Credit Card Rewards: Points versus Miles

One question that I get all the time when talking about miles and points with people is talking about the difference between miles and points. There are airline miles, hotel points, credit card points, and other types of rewards and loyalty points. If you’re just starting out, it can be tricky to understand the difference between points versus miles. In this article, we’re going to take a quick look at the different types of miles and points out there. We’ll also explore the different ways that you can earn and redeem airline miles, hotel points, and other types of credit card rewards. We’ll cover how you SHOULD and SHOULD NOT redeem your credit card points and miles in order to get the best value.

After reading this article, you should have a better understanding of what features make a rewards credit card good, the credit cards with the best rewards programs, and how to maximize your points and miles.

How accruing credit card points is different from accruing miles

There are 3 main kinds of miles and points out there:

• Airline miles – these are issued by airlines. Traditionally, airline miles were given out at a rate of one mile per flown mile (hence the name, airline “miles”). Nowadays, very few airlines still award at that rate, but the name still stuck. You usually earn airline miles by flying with that airline or its partners or spending on a co-branded airline credit card.
  • A related type of airline miles are elite qualifying miles (EQMs). These miles are used by frequent fliers to get status with different airlines, and are not redeemable for flights.
• Hotel points – Hotels have their own different type of loyalty points and are generally referred to as hotel points. You earn hotel points by staying with that hotel brand or spending on their co-branded hotel credit card. Some hotels do use the number of hotel points you earn as a way to get elite status, but there will also or additionally be a requirement for a certain number of hotel stays or nights to get hotel elite status
• Bank points – Many banks issue their own proprietary type of points. These have names like Chase Ultimate Rewards, American Express Membership Rewards, Citi ThankYou points or similar. You can earn these bank points (also referred to as “credit card points”) usually through spending on the bank’s credit card or through its partners.
  • Bank points can often be used in one of two different ways. Either to transfer to hotel and airline transfer partners or for a fixed value (what I call “cash points”)

How to redeem your credit card points and miles

If you’re wondering what is the best way to redeem credit card points, there is not a concise answer as everyone’s situation is different. I’m a firm believer that the “best” use of your miles and points is the one that gets you where you want to go, when you want to go there, for the least money out of your pocket. So everyone’s “best” redemption will be different. If you’re still not sure how to best redeem your credit card points and miles, here are some rules of thumb:

How to redeem airline miles

Generally, the best use of your airline miles will be for flights on the airline in question or one of its partners. If you have American Airlines AAdvantage miles, your best redemption will be to use those miles to fly on American or its Oneworld Alliance partners like Cathay Pacific, Qatar, or British Airways. We used AAdvantage miles to fly business class on LATAM to Peru (when LATAM was in Oneworld).

An important note is that with many airlines (including American, United and Delta), there is not a direct correlation between the cost of a flight in cash and the cost of that flight using airline miles. It is common for a flight to have a low cash cost while still costing a huge amount of airline miles. Similarly, it is also common for a flight to have a huge cash cost while still costing a relatively small number of airline miles. The metric most people use when deciding whether to redeem miles or pay cash is called “cents per mile” (CPM)

(SEE ALSO: Why Cents Per Mile Redemption Value Truly Matters Now)

To calculate the CPM, just divide the cost in cash by the number of miles it would take. If you can get a $500 flight for only 15,000 airline miles, then your CPM is 3.33 (50000 / 15000). There is a wide array of opinions on calculating value of different amount of miles and points to know how much each type of miles currency “should” be worth.

How to redeem hotel points

Again, the best way to redeem hotel points is usually by spending them to stay at one of the brands of the hotel chain in question. If you have lots of IHG points, you can use them to stay at a Staybridge Suites, Holiday Inn Express, or Intercontinental hotel. Other uses of your hotel points are not usually as good of a deal.

One exception to this rule is with Marriott Bonvoy points. Marriott Bonvoy has a program where you can transfer 3 Marriott Bonvoy points to 1 airline mile. This is a holdover from when Marriott bought the Starwood Group’s hotels. You also get a 5,000-mile bonus if you transfer in groups of 60,000. That turns 60,000 Bonvoy points into 25,000 airline miles, which can be a good use of your points

How to redeem credit card points

Redeeming credit card points is a bit trickier because most credit card points can be used as both fixed value “cash points” or by transferring them to airline or hotel partners. To decide which way makes the most sense, run the numbers both ways. If your flight on United Airlines costs 25,000 MileagePlus miles as a United award flight, it will cost you 25,000 Chase Ultimate Rewards (because Chase transfers 1:1 to United). If that same flight costs only $200 to book with cash, then you’ll be better off using your Ultimate Rewards as fixed value points through the Ultimate Rewards portal

How NOT to redeem your credit card points and miles

Now that we’ve talked about how to redeem hour credit card points and miles, let me briefly touch on how NOT to redeem your credit card points and miles. Basically, any other way besides using airline miles to take flights or hotel points to book hotels is not a great use of your miles and points. Magazines, toasters, or using points on Amazon are all not great ways to use your miles and points. Even a statement credit is not getting the most from your points and miles, although for some cashback cards that is the only way you can redeem your awards. Just watch out for redemptions where you redeem your airline miles or hotel points for cash or statement credits – those typically come with VERY poor redemptions.

What is the value when you redeem your points for cashback?

If you have a card that earns cash back, a good rule of thumb is that when you redeem your points for cashback it will be at a rate of 1 cent per point. That doesn’t always mean you are only earning 1% cashback. That is because most cards have earning structures where you might earn multiple points for every dollar spent. Consider a card like the Chase Freedom Unlimited, which earns 1.5 Ultimate Rewards for every dollar spent, or the American Express Blue for Business card, which earns 2 Membership Rewards for every dollar spent.

Some cards do offer higher redemption amounts, usually when you book for travel. For example, if you have a premium Chase card like the Chase Ink Preferred or Chase Sapphire Preferred, you’ll redeem your points for 1.25 cents per point when booking through the Chase Ultimate Rewards Travel portal. If you have Ultimate Rewards through the Chase Sapphire Reserve, you’ll redeem points for 1.5 cents of value for each point.

What features make a rewards credit card good?

If you’re looking for a rewards credit card, you may be wondering what features make a rewards credit card good? A lot of it depends on your specific spending and redemption habits. If you’re a frequent flier or road warrior, it often makes sense to get the rewards credit card of the airline or hotel chain that you frequent most often. If you’re spending a lot of money on business or other expenses, look for a card that gives a bonus spend on the categories you spend on the most.

(SEE ALSO: No, Frequent Flyer Miles ARE for everyone!)

What are the benefits of using airline miles credit cards?

• Using an airline miles credit card can help you earn a lot of airline miles even if you don’t fly that often
• Some airline rewards cards can help you with qualifying or re-qualifying for elite status
• Airline rewards cards often give cardholders perks like free checked bags, airport lounge access or priority boarding order

What are the drawbacks of using airline miles credit cards?

• An airline rewards credit card can only help you when you’re flying that airline
• Airline miles are not as flexible as a card that gives you cashback
• Having all of your miles and points with one airline doesn’t protect you if that airline devalues their miles.

The credit cards with the best rewards programs

Our recommendation to find the credit cards with the best rewards programs is to diversify your miles and points. This can help protect you in case of an (inevitable) airline or hotel program devaluation. Nothing is worse than the feeling that you get when you’ve been saving up your miles for a particular redemption, only to find that the airline or hotel “reclassifies” it to now require even more points!

One way to protect yourself from this is to earn points in flexible and transferrable currencies, like Chase Ultimate Rewards, American Express Membership Rewards or Citi ThankYou points. Because those points can be transferred to a wide variety of hotel and airline partners, you’re protected. If Delta devalues their SkyMiles currency, you can instead transfer your Membership Rewards to Virgin Atlantic or JetBlue instead. If Marriott Bonvoy raises its reward prices, transfer your Ultimate Rewards to IHG or Hyatt instead.

Hopefully, this article has helped you know the difference between different kinds of miles and points and how to earn and redeem your points.

What’s your favorite type of miles and points? Leave it in the comments!

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