The Points Guy has published new “data-driven” valuations for U.S. airline miles and for credit card points, but they don’t… show you much about the data, and the methodology they offer makes very little sense. It’s nonsense built on stilts.
They’ve picked out some flights to compare prices in cash and in miles, and then declared the value you’re getting for your miles on those flights is the value of miles. And that’s just wrong.
- This treats points as being worth the same as cash used towards an airline ticket. But points are not worth as much as cash, because cash can do more than buy airline tickets. You can spend cash on anything you want, not just on what an airline says you can, and you can invest cash to earn a return. You should discount the value of miles for their lack of flexibility compared to cash.
- They expressly ignore the way to get the most value out of your miles, which is to redeem them at the ‘saver’ level which mostly means redeeming them for partner award travel (Delta excluded, since when originating in the U.S. they’ve made those awards just as expensive or more expensive than traveling on Delta).
You’re going to get a lot more value out of United miles redeemed for international business class partner awards than spending money on United travel, and the same is usually true for spending American and Alaska miles.
It’s a harder exercise, so it’s understandable not to try to undertake it, since you have to discount the miles for the flexibility needed to use them. But turning a bling eye to the entire set of awards isn’t the way to address that challenge.
Yet while The Points Guy sets out a methodology that airline miles should be valued based on the travel those miles buy on the airline that issues them (how much American Airlines travel American’s miles buy, etc.) they take a completely different approach with credit card currencies.
They value a United mile at 1.45 cents apiece, and a Delta mile at 1.2 cents apiece, and ignore partner awards because “the capacity controls on these tickets — especially in premium cabins — mean that they’re hard to count on as a reliable aspect of a given program.”
Yet transferable currencies are valued based on their ability to do things like “jump on a once-in-a-lifetime redemption like Singapore Suites.” In what world can those two things make sense at the same time?
In the former case these awards are excluded, in the latter they’re the driver of value, and so Chase points are valued at 2.05 cents apiece and Amex points at 2 cents apiece.
Oddly TPG used to (over)value American Express and Chase at the same two cents. Now Chase points are treated as more valuable, even though there have been no improvements to the value of Chase points. They haven’t added transfer partners. Many of those partners have devalued their underlying currencies, which should make Chase’s points worth less not more. I have theories on what’s going on here, but I haven’t had anyone from within TPG confirm them yet.
Notably, they provide less detail on the routes they chose to compare when valuing airline miles and they chalk up their valuation of credit card points to a “proprietary formula.”
Ultimately, when trying to value airline miles, they’re answering the wrong question. Their data doesn’t help tell you “what are miles worth?” the data they say they’ve collected is about “how much airfare will miles buy?” They are related, but the second question is only one piece of of what you need in order to answer the first.
That’s because even if you can get $14 in airfare for 1000 Alaska miles you’re still going to prefer $14 cash over 1000 miles if you had to choose. They aren’t equivalent, and the ‘value’ of miles in cash is the point at which you’re indifferent to holding the miles versus cash.
Finally, something that the TPG analysis overlooks completely is that when they compare the cost of a paid ticket with the number of miles an award costs, the award also gives up earning miles. They should be backing out the mileage-earning foregone from their valuation or that’s another way they systematically overvalue miles. If a mile were worth 1 cent, a general member gives up 5% by redeeming and a top tier elite gives up 11%, which needs to be backed out.
If they simply presented “here’s how much airfare your miles can buy right now” this would be an interesting exercise, enlightening even. However it purports to prove more than it does, and in doing so may lead readers astray overvaluing their miles in comparison to money.
Meanwhile claiming that a Chase and American Express point are both worth 2 cents or more might lead someone to be happy with earning just one point per dollar with their spending, believing they’re doing as well as earning 2% cash back on that spend. I’d never buy those points at 2 cents apiece, except to put myself over the top for a specific award when I already had most of the points. Would you?
Also, “once in a lifetime” value is not valued you’d never otherwise opt for that route or cabin. The value is the replacement cost, that is, what you’d otherwise buy. That you get a nicer seat or some food is nice but most who care about points wouldn’t otherwise pay for it.
Valuing credit card and airline miles differently makes sense in that you can transfer Chase points to Krisflyer, which has more availability for Singapore Airlines seats than they provide to Star Alliance partners… so yes, you would include Singapore Airlines redemptions in Chase point value and not in United point value, since you can use Chase points to book Singapore awards though Singapore and you generally can’t use United miles to do so.
Feel like that’s the kind of thing a foremost expert in miles and points would understand…
My favorite TPG hilarity with value is that they assign a blanket value to elite status from different hotel chains. I’ve stayed with IHG more than anybody else this year. I wouldn’t put Platinum status anywhere near the thousand dollars or so they list it at.
Must be a lot more value on partner airlines. Delta has been offering me upgrades at $0.01 per mile vs. cash on both domestic and long haul for first class and business.
I think the over-valuation of miles and points is pretty chronic in this industry, where those of us who play the “game” want to believe we are smart, and many of those who want us to play the game also want to sell us credit cards. To me, the value of a point or mile to me has been pretty simple and changes over time, depending on many factors, not the least of which is what currencies I hold at any particular time. But, the bottom line is simple this: What is the value at which I am indifferent to whether you give me a point or give me cash. In other words, what is the most I would be willing to pay for points at the moment you are asking me the question of their value. Or, if I already hold the points, then I guess the question is at what value would I sell them.
If I would not by 74,000 Singapore miles right now for $11,000, then suggesting they are worth the value of the ticket they can obtain is absurd. I find that in general, people think the value of their point is worth a heck of lot more than they would pay for them. And, in fact, people often value their points to be worth more than they can buy them in unlimited amounts. If you ask me at a moment when I need 75,000 miles to book a unicorn first class trip to Australia, but I only have 74,000 miles, how much I value 1,000 miles, I might say $500! But by and large, I generally find that the point at which I’m a buy or most currencies is usually around 1.1 to 1.4 cents. Less for Delta. A little more for Hyatt/Chase. But, in general, I think 1.2 works as a good rough valuation for pretty much everything, for every purpose that those of us who play this game can think of. You can read the blogs about people who have gotten shut down just to have the ability to cash out Aeroplan miles at 1.25 cents per point. Getting ultra granular strikes me as angels dancing on the head of a pin. Most people can safely say 1.2 cents, give or take, and be right.
You are all participating in a (monthly?) masturbatory exercise attempting to assign a US dollar value to any program that does not have a cash out feature, i.e., non of them right now. Any program that can be devalued at will and is pegged to airfares raised, lowered and capacity controlled at will is mathematically unsound.
Thanks for pointing this out.
I stopped reading TPG years ago because their posts make no sense and they are full of false info.
I seriously do not understand how that website is still in business.
Gary, yes you give up earning miles when using award miles to ticket versus paying cash. But with award mile tickets you can cancel even on the day of travel and all of your miles go back into your account. A cash fare may or may not, depending on the fare type, provide a travel credit that must be used with AA within one year of the original reservation date. Being amongst the newly retired, I really like using award miles because of the option to easily cancel just hours before departure and use the same number of award miles just a week or two later. Plus using award miles instead of cash is more valuable for the elderly as we need to spend down our award miles balance to near zero before our final act (cardiac arrest and brain death shortly thereafter). Of course another option is to transfer (at a cost) miles as a gift to a friend or family member if one has enough time to do so (no sudden fatal cardiac event that you never saw coming) and you feel like your traveling days by airplane are probably over.
Valuing miles is always dependent on the patterns in which people obtain and spend them. We’ve all seen great deals and terrible redemptions, but where the inflection points occur is very much situation dependent.
And a mile I can get cheaply and redeem for a good award is more valuable to me than one from a currency where the redemption value may be similar but it’s slow and costly to build up to that award, because engaging in the former program means I’ll be traveling more.
I think your post is a bit too Keynesian for me, Gary. I have enough self-paid travel that I can usually use up miles before they expire (or lose value due to points inflation). The chance that I become so liquidity-constrained that I regret having not spent miles is also too remote.
In my mind, the two more important factors when valuing miles and points are:
1.) You really need to limit yourself to realistic cash alternatives. If you wouldn’t pay X dollar for a long-haul business class ticket, X is nothing which should serve as a reference point when determining the value of a mile.
Instead, if you want to do some math to approximate your subjective miles/points value, use data where you would actually cough up the cash if you couldn’t use an award.
2.) When doing the math, you need to factor in the value of miles/points you would earn if paying cash (unless that’s negligible as in those cases in which the cash ticket is in a low booking class and mileage earning is booking-class based).
If you’re choosing optimally, there’s gotta be an Euler-style condition which relates the value of an incremental mile earned to the value of an incremental mile spent (those should be close to being equal).
As an example, if an award costs 50k miles and the cash alternative is $500 and yields 5k miles, factor in that mileage earning. If you go for cash, you don’t pay $500, you pay $500 minus your valuation of the 5k miles.
TPG has been nonsense for a long time now. No one serious in the hobby should be reading it.
TPG is desperately trying to stay relevant. It isn’t working.
I agree with you Gary that whatever hocus pocus TPG is attempting here makes no sense, and appreciate your finance/economic look at it which I think is much more realistic. To value the way TPG attempts is arbitrary and value will be different from person to person depending on their application of the miles.
I guess they need something to do over there when they aren’t Griffting airlines and such, and writing about travel with a level of knowledge that is bafflingly basic.
I guess the big question is whether TPG is screwing this up through ineptitude or corruption. Stupid or Evil? They have quite the history with both but I’m going with Evil.
What points are worth is obviously a big question to everyone in this “hobby,” but the answer is nearly impossible to calculate and even then is hardly definitive. Presuming one is going to spend the money on ___________________ (gas, groceries, streaming services, whatever) anyway, then one way of thinking is that one gets the points for free! If I need to fly SFO-LAX, I have the choice of taking one of several airlines. If I use (e.g.) my debt card, I receive ZERO points for my purchase. If I use my Chase Sapphire Preferred card, I’ll receive 2 points per dollar, but I’ll get 5x if I use my Amex to fly SFO-LAX. In *that* sense, I received the points for free…they came along with the purchase I needed to make anyway.
Illustration from real life: I transferred 240,000 Citi Thank You Points (which are worth 1.8¢ per TPG, the subject of this conversation) to Air France, then spent the 240,000 Flying Blue miles for two one-way Business tickets SFO-TPE-NRT on China Airlines. The cash price for the two tickets would have been $10,237.80 — a price I could *never* afford. Instead, I paid $301.60 in taxes & fees.
—> One way of thinking would be, if the points came to me for free, burning 240,000 points saved me $9,936.20 out-of-pocket. That would be a realized value of 4.14¢/point.
—> The other way is to take the point valuation of 1.8¢ that TPG claims for Citi TYP at face value and say the 240,000 points were worth $4,320. That means I spent $4,621.60 ($301.60 + $4,320). In this scenario, I saved $5,616.20, meaning the value I got from spending the points equaled 2.34¢.
Bloggers always overestimate the value of points because they make the deliberate mistake of valuing, say, a hotel room at the stupid price displayed by the hotelkeeper rather than the amount you would budget for that stay.
Reminds me of the joke about the Jewish boy proudly telling his dad that he ran home from school behind the bus and saved 50c. But his father said, Stupid boy, you should have run behind a taxi and saved $20.
I’ve never been a fan of TPG but the reason they are still around is that they have done a good job of “gaming” searches. Often when I do searches on various travel things involving miles/points they are at/near the top of the list every time.
Now I know enough to avoid clicking on their links since most of their articles are more fluff than any reason substance but the average person out there who doesn’t read a lot of blogs blindly click on the articles and assume they are full of good info. I see that on various financial blogs I visit. Someone will refer people to TPG when topics involve cc points or FF miles and I just roll my eyes.
I expect a closer look at how TPG generates revenue from banks/affiliate links would be very instructive.
I think for most people the value tops out at 2c as once you get beyond that you are likely looking at prices people would not pay in cash.
Personally I see it as a way to fly in a bit more luxury than I would otherwise pay for, but I am still not allocating more than 2cpm and often lower
“…The Points Guy’s New Effort To Value Miles Is Nonsense.”
So is virtually every other travel blog’s “effort”, including this site’s, so what exactly is the point of this post?
Its to make points/miles look more valuable, so signup bonuses look more valuable, so people are more likely to sign up – using TPG’s links. And why I stopped reading that blog.
I’m inclined to agree that saver awards on either United or its partners (by far the vast majority of the flights from SFO, my local airport) for specific, planned itineraries, rather than last-minute serendipitous ones, are extremely hard to obtain. With this in mind, I’m very much struggling to believe that miles are worth the huge multipliers that they were say, 15, years ago.
If we’re all on the same page that under that rubric, they’re worth < $0.02 (https://viewfromthewing.com/value-of-frequent-flyer-miles/), even if you charge $100,000 miles a year, the difference between 1.3% or 1.7% (for example) is $400. Seems like there’s better ways to make money — even “free” money — than juggling a half dozen credit cards. The Citi Double Cash maybe, for most, or for those that are able, the Schwab Platinum,, at 1.1% for the customer service?
LOL “nonsense built on stilts”
That’s a new one for me and made reading the piece worth it.
TPG is unfortunately just commercial drivel anymore.
First, to say that points are not worth as much as cash misses the point. Airlines and hotels don’t award cash (if they did we would take it). So there is no cash option for earn.
Second, if cash redemption is preferred then transferrable points from Amex/Chase/Cap1/Citi would always be converted to bill credit or travel portals. But most of us here transfer them to airlines/hotels for high value rewards, which we obviously value more than cash.
Third, it’s impossible to come up with a metric that satisfies everyone or that is accurate for everyone. Ultimately the question for me is exactly how much airfare (or lodging) do my points buy me? Which does render silly the TPC flight data because these are not the flights that you, or I or anyone else is buying.The better question is the actual value you personally receive when you transfer points (or use miles) vs. the cash fare/room rate. In my case I always get a minimum of 2cpm for UA & AA miles, 1cpm for DL miles and don’t transfer unless I’m getting 2cpm (and usually much more on biz class).
Which leads to Fourth, which is (a) can I still redeem for high value saver awards and if so (b) what is the price? Clearly UA mileage value tanked when it now costs me 80k to offset a fare that previously cost 60k. But still worth far more than DL which charges 200k for the same fare. Ultimately that is the value of the mile – the biz class price at the time you made the redemption. (Of course we will put aside the intangible but very significant value that you can redeposit miles v. receiving dated airline scrip when you cancel a ticket).
Finally, in my view Chase is easily worth more than Amex because as Gary often notes elsewhere we can and do transfer Chase to Hyatt for high value redemptions. Amex has no equivalent (though one can quibble about airline partners).
Kudos to Larry who clarified value very precisely .
“But, the bottom line is simple this: What is the value at which I am indifferent to whether you give me a point or give me cash. I”
It really depends upon what you are using them for. I use points almost exclusively now for saver award international business class, though I also used to use them for international business upgrades (which have pretty much dried up). So to me, they are worth 3 to 4 cents.
TPG is like TikTok it’s mostly make believe. They are in the business of getting you to sign up for products through their affiliate links, period. They would do anything to further that. The only way I would trust them less is if they all started wearing bowties.
@Jason Brandt: The points are *NOT* free. They cost you $0.015 to $0.02 each, even on purchases you are going to make anyway, because you could have charged those purchases to a cash back card that earned you cash.
I am the typical business traveler. I use the company’s spending to earn points, nights, status and miles for personal use for holidays.
The value of my benefit is untaxed compensation which in and of itself has a tangible real world value. I almost never pay cash for anything. Rather rotate card usage based on best deal of earning and promotions at that particular moment. I actively call cards for offers and use them to earn bonus points. Took Globalist challenge for Hyatt and will likely have enough points for 7 nights at a high end all inclusive for Christmas/New Years for December 2024 with minimal to no effort.
I have found great value in AA as a Executive Platinum member with free upgrades. Hilton Diamond treats guests outside US wonderfully. Titanium level Marriott is the sweet spot for status and benefits. No sense chasing Ambassador. Benefits at that level don’t justify the spend. I’ve enjoyed Marriott Moments. Got batting practice on Citifield with Mets and meet and greet with Keith Hernandez and game tickets for son and I. Amazing experience. Got luxury box seats for concerts at MSG that otherwise would have cost an arm and a leg and made the wife very very happy and that is worth the value of points.
I use points judiciously and the based on value and opportunity. I never use points for work. They are there to enrich life. Just my 2 1/2 cents
@Boraxo, given that we’ve acknowledged the difficulty of obtaining saver awards when you need them, would Chase still have outsized value for you if you did not typically stay at Hyatt properties, which seems to be the last man standing for such values? It seems to me the discussion is suggesting “no..”
Up until a few years ago, I’d seen regular reviews about riding in international First Class using points. Not anymore.
That’s should tell you everything you need to know about the value of those points.
I’m going to pile on with the TPG hate. The better title for this article is “One More Example of How Illrelevant TPG Has Become.”
I believe the decline started the day they stopped allowing comments on their posts. There was so much valuable information being shared in those comments… yes with a lot of vitriol and hate (just like this one), but as with everything you have to take the good with the bad.
Then they have either fired or driven off anyone with real points and/or credit card knowledge and hire people right out of college who haven’t even owned a credit card other than one their parents gave, are so illiterate about their benefits they don’t even know, or so poorly traveled they get excited about a business seat on a domestic flight.
Today’s email included “gems” like how to use Google to book a flight, what to do if you miss a flight, or the totally exotic review of the W in Toronto. Of course, I can’t forget about Brian’s email today, about taking a cruise with Martha Stewart, his new BFF.
Really living up to their motto of “The Points Guy was created for travelers by travelers”
Regardless of the criticisms of the methodology, I can’t really argue with the results of the airline valuations.
Let’s start with Delta, as they are easiest to value. We know Delta miles are worth a minimum of 1 cent per point because that is their value through Pay by Miles. We also know that cardholders get a 15% discount on regular award travel. This reliably gets you to about 1.2 to 1.3 cents per SkyMile. I disagree with your dismissal of using the cash rate – remember that the vast majority of award redemptions are for domestic travel, where the cash rate will be the most relevant.
We also know that UA, AA and Alaska miles are worth more than Delta miles because they have more access to reasonably priced international business class (I don’t really care if they are partner flights, saver flights, etc). So 1.4 to 1.5 cents for those currencies seem fair to me.
In term of Chase vs Amex, I believe Chase miles are slightly worth more than Amex because
1) Hyatt
2) The easy ability to cash out for travel at 1.25 or 1.5 cents per point
This is slightly offset by more regular transfer bonuses for Amex. Also it remember it is easier to earn Amex points in general with Amex Gold.
So I don’t really care about the history or criticism of TPG – IMO their points valuations are pretty close.
@Ed I think I’ve come to the same conclusion. That leaves me with finding that the “hobby” really is neither fun nor rewarding any longer and my time and energy is better spent elsewhere. So the obvious conclusion is 2x cash back. However, the problem with the Citi Double Cash is Citi. The problem with the Fidelity 2% is Elan. The problem with the Apple Card (which would be fine given how many of my purchases are via Apple Pay) is Goldman and the lack of any of the other typical card perks and protections. The probem with Chase isn’t so much Chase but Chase’s policy of forcing authorized users to share web site logins, which seems stupid in an era of strong, multi-factor authentication. This leaves just Amex and the Schwab Platinum at 1.1% I think? It’s not 2x but gets some cash back and ticks off the other boxes.
Here’s my math. I get 0.0262 – 0.035 for my BoA credit card in cash. That beats almost anything and I don’t have to carry 27 cards. I’ll still take 5 amex points for airfare though.
I’ve stopped this stupid game and am spending my many miles, usually at 1.5-2.3c p/m vs. fare. You can also still get decent value off of miles & cash on BA/IB. I am saving my convertible to Singapore miles as that will be a good aspirational value (bc I’d never pay for it in cash). Once.
“As we say in Qatar, you should never build your house on shifting sands” – Jaffar
Sums up most loyalty programs and cryptocurrency. Its a house of card and you don’t want to be the last one holding the bag…Get in and get out quickly.
The value of miles is not based on what you bought them for, that is their cost.
For BA avios, the price of a seat will involve you making a choice from a variable amount of avios and cash for each flight.
You might contrast that with the total cash price that BA set, or your own hypothetical cash price that you would be willing to pay. Only the former would actually get you the seat though, so the latter is literally a non starter.
Either way, you will get a different notional value for the ships used depending upon the proportions of cash or avios used.
In other words, there are several valid answers depending solely on how many miles you are willing or able to use.
Literaly, trying to get a fixed value has you just flying round in circles!
I get that TPG has become useless for everything past introductory travel advice (I gave up on Nerd Wallet years ago for the same reason). Travel sites are good sources of travel info?
What sites are good sources of info?*Sent early by accident… ugh
I track my redemption against the cash price of the flight I would’ve taken if I didn’t have any points or miles.. it’s usually not the same flight. this keeps me from calculating against one airlines arbitrary price for a particular flight. Doing this is a little more work, but I find it fun.. I keep a historical average giving greater weight to more recent redemptions. We have different habits on how we redeem our points using this method,, I can calculate my own particular valuation for each currency I have redeemed. This personal valuation allows me to compare different credit card offers to determine which one suits me best.