Originally Posted by yellow77

Flyertalk is not the place to find a lot of people who think this is the right answer, but if you use miles for travel in Y class, particularly on popular routes, then cashback is probably better. For example, using Amex Blue Cash's new scheme, after $6500 in charges you get 1.5% cashback on all purchases except that you get 5% back on supermarkets, drugstores and one other category I forget right now. (During the first $6500 of charges per year, you get 0.5% and 1.5%, so if you do it right and buy low-reward items only for the first $6500 of purchases, you forgo 1% reward cashback on $6500 of purchases, that is, you can think of the card as charging you a $65 fee and then giving you 1.5% and 5% back on all purchases (up to $50K per year).

Whether this is a better deal for you depends on what you use miles for. A 25K domestic award, say BOS-LAX return, for example:

- if you pay on a cashback card, it costs you maybe $300, and you get $4.50 back and also earn at least 2689*2 = 5378 miles (more if you have status or take a connection) and 5378 status miles (and maybe also 1000 miles for booking online)
- if you get an award, it costs you 25K miles plus maybe $10 taxes
- so the question is whether $295.50 less 5378 miles less 5378 EQM is worth more than $10 plus 25K miles
- even ignoring the EQM, the award is only a better value if you value 30378 miles at less than $285.50, that is, if you value miles at less than 0.94c each. But when you're choosing your credit card, roughly speaking you're choosing between getting 1 mile per dollar, or at least 1.5c per dollar, so you have to value these miles at (at least) 1.5c each for it to make any sense to collect them. So the domestic award in Y makes no sense for you.

Now, maybe you want to use the cashback card for shorter trips. For the trip to be worth 25K miles if you're earning (worst case) 1.5c per mile, and (worst case) the trip is short so you only forgo earning 1000 miles total, then a little algebra will tell you the domestic ticket has to cost at least (25K + 1K)*1.5c + $10 taxes = $400 before you have _any_ chance of being ahead on miles.

Other examples are the same: coach to Europe for 50K miles would have to cost (50K + 7K)*1.5c + $100 taxes = $955 before you have any chance of coming out ahead by using miles rather than cashback cards. Coach to Australia: (60K + 15K)*1.5c + $100 taxes = $1225. And all this assumes you have no status - if you're mid-tier and earning a 100% flown mile bonus, that transcon has to cost (25K + 10K)*1.5c + $10 = $635 before you have any chance of coming out ahead; the coach trip to Europe has to cost (50K + 14K)*1.5c + $100 = $1060; coach to Australia has to cost (60K + 30K)*1.5c + $100 = $1450.

And remember this ignores the EQM - if you fly an award, you're not earning status miles, so in reality miles look even worse than this for coach flyers.

It also ignores the fact that you can do other stuff with the cash back, in case you don't want to fly any more! Plus, the cash ain't going anywhere, whereas despite what Randy says, there's always some chance your miles will be devalued or lost any time and without much warning.

For whom would it make any sense to use a mileage earning card? Well, first, if you can get more than 1 mile per dollar, it all starts to look a little better. For example, Starwood Amex will give you 1.25 miles per dollar, which brings those figures down some. Second, if you fly premium classes, it makes more sense to use miles - though not as much as you think. If you can find a saver J award to Europe for 80K miles, you'd come out ahead if you paid less than (80K + 11K)*1.5c + $150 taxes = $1515. You may be able to find this kind of price on sale anyway. First class it's even clearer you want to use miles.

The hotel calculations are similar - if you like luxury chain hotels, the Starwood Amex is fine. If you're happy with a cheaper hotel or don't like chains (or travel to chain hotel-less places), then take cashback.

If you were a huge spender, another reason for not using cashback is that the rewards are usually capped (for Amex Blue it's only the first $50K of spending per year). If you spend a bit more than $50K, just get another cashback card (eg Citibank Dividend Select or Fidelity MBNA). If you spend millions, an uncapped mileage earning card may be a better deal (less hassle). But that doesn't sound like your problem.

Last but not least - the other time you need miles is to make last minute trips which are far cheaper using miles. But if you fly enough, you earn those miles from flying anyway. If you don't fly much, then a mileage earning card may start to look better for you.

So: use cashback unless you want to fly premium classes, or unless you never fly otherwise. And sorry about the essay, I just think a lot of people on FT have this one 100% wrong. Cashback is better for 90% of people out there.