When to use points vs. pay cash

Good morning, everyone. Before we get into the good stuff, I have to address some not-so-good stuff…

Many of you reached out yesterday telling me how wrong I was about the cruise news section, and how my cost analysis was pretty far off from reality.

Y’all were totally right, and the true cost of those cruises is significantly more than what I described.

To be honest, I had a pretty challenging day yesterday. I spent hours getting caught up in an unfortunate travel scam and had to scramble to get some content together for the newsletter.

As a result, I didn’t properly vet the promotion - and I actually feel really bad about it. 😕

I hope that the value and entertainment that Daily Drop has provided over the last eight months outweigh the rare occasions where I totally miss the mark. I just wanted to acknowledge that before jumping in.

So now let’s jump in:

• 🤔 Questions from the lounge: When to use points vs. paying cash

• ✈️ JetBlue expands to another European city

• 🖼️ Travel meme

🤔 Questions from the lounge: When to use points vs. paying cash

In case this wasn’t clear, we have a Daily Drop lounge where all the cool kids get together and nerd out about travel hacking.

One question that comes up a LOT is this:

This is definitely a layered question, but let’s try to tackle it.

First of all, there is no wrong answer. If you use points to get some free travel, it’s always a win. You should never feel like you NEED to get a certain value from your points.

Having said that, there are ways to get more value out of your points and to make them last longer.

But first, let’s talk about how to determine the value of your points in the first place, using a couple of flights as examples.

You know what that means; it’s time to blow your mind with some cold, hard, basic arithmetic.

Let’s take this flight on United, which costs 13,400 miles, or $119 if paying cash.

Keep in mind that booking award flights still requires you to pay taxes and fees, which we’ll incorporate into the process.

To calculate the value you’d get from using points, you’d simply use the following equation:

(cash price) - (taxes and fees) / (points cost) = value per point

In this case, it would look like this:

$119 - $5.60 / 13,400 = .008

Since the unit we’re working with is dollars, this is .008 dollars per point, or 0.8 cents per point, or less than one cent each (to be very specific).

United miles can generally be redeemed for 2 cents per point, oftentimes even more. This example would be a less-than-ideal way to use miles.

Does that mean it’s wrong to use miles? Not at all. Could you do better if you wanted to? Definitely.

So you might be wondering, “how do you know that United miles are generally worth 2 cents to determine that this is not a great redemption?”

The answer is, there are smart people who spend hours determining these “reasonable redemption values.” A great example is The Points Guy, who publishes regular updates on points and miles values.

So here’s what you do:

1. Use the equation above to determine the value you’d get

2. Compare it with this chart to see if the value you’re getting stacks up to the value you could reasonably get otherwise.

Let’s look at a really GOOD redemption, using this Virgin Atlantic flight as an example:

As you can see, this long-haul, business-class flight is HELLA expensive at a whopping $6,471 or 57,500 miles…

So let’s use our handy equation to see how much each point is worth.

$6,471 - $877 / 57,500 = .097

So in this redemption, you’re getting 9.7 cents per point in value. Of course, the taxes are quite high - but if you’re willing to shell out, you could experience an amazing, luxurious flight that most people could never dream of affording.

So let’s say you have a stack of Chase points to use toward booking travel. You could transfer those points to United and book a flight at less than 1 cent per point, OR you could transfer them to Virgin Atlantic and get more than 10 times the value.

I don’t think I need to tell you why that’s a no-brainer…

This is exactly why people aim for high value and opt to pay cash otherwise. Saving up your points for the chance to redeem for “unobtainable” travel experiences is well worth the effort.

This is by no means a hard rule, nor should it be the only thing that helps you determine whether or not to book a flight/hotel/cruise.

But hopefully this helps shed some light on why people like me obsess over getting maximum value from points.

✈️ JetBlue expands to another European city

If you’ve never flown JetBlue, it can best be described as the “Mike Dodge” of airlines. Despite having a lot to offer, it never quite reached the upper echelon of popularity among its peers.

But JetBlue has been making moves in recent years, even going so far as to establish a presence in Europe.

And clearly, that endeavor is going well because JetBlue has recently announced plans to expand to its third European city; Amsterdam.

We don’t have a firm date for when these flights will launch, but we do know that it will be some time “later this Summer,” according to the press release.

I’m starting to get a bit more interested in JetBlue and its loyalty program, TrueBlue. We’ve never really talked about it here, but it’s totally on the table if y’all want to learn more.

Overall, I find this to be extremely exciting news.

This means more competition and more opportunities for us to find good deals across the pond, which is never a bad thing.

🖼️ Travel meme

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That’s all for this week, folks. I’m super excited about an announcement on Monday… I can’t tell you about it yet, but it’s a lot of fun.

In fact, there are a couple of exciting things happening next week… so definitely look forward to those. 😉

I hope you have a great weekend and I’ll see you again on Monday.

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