I use miles for last-minute emergencies, business travel, upgrades and vacations to far-flung destinations. The one thing all these have in common is that such tickets are usually painfully expensive.
Consider that last year alone, American Airlines (the third largest airline in the world) redeemed over 5 million flight segments for miles, conservatively valued at over $1.5 billion.
What is a mile worth?
Experts in the miles game vary wildly on what they think various airline miles are worth, but all would approve if you got more than 1 and 3/4 cents in value per redeemed mile.
As a point of reference, a typical 25,000 mile domestic round-trip redemption at this rate works out to a value of $437.
What is the 'pay cash' magic number?
For domestic roundtrips, the threshold at which I decide to use miles instead of cash is $475, going up to $525 for coast-to-coast trips and $750 for round-trips to Hawaii.
This upward rounding takes into account minimal domestic taxes, the value of miles lost by not paying cash and higher redemption rates for Hawaii.
A good rule of thumb is to value Mexico, Caribbean and Canada flights somewhere between coast-to-coast and Hawaii flights – around $625.
What about trips over 6 hours?
International trips - especially at peak travel times or when upgrading - are, in my opinion, the best time to use miles, but these are also typically the most frustrating times to redeem them.
Up until the fuel crisis of 2008, it was almost always better to pay cash for transoceanic journeys and accumulate miles for bucket-list trips and last-minute emergencies. That is no longer the case because finding an overseas ticket for under $850 round trip (even in the cheapest season of winter) is no longer all that easy, even for those who live in hub cities.
But say you have over 60,000 miles to redeem on one of these tickets (you are either an elite traveler, credit-card maven or both); in that case, using your miles to save $1,000 or more is always a good idea.
Frequent-flier gotchas to keep in mind
  • Redemption fees: Some airlines charge up to $100 for free tickets redeemed inside a couple weeks of departure.
  • Buying miles: Paying 2 and 3/4 cents per mile (when they are worth 1 and 3/4) is kind of like buying swamp land in Florida - unless you are close to reaching an award level and need to top off your account.
  • Fuel surcharges and taxes: Some airlines make you pay for fuel surcharges on "free" tickets and all of them require you to pay the up to $10 round-trip for the September 11th security fee, so be sure to add that to your total price calculations.
  • Cash miles lost: Always include miles you would have added to your account had you paid cash to your calculations.
  • Miles devaluation: The fine print in airlines' miles rules state that they can change the program at their whim so it's a good rule of thumb to use miles if you have them.
  • Lower level awards: Airlines don't have as many empty seats as they did five years ago, so redeeming at the optimal lower mile amounts for popular destinations can be tricky.
  • Expiring miles: Almost all airline miles expire if you don't have activity within an 18-month time frame.
  • Mergers: Although there have been several mega-mergers in the past four years, for the most part airlines have kept the best of the merger partners' programs.
  • Non-stops: Airlines will typically black-out all lower level awards on non-stops to popular destinations.
FareCompare CEO Rick Seaney is an airline industry insider and top media air travel resource. Follow Rick (@rickseaney) and never overpay for airfare again.