loyalty programs reserve the right to devalue their already-made-up currencies at any time without notice. It’s called devaluation, and it means that your points almost always become less valuable over time. To make sure that doesn’t happen to you, spend — don’t save — those points.
Bankruptcies, acquisitions or mergers can drop point values: If the company you have loyalty rewards with goes out of business, then there’s also a chance your points will be worth nothing. Sometimes, when hotel chains or airlines are acquired by another hotel or airline company (whether through mergers, sales or bankruptcy), your points automatically transfer to the new loyalty program — but it’s not a guarantee. And even if your points do transfer, they might not be worth as much as they once were.
You want to save your cash
Sitting on a pile of points might sound exhilarating, but it’s not all it’s cracked up to be. Sure, you might have enough miles for a business class seat on Japan Airlines from New York to Tokyo, but frequent flier miles don’t do you a whole lot of good when your travel plans this year went from being at the Olympics to road tripping in an RV.
And maybe your focus this year is on something else entirely, like keeping up with a mortgage payment or covering moving costs. Even if it’s a better “deal” to pay with cash, you might be better off saving your money for higher priority purchases and using up some points on the reservation.
The bottom line
From a mathematical standpoint, it’s often a toss-up whether you get a better value from booking travel with cash vs. points, but it’s almost never the best value to book with a combo of cash + points. That said, there are a lot more factors to consider than just pure financial value.
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