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For fliers, cash-back cards make cents

If you're feeling let down by frequent flyer programs, join the club. Several times in the past few months, staff members have tried to cash in frequent flyer miles to buy both economy class and business-class flights within the U.S.
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If you're feeling let down by frequent flyer programs, join the club.

Several times in the past few months, staff members have tried to cash in frequent flyer miles to buy both economy class and business-class flights within the U.S.

Each time we’ve tried, seats either were unavailable or were available only for point-redemption levels higher than the standard 25,000 miles that airlines typically “charge” for an economy- class ticket, or the 50,000 miles that a standard business-class ticket goes for. Instead, most of the time, we were offered seats at twice those mileage levels, because the lower award levels were “sold out.”

Even worse, in many cases, even though the airline in question flew our desired routes nonstop, nonstop flights weren’t on offer even at the elevated redemption levels, forcing us to take connecting flights instead.

And consider this. We often have to travel with little notice, as do many travelers — everyone from business travelers to expectant grandparents — and the airlines charge us up to $100 for mileage redemptions with what they consider insufficient notice (fewer than 21 days in some cases), even though these tickets are issued electronically by computer programs in a matter of hours. Should our plans change, and we need to redeposit those miles, some airlines charge another $100.

All this got me thinking: Are frequent flyer miles really worth collecting? Let’s say that, instead, I acquired a cash-back card (which I currently do not have).

Cash-back card rewards
The American Express Blue Cash card, for example, pays 5 percent cash back on purchases at groceries, drugstores and gas stations, and 1.5 percent cash back on everything else charged to the card. I spend about $200 a week on groceries, maybe $25 a week at my local CVS, and $50 a week on gas. I’m no math genius (just ask my accountant), but on a yearly basis I’d earn $500 for the food, $65 for the shampoo and razor blades, and $130 at the pump.

Let’s say I charge another, oh, $15,000 in the “other” category to the card over the course of a year. That’s another $225 at the 1.5 percent rate. My total winnings: $920 per year on purchases of $28,900.

Considering that on a site like, you can often find coast-to-coast fares for under $200, that’s enough for almost five round-trips. But in frequent flyer terms that would be 28,900 miles, barely enough for a domestic coach ticket, assuming you’re not told that you need 45,000 or 50,000 for a “mileage buster.”

Unlike frequent flyer miles, the cash I get from my cash-back card doesn’t expire, no matter how long I take to buy a ticket. Sure, inflation kicks in at some point, but miles suffer inflation too, and don’t be surprised if the airlines start charging even more mileage points for redemptions this year, especially when consolidation gets into full swing — after all, if there are just three major airlines, who you going to complain to?

The 'No' factor
And, unlike miles, there’s no “No” factor. There's no, “Sorry, frequent flyer seats to Honolulu are not available on that flight. Or, hey, any flight for the next decade.”

I know some of you are thinking that you never use miles on domestic coach tickets anyway. Rather, you save them up (200,000, or 250,000, or however many miles your airline charges) for international business-class and first-class fares, which can cost $5,000 to $10,000 or so round-trip were you to purchase them.

If you’re earning those miles purely by spending on a credit card, however, you need to charge $200,000 to your British Airways Visa or Delta Amex card in order to earn those 200,000 miles (at a dollar a mile), unless my math is fuzzy.

I think you’re better off getting 5 percent cash back on $200,000 of groceries, gas, and Gillette Foamy, which could earn you $10,000 in cash back, and then you can take it to any airline, any time — the one with the best service or the best schedule, not just the airline you’ve earned the miles on.

You can even stretch your earnings by using a business/first-class specialist like or rather than buying it from the airline directly. These discounters often offer business and first class fares at up to 50 percent off what the airlines charge.

Trading miles for upgrades
I do agree that using miles for upgrades from economy to first class can be a worthy way to spend them — assuming, again, that you can find seats. And that’s primarily what I do with my miles.

If first class from New York to L.A. is running $2,400 round-trip, and I can upgrade a $400 or $600 fare using 30,000 or so miles on some airlines (upgradeable fares vary from airline to airline and depend on your fare class), then to my mind it’s wiser to spend those miles on an upgrade that would have cost me $1,800 rather than on a coach ticket that costs $400 to $600, or even worse, one costing $179.

Ultimately, what you do with your hard-earned miles and cash is your business. But cash-back cards just might be worth a closer look the next time you can’t spend your frequent flyer miles or they’re on the verge of expiring.