broadwayblue

Yes, I was using 2% as my example because that's the best rate you can find on a flat cash back on everything card (and as you say that might not even be an option at the moment with the Schwab card no longer available to new applicants.) Even having the Schwab Visa, I still put every purchase I can make on my SPG Amex instead...as I value a Starpoint at more than $0.02 (as stated above.) I could get one of those cards that offer 5% on groceries or gas, but I don't spend enough on those categories to really make it worth my while.

ajnaro

In the case of a BA flight bought with BA miles, you have to take into account that you will have to pay fuel surcharges and that can be quite expensive. Of course, you could use AA (except to UK from US) or LAN or perhaps other BA partners. But if you have to pay fuel surcharges, most of the apparent value of the 'free' ticket is gone.

The general moral is that if you use miles for premium travel (first or business) or five-star hotels you will get good value in terms of the corresponding cash pricing. For anything else, cash rebates may well be better value and will certainly involve less hassle for booking.

Ken in Phx

That couldnt be further from the actual truth. I stick with Hotel stays only and my points for resort/beach properties than arent 4-5 star but in popular places run 200-300 a night. Using Marriott Hilton and Starwood pts i can easily earn 3-5% return on my dollars to capture a desirable room (OceanView -- Corner room etc etc)

Cash back cards only work if you arent savvy enough or dont want to play the game to travel cheap/free.

Mountain Trader

I tip my hat to the FF program designers, as they continue to benefit from the many participants' lack of understanding of basic economics. This thread, like most valuation discussions, makes almost no mention of factors impacting many users, such as:

1. Time Value of Money-Points I earn now will not be used for 4-5 years. Whatever your view of cash returns down the road, it isn't zero.

2. Availability-Less of a problem with some hotel programs, but if you think this can be avoided by booking ahead, spend some time reading the Delta boards.

3. Program Downgrades-I imagine there is some program that has lower redemption rates than it did 4 or 5 years ago, but none come to mind.

Each of the above factors should cause most users to discount the value of program miles by a big percentage. Yet they are rarely mentioned in these discussions, which I guess is to be expected since this is a site devoted to FF programs. This is not to say cash is always better than miles/points. It is just noting that factors like this apply to many users, yet they're often not taken into account. Just because something is hard to value doesn't mean it has no value.

One other note-the comment that 2% cash back can't be obtained (now that new aps for Schwab are not being accepted) ignores the ways other cards can be used to get various cash rebates for certain purchases.

ajnaro

I think there must be a misunderstanding here. For me, any hotel at $200-$300 per night isn't low class. It is precisely this category of hotel rate, whatever it may be rated in terms of stars, for which I use points. But I really only use points for hotels when the rate has been jacked up due to relative high demand at a particular point in time. Otherwise, various discounts (such as AARP, etc) usually bring the rate down well below the $200 mark.

sharmaintl

You make an excellent point here that many people miss. There is almost always fees and/or surcharges associated with redeeming miles. It devalues the miles you earn. I wrote a blog post recently going extensively over the various costs and fees charged when redeeming miles.

Hotel redemptions on the other hand are almost always for free. There is an argument there saying that hotel redemptions are worth more than airline redemptions. I think it all depends upon what you need.