Is it worth collecting miles if I don’t want to travel in First/Business Class?

An anonymous user asked the following question on The Milelion’s Community:

“Is it still worth getting a miles card if I don’t want to travel in first/business class?”

First, let me shed a little tear, because redeeming miles for Economy Class means settling for a fraction of their potential. After all, the beauty of miles is that they let us enjoy experiences we wouldn’t have been willing or able to spend money on.

I can’t think of too many people who would pay for Business Class, much less First. On the other hand, most of us could buy Economy Class tickets if we had to. So by redeeming your miles for Economy, you’re really not getting anything you wouldn’t otherwise have had.

To put it another way, the golden rule of redeeming miles is:

Miles are worth more the higher the cabin you redeem

To illustrate this, consider the following-

Now, I’m hesitant to put it in such simplistic terms, because it’s wrong to say you get 4.4 cents per mile by redeeming First Class unless you’d have been willing to pay S$11,540 out of pocket otherwise.

Moreover, you need to consider the value of miles earned on a cash ticket, the likelihood of getting a Saver award, and a whole lot of other non-quantifiable variables that can throw your calculation out of whack.

All that said, however, the general trend still holds: miles are more valuable when redeemed for Business or First Class. But I suppose that if you’re redeeming for a family, or just trying to minimize the cost of travel, then Economy Class redemptions can look attractive. In fact, I’ve laid out a few scenarios where Economy Class awards can make sense.

So back to our question: does it make sense to get a miles card if you want to fly in Economy Class?

Most of the respondents on the Seedly thread have said “no”, with some suggesting that it’s more efficient to use a cashback card and pay for an air ticket with the money saved.

But is that true, though?

Miles vs cashback, Economy Class edition

Suppose I want to fly to Sydney in Economy Class. The cheapest fare I can find on Singapore Airlines is S$598, versus 39,200 miles for a Spontaneous Escapes award.

Let’s see how much spending this award will require with a cashback card, versus a miles card.

	AMEX True Cashback	BOC Elite Miles
Earn rate per S$1	1.5% cashback	1.5 mpd
Return Economy Class ticket to Sydney	S$598	39,200 miles + S$173 taxes
Spending required	~S$40,000	~S$26,000 + S$173

That’s…interesting. We see that the miles card requires 35% less spending to earn the same Economy Class award!

If you think that’s just because I’ve chosen Sydney, consider the following table, with a few other destinations thrown in:

Let me pre-empt a few objections to this analysis:

(1) You’re using Spontaneous Escapes pricing for the award- if we take the regular award price, the picture changes

Yes, I’ve used Spontaneous Escapes pricing, but my line of thinking is that if we’re looking at the absolute cheapest cash fares can go, it’s only fair we do the same for awards.

In the same way that Spontaneous Escapes have restrictions on travel (they’re only released one month in advance, no cancellations), the cheapest cash fares will also have restrictions (e.g. limited travel periods, advance booking requirements, minimum passengers to travel, no cancellations).

So I know it’s not exactly like-to-like, but if you want to compare regular price redemptions, you should look at regular price Economy Class tickets, not promo fares.

But fine, I’m feeling generous. Perhaps you don’t fancy making your travel plans a month in advance, or the destination you want doesn’t frequently feature in Spontaneous Escapes. Here’s the table again, redone with regular award prices:

The picture changes, but the story largely doesn’t. Although there are some situations where a cashback card may require less spending, if you want to travel medium or long haul, you’re mostly better off with a miles card.

(2) You’re comparing revenue space to award space. It’s always easier to book a ticket with cash than miles

True. If there’s even one seat left on the plane, you should be able to buy it for cash; it’s unlikely you’ll be able to redeem it with miles. However, deep discount fares are capacity restricted too. If there are only a few seats left on the plane, you can forget about getting one.

So if we’re going to bring in the award availability argument, then we shouldn’t be looking at the cheapest cash fares either.

(3) You’re not taking into account the fact that the cash ticket earns miles, but the award ticket does not

Again, valid point. But remember, if you’re booking the cheapest cash fare, you’ll earn 50% of the miles flown. Even on the longest route in our sample set (New York JFK), you’ll earn 9,534 miles, worth ~S$170 at a 1.8 cents per mile valuation. It doesn’t dramatically change our workings, especially when we consider that a miles strategy requires up to S$49K less spending.

(4) You haven’t considered the specialized spending scenario. There are cashback cards which earn much higher rates

For ease of comparison I’ve benchmarked a general spending cashback card to a general spending miles card- both of these earn the same flat rate regardless of spending category.

We can of course look at a specialized spending scenario too, but it gets a bit more complicated. Here’s a scenario comparing the Citi Cash Back Card (8% on dining, groceries and petrol) and the DBS Woman’s World Card (4 mpd on online spending)

	Citi Cash Back	DBS Woman’s World
Specialized Earn Rate	8% on dining, groceries, and petrol	4 mpd on online spending
Bonus Cap	S$75 per month	8,000 miles per month
Return Economy Class ticket to Sydney	S$598	39,200 miles + S$173 taxes
Spending required	~S$7,475	~S$9,800 + S$173

The Citi Cash Back card requires less spending, but there are a few important caveats to note.

First, regardless of which specialized spending cashback card you’re looking at, you’ll run into a minimum spend requirement. In the case of the Citi Cash Back card, you’ll have to spend a minimum of S$888 each month to earn 8% cashback. In contrast, there’s no minimum spending required to earn 4 mpd on the DBS Woman’s World, or with most other 4 mpd cards.

Second, the minimum spending requirement means you’ll be a lot more restricted with a specialized spending cashback card. In some cases, you may need to spend on non-bonus categories just to hit the threshold (which earn 0.25% cashback on the Citi Cash Back card). The absence of a minimum spend requirement for the DBS Woman’s World means you’re free to spend what you need each month, switching to other 4 mpd cards for other categories.

Third, note the monthly cap and the implications for how fast you earn your reward. You earn a maximum of S$75 bonus cashback per month with the Citi Cash Back card, which means at least 8 months to get your Sydney ticket. The DBS Woman’s World Card lets you earn it in as little as 5 months. Whether that’s worth a 30% difference in spending efficiency (S$7,475 vs S$9,800) is another matter, but it’s still worth highlighting.

Fourth, a lot of miles cards have sign up bonuses, which are a shortcut to hitting your reward. Very few cashback cards offer sign up bonuses, and where they do, the quantum is a lot smaller.

(5) You haven’t considered budget options or other carriers. If I’m earning cashback, I could just as well buy these instead

I can’t refute this point, because budget tickets can be fantastically cheap if you get them on sale. The same thing goes with Economy fares on other carriers. If the goal is to get from A to B in the cheapest way possible, then you wouldn’t even be considering Singapore Airlines Economy Class as an alternative.

So in that sense, yes- if you’re not an “SQ or bust” kind of person, cashback is definitely a better option for Economy/budget travel. However, if you want to fly full service Economy on Singapore Airlines, then I think there’s a decent case to be made for accumulating miles.

The “on Singapore Airlines” distinction is crucial, because Singapore Airlines no longer imposes fuel surcharges on award redemptions. It rarely makes sense to redeem miles for Economy on other airlines with fuel surcharges,because these can be a significant chunk of the overall cash ticket price.

Conclusion

A cashback strategy lets you keep the flexibility to choose carriers, dates and timings. If the concern is just to get the cheapest flight possible, then it doesn’t make sense to cumber yourself with a captive currency like miles. I suppose you could really say that cash is king, for people with this profile.

However, if you’re already “restricting” yourself to flying only on Singapore Airlines, then I’d argue it can still make sense to earn miles. Sign up bonuses, 4 mpd opportunities and discounts like Spontaneous Escapes can help you reach your free flight much faster than earning cashback.

At the end of the day, the best redemption is the one that makes you happy- and if that’s Singapore Airlines Economy Class, it’s still a pretty decent way to fly!