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At the start of 2015, Delta Air Lines introduced a new option for its SkyMiles members called Miles + Cash, which allows travelers to redeem less Delta SkyMiles for an award ticket if they're willing to part with some extra cash. Other airline and hotel loyalty programs offer similar "mixed" cash and points redemptions, and as these options become popular, consumers will likely see more and more travel brands offering them. But what are the advantages and disadvantages of adding cash to the mix? How can frequent fliers value their miles when considering a mixed redemption? And is there a way to determine when cash and miles is a better choice than redeeming with miles alone?
See: Navigating the Landscape of Airline Loyalty Programs in 2015
Programs offering mixed redemptions
With Delta's Miles + Cash program, the Delta website automatically displays the mixed redemption options for SkyMiles members looking to pay with both cash and miles. For instance, if you search for an award ticket from New York to Los Angeles, you may be offered a round-trip economy ticket for 30,000 SkyMiles, but may also have the option to redeem for the identical round-trip flight for 20,000 SkyMiles, plus $180 in cash.
Interestingly enough, while Miles + Cash is available to anyone booking with SkyMiles, Delta also has a separate mixed redemption program that it only offers to customers who hold its co-branded American Express credit card. Under this second program, called Pay with Miles, customers can redeem 10,000 SkyMiles for $100 off a ticket that is equal to or greater than $250. You can then add multiples of 5,000 SkyMiles for additional $50 discounts. So, a $375 ticket can be paid for with $275 and 10,000 SkyMiles, or $125 and 25,000 SkyMiles, or any similar variation. Unlike the Miles + Cash program, there's no restrictions on availability when using Pay with Miles -- miles can be applied to any Delta airfare.
Delta joins a few other airlines that also offer cash and points redemptions, including Alaska Airlines and British Airways, but air carriers aren't the only travel companies getting into the mixed redemption game. Starwood, which encompasses brands like Sheraton and Westin, also offers Cash & Points redemptions through its Starwood Preferred Guest program. In 2014, Hyatt started a Points + Cash program similar to Starwood's. Both brands determine their mixed redemption prices based on the category of the hotel, comparable to the way each brand's regular award charts work.
See: 2014-15 Best Travel Rewards Programs
The value of adding cash
There are a number of ways to determine if mixing cash and points is a good value. One method is to think of the cash portion of the redemption as "buying back" your points or miles.
For example, if Delta offers you a ticket for 30,000 SkyMiles, but instead you choose to buy it for 20,000 miles plus $180 in cash, you're essentially paying $180 to keep 10,000 extra miles in your account, valuing the miles at 1.8 cents each. In this case, you should only accept the cash and miles redemption if you think your SkyMiles are worth at least 1.8 cents each.
Another way to value the cash and points option is to compare the redemption cost to the actual airfare. If that same ticket is selling for $780 and you redeem 20,000 miles plus $180 in cash, you're effectively saving $600 for your 20,000 miles and getting 3 cents a mile in value. Redeeming 30,000 miles for the same $780 ticket would value the miles at only 2.6 cents a mile, so in this example it might make sense to opt for a mixed redemption.
There are several variations to these methods, including considering the points saved as a cash-back rebate (similar to the way you might get cash back from a credit card), or calculating the cost of points against what you might pay for them if you bought them directly from the airline or hotel. You'll want to choose a method that values your points based on your personal travel habits and needs.
The fine print
The value of your points isn't the only variable in this equation. Flights or hotel rooms redeemed with cash and points instead of points alone are often handled differently than regular award redemptions, and the rules of each program vary greatly.
For example, if you want to achieve a higher membership tier within the Hyatt Gold Passport program, you won't earn it through award stays at Hyatt hotels -- these stays don't count toward annual elite status. However, Points + Cash stays do, giving Points + Cash stays extra value at Hyatt. With Starwood, you'll receive credit for a stay regardless of whether it's paid for with Cash & Points or a regular award, so there's no additional elite value to the brand's Cash & Points option.
When redeeming SkyMiles for Delta flights, you'll accrue no miles for flying on that award ticket. But if you have a Delta SkyMiles American Express credit card and use the Pay with Miles program, you'll actually earn additional miles for the cash portion of the ticket, so a small percentage of the miles you spent will end up being returned to you.
Some of these rules can get complicated. For instance, Delta tickets redeemed under its Miles + Cash program do not count toward elite status and are not eligible for mileage accrual or complimentary upgrades for elite members. But tickets bought under the separate Pay with Miles program do retain those extra perks.
In the end, the real question is what you value most. If you're sitting on hundreds of thousands of miles and cash is tight, then you'll likely want to lean toward spending your miles instead of cash, unless the valuation simply doesn't make sense. But if you're "miles poor" and the cash portion of the mixed redemption is low, it may make more sense to take advantage of the compound option. Or, if you're saving up miles for a big redemption down the road like an international trip in first class, it might be worth keeping a few extra miles in the bank.
See: 4 Ways to Prevent Your Miles From Expiring
About the author: Julian Mark Kheel learned the ins and outs of travel loyalty programs while flying more than 200,000 miles a year as a TV producer and director. He takes a contrarian view on travel wisdom in his "Devil's Advocate" series every Thursday at the blog Travel Codex. You can also reach him on Twitter @dvlsadvcate.
from Travel - The Huffington Post http://ift.tt/1avE3T5
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