## Cash to miles

In the post “Giving Cash its Dukedom,” I argued that getting cash back instead of points & miles can be a good thing even if you’re points-obsessed.  In that post, I argued that under certain circumstances it is preferable to choose cash back instead of miles even if your end-goal is to earn miles.  I pointed out that it is often possible to use cash back to buy miles cheaply.  Here are some examples of current and past opportunities for buying miles cheaply:

1. Purchase US Airways miles for 1.135 cents each.  Offer expired at the end of October 2012, but hopefully we’ll see it again sometime this year.
2. Purchase US Airways miles for 1.2 cents each.  Expired.
3. Buy Avianca LifeMiles for 1.5 cents each.  Offer expired September 28th (but is likely to return)
4. Use Avianca’s cash and points awards bookings to buy LifeMiles for less than 1.3 cents each.  Ongoing

The techniques shown above for buying miles at a discount average to about 1.3 cents per mile.  Let’s use that as our benchmark.

Assuming you’re happy with the types of airline miles that can be bought cheaply, it’s worth considering whether earning cash may be better than earning miles…

### Evaluating cash back opportunities

Suppose you had to choose between putting your day to day spend on an airline credit card that earns 1 mile per dollar everywhere, or a cash back card that earns 1.5% everywhere.  After \$10,000 of spend, you would get 10,000 miles from the airline card.  With the cash back card, though, you would get \$150 back, which you could then use to buy about 11,500 miles (given the 1.3 cents per mile benchmark).  So, the 1.5% cash back card is arguably slightly better at earning miles than the 1 mile per dollar card.

An easy way to replicate this analysis is to take the cash back % and divide it by 1.3.  So, a 1.5% cash back card is like a 1.15 miles per dollar card (1.5 / 1.3 = 1.15).  In other words, it’s better than an average airline card (but not by much).

### SPG vs. 2% cash back

The Starwood Preferred Guest (SPG) card is quite valuable for its hotel points, but some people use it for earning miles since each SPG point becomes 1.25 miles when transferred 20,000 points at a time.  This is arguably one of the better cards for earning miles for general, non-bonus category spend. Meanwhile, the benchmark for cash back cards tends to be the handful of cards that offer 2% cash back.

We can compare these two types of cards with the formula given above.  2% cash back is like 2 / 1.3 = 1.54 miles per dollar.  In other words, a 2% cash back card beats out the SPG card for earning miles.  Don’t mistake me here, I would still prefer SPG points over 1.5% cash, but that has more to do with the value of SPG points for hotel stays and for the flexibility of transferring to a huge number of airline programs.  If you were to treat all miles equally, and if earning miles is your goal, then this analysis says that 1.5% back is better.

### 1.5X vs. 2% cash back

There are a few airline cards that offer 1.5 miles per dollar.  One example is the United MileagePlus Club Card which automatically offers 1.5 miles per dollar.  Some others offer 50% bonus miles when you reach a spend threshold (e.g. Delta Reserve at \$30K and \$60K spend, and American Express Premier Rewards Gold at \$30K spend).  If you can hit those spend thresholds exactly without going over, then those cards also average 1.5 miles per dollar.

Since we showed above that 2% cash back cards earn the equivalent of 1.54 miles per dollar, all of these cards are roughly equivalent in earnings.  Here the deciding factor may be the types of miles you can earn.  If you like US Airways or Avianca miles, then cash back may be your best bet.  If you prefer United miles, then the MileagePlus Club card is worth considering (if you can stomach its hefty \$395 annual fee).

### Bonus categories

If you’re like me, you may have a mix of points & miles earning cards and cash back cards.  The best cards offer bonus points in various categories (for a list of examples, see “Best Category Bonuses“).  Let’s look at some of the categories and see whether cash back or miles are preferred.  Note that, for the purpose of this analysis, I’m not looking at hotel points as an option.

• Office Supplies: The Chase Ink cards offer 5 points per dollar at office supply stores.  Since Ink Bold & Ink Plus points can be transferred directly to United miles, let’s treat those points like miles.  Meanwhile, the American Express SimplyCash card earns 5% cash back which is  equivalent to 5 / 1.3 = 3.85 miles per dollarInk wins easily.
• Drug Stores: While some mile earning cards offer short term or limited bonus points at drug stores, I don’t know of any that offer drug store bonuses as a standard feature.  Yes, the Hilton cards currently offer bonus points at drug stores, but we’re talking about miles here.  So, I think the best we could do is get 1.5 miles per dollar (with the MileagePlus Club card, for example).  Meanwhile, the US Bank Cash+ card can earn up to 2.5% cash back at drug stores.  That’s equivalent to 2.5 / 1.3 = 1.92 miles per dollarCash+ wins.
• Grocery Stores: The Amex Blue Cash Preferred card offers 6% cash back up to \$6K per year in spend.  That’s equivalent to 6 / 1.3 = 4.6 miles per dollar.  Next best is the PenFed Platinum Rewards card which is like a cash back card in that points can be converted to Visa gift cards for 1 cent each. The PenFed card earns 3 points per dollar at grocery stores, which is like 3 / 1.3 = 2.3 miles per dollar.  As with drug stores, the best mile earning options are 1.5 miles per dollarWinners: Blue Cash Preferred & PenFed Platinum Rewards.
• Restaurants: The Citi Forward card can be treated like a cash back card since its points can be converted to cash at a value of 1 cent each by using points to pay mortgage or student loans.  So, since the Forward card gets 5X points at restaurants, it is equivalent to 5% cash back, which equals 5 / 1.3 = 3.8 miles per dollar.  The best mile earning card, meanwhile, is the Chase Sapphire Preferred which earns 2.14 points per dollar at restaurants (when you include the 7% annual dividend that Chase offers).  Citi Forward wins (and it’s even better if you pair it with the Citi ThankYou Premier card and use points for airfare for a value of 1.33 cents per point).

### What it all means

If you’re still with me here, then hopefully you see the point.  Often, the best way to earn the most miles is by getting cash back instead of miles.  The examples I listed above focus on credit card earnings, but the same thinking is true of shopping portals, and other points vs. cash earning opportunities.  If your main goal is to earn miles, then, ironically, you’re often better off taking cash.

Now, in real life, the decision doesn’t just boil down to a simple formula.  If you want to earn miles, you should think about what type of miles you most want to earn.  Opportunities to buy miles cheaply are rare with United and American Airlines miles, for example.  So, if you need those miles, you can forget everything you just read .

#### About Greg The Frequent Miler

Greg is the owner, founder, and primary author of the Frequent Miler. He earns millions of points and miles each year, mostly without flying, and dedicates this blog to teaching others how to do the same.

More articles by Greg The Frequent Miler »

21 Comments on "Cash to miles"

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Guest
Preacher

So using this formula, which is better for gas: Amex Simply Cash (3 cents back per dollar) or any Ink card (2 UR points per dollar)?

Guest

Regarding drugstores, there’s a Citi Preferred 5% GGD for 12 months offer that will give you 6.67% on travel when combined with a Citi Premier. Or 7.5 HHonors points per dollar if you’re into that sort of thing.

Guest

I recieved an email from Citi yesterday for a promotion of 5 Thank you points (5%) per dollar transaction at grocery, gas, restaraunts, and drugstores, until 3/31/13. This is capped at 2,500 additional points (or \$625) but is a good offer now that Citi seems to be adding reward transfer partners

Guest

Great Summary! For groceries, I use SallieMae World Mastercard which is 5% on the first \$250 of groceries per month, 5% on the first \$250 of gas per month and 5% on the first \$750 of bookstores per month. I usually don’t spend more than \$250 on gas and groceries per month (single guy) so this card works well for me.

Guest

The position I have evolved to is I want as much of my spend to fall into either high category multipliers or meeting minumum spend. To help ensure that I find the BA 100K card to be a nice backstop since 19 of the 20K has to be met within a year. As long as you are sure you can meet the threshholds its like (25K/10K = 2.5, + normal earn 1.25) a 3.75 mile per \$ card. Perfect for the periods when I have completed the min spend on my other recent apps, and perfect as the third card in my wife’s wallet (BCP for Groc/Gas, Forward for Dining & Amazon).

Guest
Frequent Churner

You can still buy \$500 gift cards at office stores and get 5x for \$4.95, which means you get 4% cashback, 5.25% towards airfare (5 x1.25 -1% fee) or close to 8-10% if you redeem for SW or *Alliance flights.

What’s funny is that for 108k chase points, you can get \$1080 cash and buy US Airways miles at 1.2cents and get 90k US Air miles, which will get you a Europe+Asia award for less than the 120k chase points it would take if you transferred to United.

Guest
Frequent Churner

…so in the above scenario you get 4/1.2 = 3.33 US Air miles per dollar spent. Not bad!

Guest

Thank for the roundup. Regarding the restaurant category, it’s also a 5% category for the Cash+ card, without the hassle of needing a mortgage or student loan. I think it’s a more convenient alternative to the CitiForward.

Guest

Isnt the mileage multiplier dead

Guest

Visa gift card churning you would get 4% back all purchases or 6X off all if you value UR as 1.5X.

Guest

I’m familiar with the Chase products which earn UR points but how do the normal cashback cards work? It’s no use to me to get \$3 back on a \$150 grocery shop as it would fritter away into the daily spending. I’m looking for a way to get cash from credit cards to be spent on non-chain hotels like eco-lodges and cruises but want something that accumulates in an account where it can all add up.

Guest

I think I should get myself a cash back card just for the principle of it. If you were going to go for ONE cash back card, u wanted to keep it simple, capped category spend bonuses is irrelevant (enough hassle with cc’s to keep it straight)…which one would you recommend? I am thinking the Priceline Visa as I do use Priceline sometimes.

Guest

For grocery, I’m surprised flexperks doesn’t get more mention. If you use it only for grocery and maximize redemption it’s worth 4 cents. I assume 3.5 cents. Not as good as blue, but no cap.

Guest
PoconoPat

Hey all just thought I’d share and I’m also curious to know if this is in your areas but I went to OD today and they told me they stopped stocking gift cards in denominations over 200 dollars. I heard the same thing from a different employee at the same OD in late December and I went again today to check back and they confirmed it

Guest

Mileage multiplier is dead. There is no cap on the \$ amount so it’s now 2cpm.

Guest

I think it’s not a fair comparison as for most programs no cheap mile buying opportunity exists. Take Hilton and the various multipliers – you can earn a ton of points on spend but it’s hard to buy Hilton points cheaply.

Plus who gets points from credit card spend anyways? 😉