Is cash really king for domestic economy travel?

I love cash back. I earn a lot of cash back. Cash back can be used for all sorts of purposes that other currencies are ill-suited for. Things like food and shelter, paying taxes, and saving for retirement. But precisely because my personal preference is to earn as much cash as possible, I like to check in from time to time on exactly how cash back stacks up against other rewards currencies.

For example, that was the inspiration for my imputed redemption value tables, which I use whenever I have to decide whether to book hotel stays with cash or with points.

What's the best credit card?

It doesn't take long after you first get interested in travel hacking for someone to ask, "what's the best credit card?" As your game evolves, the answer naturally changes. If you just got started reading affiliate bloggers, you might confidently state the Chase Sapphire Preferred is the first card anyone should apply for. If you just started manufacturing spend, you might explain the (new) "old" Blue Cash is an easy money maker. And if you just spent an evening chasing phantom award space, you might just answer that it's best to run as fast as possible away from travel hacking.

I've been at this for a few years now, and my approach to advising curious acquaintances is to make sure they have a 2% cash back credit card. It doesn't really matter which one. Neither the Fidelity Investment Rewards American Express or Citi Double Cash has an annual fee. Fidelity's card gives you access to Amex Sync offers over Twitter, and the Citi card has slightly wider acceptance. Get either, or get both (I have both, although so far I've only used my Double Cash for the 15-month negative-interest-rate loan).

This isn't because a 2% cash back card is the best way to earn travel. It's because as long as 2% cash back cards exist, that's the standard you should judge all other travel rewards cards against. But if you don't have a 2% cash back card, the exercise is academic!

Is cash back the best way to earn economy travel?

The cliche that cash back is the best way to earn economy travel has two logical bases:

  • co-branded credit cards earn 1 mile per dollar spent;
  • and it's hard to get more than 2 cents per mile on economy redemptions.

The argument is then strengthened with reference to the fact that paying with cash gives you access to the airlines and flights of your choosing and that revenue fares are mileage-earning. It follows that while airline miles may give deep discounts on (capacity-controlled) premium-cabin redemptions, you're better off earning cash back if you're content to fly economy (as I, in fact, am).

It's an elegant argument. But is it true?

Do co-branded credit cards earn 1 mile per dollar?

It's true that most airline co-branded credit cards earn 1 mile per dollar.

But the American Express Starwood Preferred Guest card earns 1 Starpoint per dollar, which, when transferred in 20,000 increments, is worth 1.25 American AAdvantage or Alaska Mileage Plan mile.

Meanwhile, the Chase United Club card earns 1.5 Mileage Plus miles per dollar spent everywhere.

Suddenly we don't need to get 2 cents per mile, but just 1.6 (American and Alaska) or 1.3 (United) cents per dollar in order to break even compared to a 2% cash back card — although both the Starwood Preferred Guest and United Club cards have annual fees to beware of.

Is it hard to get 2 cents per mile on economy redemptions?

Because of capacity controls, the hoary wisdom states, award space is typically available only on dates when airlines expect to have unsold inventory, which are also the dates when airlines are supposed to price their seats most competitively.

But in addition to the "low"-level award inventory travel hackers love so dearly, American, United, and Alaska Airlines also offer more expensive awards that escape most capacity controls. While they're much-maligned by those who will pay any price to avoid using their miles on anything but low-level awards, this is in fact precisely the supposed benefit of booking with cash: access to any flight on any day!

Paying with cash, therefore, has to be compared not just to capacity-controlled low-level seats, but also to more expensive last-seat-availability awards. So, how do they compare?

Where do your domestic economy flights fall?

One could imagine four constellations of datapoints when looking at airfares and award availability:

  • Expensive fares with low-level availability. @turnbullben on Twitter suggested American's flight from Richmond to New York City as an example of an expensive fare, and he's right: American wants $405 for a one-way flight on November 2, 2015. But they'll take 12,500 AAdvantage miles, instead! These are the redemptions that are the airlines' worst enemy: when someone who would otherwise spend a lot of cash spends just a handful of miles.
  • Cheap fares without low-level availability. These are the opposite of the above: fares where you'd be crazy to redeem miles, getting well less than 1 cent per mile.
  • Cheap fares with low-level availability. If 12,500-mile seats are available, you need to be saving at least $200 to justify transferring Starpoints in for a low-level redemption. But there are plenty of airfares cheaper than that, and those are the ones cash was made for.
  • Expensive fares without low-level availability. These are the edge cases: do you spend more money than you'd like to spend or redeem more miles than you'd like to redeem? In January, American wants $1,122 for their nonstop flights between Chicago's O'Hare airport and San Jose, California. But they'll take 20,000 AAdvantage miles, instead. That's more AAdvantage miles than you'd prefer to spend on a domestic economy ticket, but it's also a 5.61-cent-per-mile return.


I don't get paid enough to give advice, so don't take this post as an invitation to apply for a $450-annual-fee United Club card. But the cliche that domestic economy flights should be paid for with cash, rather than miles, is treated as such gospel that I wanted to take a step back and interrogate it a little further today.

If your local airport is served by multiple competing airlines, you'll likely find fares too cheap to bother redeeming miles for. If you're a hub captive, you may find yourself buying fares so expensive that even high-level awards give you a better return on your credit card spend.