Creating a travel budget using points and miles in 2024

This collection of articles on credit cards, points and miles, and travel budgeting is presented in collaboration with The Points Guy.

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This summer, many travelers experienced shocking prices for flights and hotels, with steep rates rising globally. Even places usually deemed 'off-peak' during summer saw increased demand and costs. More travelers are discovering the advantages of using points and miles in their travel budgets.

Crafting a travel budget with points and miles is quite similar to using cash: you set a target, explore ways to earn rewards, and when it’s time to 'pay' for your trip, you look for the most affordable option for your budget. However, keep in mind that points and miles can have blackout dates. Despite these limitations, choosing the right programs can lead to significant savings on travel.

Here’s how to create a travel budget using points and miles:

Begin by establishing a travel objective

The key step in crafting a travel budget is defining how you intend to use your points. Start by selecting a destination, then decide on your travel style: Are you a budget traveler? Do you prefer first-class flights? Looking for an all-inclusive getaway? Perhaps you enjoy cruises or are planning a family trip to Disney World. Whatever your travel aspirations, it’s essential to clarify them before you start accumulating points.

The last thing you want is to accumulate points that lack flexibility or to restrict yourself to an airline with limited award options or a hotel loyalty program that doesn’t cover your desired destinations. Identifying where you want to go, when, and how you plan to get there is a vital initial step in assessing how many points and miles you’ll require.

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Determine the most affordable way to reach your destination

Once you have a destination in mind and a travel plan, it’s time to find the most cost-effective way to get there. There are various ways to use points for travel, so base your budget on the cheapest option. For instance, United Airlines may charge over 60,000 miles for a round-trip economy ticket to Honolulu in summer, but booking the same trip with Turkish Airlines Miles&Smiles (a partner of United) could cost only 15,000 miles round-trip.

Navigating through numerous loyalty point programs can be overwhelming, but finding the least expensive option can save you points while planning your travel budget. To assist you, here’s a collection of low award redemption rates for popular destinations:

• Hawaii: 15,000 Turkish Airlines miles for a round-trip in United economy class. Turkish Miles&Smiles partners with Bilt Rewards, Capital One, and Citi ThankYou for transfers.

• East Coast to London: 20,000 Virgin Atlantic points for a round-trip. Virgin Atlantic is affiliated with American Express Membership Rewards*, Bilt Rewards, Capital One, and Citi ThankYou Rewards.

• Europe (general): 55,000 All Nippon Airways (ANA) miles for a round-trip in economy, and 88,000 miles for business class. You can transfer Membership Rewards points to ANA miles at a 1:1 ratio.

• Asia: 100,000 Alaska Airlines miles for a round-trip in business class to Asia, including a complimentary stopover to explore multiple cities or countries.

• Middle East and Africa: 65,000 ANA miles for a round-trip in economy or 104,000 miles for business class.

• Australia: 160,000 Avianca Lifemiles for a round-trip United business class ticket to Australia. Avianca Lifemiles is a 1:1 transfer partner for Membership Rewards, Capital One miles, and Citi ThankYou.

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Consider varying redemption rates

When planning a travel budget, it’s crucial to keep in mind that award availability and pricing can fluctuate widely. Most airlines employ dynamic pricing, which means that award rates can spike significantly during times of high demand. Hotels such as Hyatt and Marriott also use peak and off-peak pricing, leading to dramatic increases in nightly rates during busy seasons.

As demand surges and saver inventory gets booked, airlines and hotels frequently offer premium awards. However, premium doesn’t always equate to an upgraded travel experience. Occasionally, airlines may charge the same for a non-saver economy class seat as they typically would for business or first class.

If standard rooms are fully booked, you might discover an upgraded room with a better view or even a suite available for more points than you had planned. Transferable currencies can help bridge the gap in these situations, but it’s essential to stay alert to these price variations and set aside additional points to accommodate them. You don’t want to miss out on your dream vacation due to a lack of points.

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Assess your spending patterns

While it may seem odd to assess your spending patterns when budgeting with points and miles, it's essential for determining which credit cards suit you best. Credit cards play a vital role in accumulating points and miles, with top cards often offering new applicants 60,000 points or more after meeting certain spending thresholds. Evaluating your spending habits will help you figure out 1.) how much of the required spending you can achieve to earn bonuses and 2.) which credit cards align with your financial behavior.

For instance, if your primary expenses include dining out, groceries, and takeout in the US, the American Express® Gold Card* might be a fantastic choice. The Amex Gold Card earns 4 points per dollar on dining worldwide at restaurants (up to $50,000 in purchases each calendar year, then 1 point per dollar thereafter) and at U.S. supermarkets (up to $25,000 annually, then 1 point per dollar). Additionally, it earns 3 points per dollar on flights booked directly or through Amex Travel, and 1 point on all other purchases. If your spending doesn't fit neatly into specific categories, you may prefer the Capital One Venture Rewards Credit Card, which provides 2 miles per dollar on all purchases (with up to 5X miles on Capital One Travel bookings). Understanding your spending and the categories it falls into can help refine your credit card choices.

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Broaden your points portfolio

Broadening your points portfolio is crucial for maintaining a balanced travel budget. While it’s difficult to predict how many points you’ll need, having a diverse points collection provides flexibility if certain loyalty programs limit award availability. The best strategy for diversifying your points is to earn bank points that can be transferred to various airlines and hotels. Transferable points often cover everything you need for accessing a wide range of rewards as you prepare for your dream vacation. Top transferable rewards include American Express Membership Rewards*, Bilt Rewards, Capital One Miles, Chase Ultimate Rewards, and Citi ThankYou points.

Though they are arguably the most valuable, transferable points aren’t the only rewards worth accumulating. Airline miles are also significant, potentially saving you thousands on airfare. You can book affordable economy flights or indulge in a once-in-a-lifetime trip in first class. Some of the best airline miles for budget-friendly redemptions (and ease of earning) include Avianca Lifemiles, Alaska Mileage Plan, Air France-KLM Flying Blue miles, and Virgin Atlantic points. With the exception of Alaska, all these points can be transferred from American Express Membership Rewards*, Capital One, and Citi ThankYou at a 1:1 ratio.

Hotel points are useful whether you’re aiming for luxury accommodations or budget-friendly options. Most major hotel chains have stopped publishing award charts, making it tricky to know how many points you need for a complimentary night. Hyatt continues to provide detailed award charts that show the point cost for each hotel during peak, standard, and off-peak seasons. Hyatt is an excellent choice for many travelers, with free nights starting at just 3,500 points.

As the world’s largest hotel chain, Marriott Bonvoy is beneficial for securing free nights. Hilton Honors and IHG One also boast extensive property portfolios, making them appealing if you desire diverse hotel options. Meanwhile, Wyndham Rewards is ideal for families and group travelers, as it encompasses a variety of accommodations including hotels, resorts, condos, and vacation homes. Wyndham awards begin at 7,500 points per night (per bedroom), and you can book a cash-and-points stay starting from just 1,500 points.

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Remember to include taxes and fees

When creating a travel budget with points and miles, it's essential to factor in taxes and fees. For domestic flights, award taxes can be as low as $5.60, but for international flights, they can escalate to hundreds or even thousands of dollars. British Airways, for instance, is well-known for imposing steep fuel surcharges on flights to the UK, which can exceed $2,000 for round-trip first-class tickets. Many travelers are caught off guard by these costs during their first redemption experience. Thus, it's crucial to incorporate these expenses into your travel budget and steer clear of airlines with high fuel surcharges.

Rather than opting for British Airways, consider other Oneworld alliance members such as American Airlines AAdvantage, Alaska Mileage Plan, or Iberia Plus. These loyalty programs provide ample flights to Europe and beyond, allowing you to book without facing fuel surcharges.

While you’ll notice taxes and fees on flight bookings, hotels can also impose resort fees on award stays. For example, the Ritz-Carlton Reserve Dorado Beach in Puerto Rico charges a hefty $150 nightly resort fee per room. So, even if you redeem points for a stay, you may still find yourself responsible for significant resort fees.

These costs can accumulate significantly during an extended trip, particularly if you're reserving multiple rooms or flights. The best approach is to steer clear of loyalty programs with excessive taxes and fees. If that's not feasible, you can also utilize points and miles to help cover award-related taxes and fees.

Remember those transferable rewards we discussed? This is yet another instance where their versatility shines. Almost all the transferable rewards mentioned in this guide can be converted into cashback. You can use these points for statement credits against travel expenses or practically any other charge. The exact conversion rate will depend on the currency, but typically, you just charge the travel costs to your card and then redeem points to offset that amount:

• American Express Membership Rewards*: 0.6 cents per point

• Capital One miles: 1 cent per mile

• Chase Ultimate Rewards: 1 cent per point

• Citi ThankYou points: 1 cent per point

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Explore discounted awards and transfer bonuses

Although predicting award pricing can be tricky with various airlines and hotel loyalty programs, you can achieve significant savings by considering discounted awards in your budget. Both airlines and hotel programs frequently offer discounts on award bookings and hold periodic sales. By leveraging these deals, you can save up to 50%. Here’s a list of discounted awards worth your attention.

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Off-peak flight and hotel award options

Certain loyalty programs provide discounts on award flights for off-peak travel. These awards can help you maximize your travel budget or require fewer miles initially. Airlines like All Nippon Airways (ANA), American Airlines, Aer Lingus, British Airways, Iberia, and Virgin Atlantic feature lower off-peak rates. Additionally, Hyatt and Marriott offer discounts of up to 46% when redeeming points during off-peak periods.

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Discounts for consecutive night stays

By booking consecutive nights, you can save as much as 25% of your hotel points. Three major hotel chains provide the fourth or fifth night free: Hilton Honors, IHG One, and Marriott Bonvoy. Hilton offers a free fifth night for Hilton Honors Silver elite members and higher who book their stay completely with points. IHG allows all IHG credit card holders to get a fourth night free when redeeming points for stays of four nights or more, while Marriott grants a complimentary fifth night to all Marriott Bonvoy members who pay for five consecutive nights with Marriott Bonvoy® Points.

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Stay alert for award sales

Award sales can significantly enhance your travel budget by allowing you to stretch your points further. Air France and KLM’s Flying Blue program, along with Delta SkyMiles, frequently offer discounted awards. Flying Blue’s Promo Rewards can feature discounts up to 50%, while Delta SkyMiles Award Deals may present even better deals. Although you can't schedule your travel around these sales, they can offer valuable savings if you're flexible with your travel dates.

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Companion passes

Companion passes are an excellent way to maximize your points and travel budget. Various airlines provide passes that let you book a flight for a companion at just the cost of taxes and fees. Most of these passes can be earned through credit cards and are applicable for paid flights rather than award bookings. Here are some companion passes to consider for extending your travel budget:

• Alaska Airlines Famous Companion Fare: Receive a $99 Companion Fare (plus taxes and fees starting at $23) annually after spending $6,000 in the previous year on the Alaska Airlines Visa® Credit Card. This fare is valid for round-trip economy flights on Alaska Airlines.

• American Airlines Companion Certificate: Achieve a Companion Certificate after spending $20,000 on the AAdvantage® Aviator® Red World Elite Mastercard® or $30,000 on the AAdvantage® Aviator Business Mastercard. This certificate is awarded yearly and is valid on round-trip economy tickets within the U.S., applicable to flights operated by various airlines. A payment of $99 plus taxes is required, and it can be used on any flight operated by American Airlines.

• British Airways Travel Together Ticket: After spending $30,000 annually on the British Airways Visa Signature Card, you can earn a Travel Together Ticket that can be used for a companion’s award ticket or for 50% off your own. This ticket is exclusively valid for British Airways flights departing from the U.S.

• Delta Air Lines Companion Pass: Delta offers a Companion Pass through four credit cards. The pass from the Delta SkyMiles® Platinum American Express Card* and Delta SkyMiles® Platinum Business American Express Card* is only valid for domestic economy class tickets. The one from the Delta SkyMiles® Reserve American Express Card* and Delta SkyMiles® Reserve Business American Express Card* can be used for first-class tickets.

• Southwest Companion Pass: The Southwest Companion Pass allows you to take a companion on any flight for just the cost of taxes. To earn it, you need to complete 100 one-way flights or accumulate 135,000 points. Points earned through Southwest credit cards (including welcome bonuses) count towards this requirement. Once earned, the Companion Pass is valid for the remainder of the calendar year in which it was obtained and the following year.

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Involve family members for support

Creating a travel budget with only one person earning points can be quite challenging due to limits on credit cards and earning opportunities. This is why involving family members is crucial. Taking a moment to share your travel budget aspirations with them can significantly enhance your ability to accumulate miles together.

Add your partner as an authorized user on your credit card to supercharge your point-earning potential. You'll accumulate rewards for every dollar they spend, and it allows you to monitor your household expenses in one convenient location. The best part? Most credit cards don't charge a fee for adding an authorized user, and some even reward you with bonus points for doing so—great motivation to boost your travel budget.

Even your children can help by utilizing shopping portals to earn bonus points online. There are numerous ways to collect points and miles without needing a credit card. By exploring these avenues and encouraging family participation, you can significantly enhance your travel budget.

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In summary

Creating a travel budget using points and miles can feel daunting for newcomers, but once you grasp the concept, it becomes highly rewarding. With thorough planning and a bit of research into loyalty programs, travelers can significantly maximize their budgets by utilizing airline miles, hotel points, and transferable rewards.

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*American Express benefits and offers may have terms that apply. Enrollment might be necessary for certain benefits and offers. For more information, visit americanexpress.com.

Editorial note: The views expressed here are solely those of the author and do not reflect the views of any bank, credit card issuer, airline, or hotel chain, and have not been reviewed, approved, or endorsed by any of these entities.