Cash Back Cards Vs. Airline Rewards Cards – How Much Is A Mile Worth Anymore?

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Many folks use credit cards and accumulate “miles” to use on an airline. Some cards only allow their miles on a particular airline and others allow them for any carrier. Some cards have restricted the times for airline reward miles use and other credit cards have no restrictions. To make matters even more confusing, some airlines restrict the number of seats a given flight allows for “reward” fliers.

So, given the restrictions that the airlines and credit card companies impose, the question of which is more valuable a cash back or miles earned credit card deserves exploration.

Experts estimate that a reward mile is generally worth less than one cent. The reason is that while estimates vary greatly, the common wisdom is that 75 percent of miles never are redeemed and of those that are, they are fallow for up to five years.

Cash back cards pay at least 1 percent and some have tiered purchases where on certain purchases you can earn 2, 3 or even as much as 5 percent back. In addition, it is automatic. Therefore, if you spend $3,000, you earn $30 with a cash back card or 30 miles with an airline reward card. Thirty dollars is something you can spend, 30 miles…………….not enough to do anything with, you wait to accumulate more. In addition, you always will spend cash, but you might not always want to fly somewhere. If you are not flying anywhere, your airline miles are worthless.

For the sake of argument, let’s say you are flying somewhere. Coast to coast an airline ticket is about $350. The credit card company charges you 40,000 miles to purchase that ticket so the value of a mile for this flight is $350/40,000 = $0.0875. Therefore, each mile is worth less than a penny. Had you used a cash back card, and saved the cash rewards and then purchased the exact same ticket you only spend $350.00 for the ticket and have $50 left over to buy snacks, a beverage and watch the in-flight movie. Clearly, the cash back card is a better deal.

Now, some cards that allow you to accumulate “miles” will let you exchange them for merchandise such as a touch screen device. If you have the miles and do not plan to use them then buying something with them is usually a good idea. However, an item that might cost $225 in the stores can easily cost you 30,000 from the rewards catalog.

If you do the math, the miles are still worth less than one cent, but at least you can use them. Overall, air miles are a generally lousy deal.