The answer to one of the most frequently asked questions is often a no-brainer—once you can do the math

What is the value of a loyalty program mile? Is it one cent? That’s the figure the airlines sometimes throw around. Or is it $1? That’s what we subconsciously assign to it because with an affinity credit card, $1 nets 1 mile. The answer is neither. The value of a mile varies, but the method of calculating it doesn’t. And once you know it, you’ll know whether to pay or play. Here’s the formula:

Money Saved ÷ Award Miles Used = Value of a Mile

Just divide the amount of money you saved by using miles by the number of miles it takes to claim the award. “Money saved” is simply the cost of your flight if you had paid for the ticket, for instance $15,059 for a First Class ticket on American Airlines from Los Angeles to London. It takes 125,000 miles to get that award, thus on this flight the value of a First Class award mile is:

$15,059 ÷ 125,000 miles = about 12¢ per mile

Calculating the Value of a Mile for an Upgrade Award The math is done a little differently when you’re upgrading from a paid ticket.

Assume a Los Angeles–London full-fare (B class) economy ticket with American costs $2,450. A Business Class ticket might cost you $9,800. It takes 20,000 miles to upgrade the paid economy ticket to a Business Class award ticket.

To calculate the money saved, deduct the cost of the upgradeable fare from the cost of the regular fare. Then divide that figure by the number of miles it takes to upgrade. Here’s the formula:

1st Step: Cost of Regular Fare – Cost of Upgradeable Fare = Money Saved Using Miles $9,800 - $2,450 = $7,350

2nd Step: Money Saved ÷ Miles Required = Value of Mile $7,350 ÷ 20,000 miles = 37¢ per mile

General Lesson: You often get more value for your miles with an upgrade than with a free award seat.

That’s fine, but that free First Class award seat on a long flight is still worth getting—for the comfort, of course, and because upgrading from Business to First Class is usually not a good idea since upgradeable Business Class fares are usually high. It just goes to show that you can’t always base your decision on what a mile is worth. But there are some hard-and-fast rules that tell you when it’s wise to use miles and when it’s a waste.

When to Pay with Cash

1. If your miles end up being worth less than about 3¢ each, buy the ticket and save the miles for another day For instance, you may snag a $1,100 Business Class ticket to Europe for the holidays. Using our formula ($1,100 saved divided by 80,000 miles spent) shows that each mile is worth little more than a penny. Is that a good return on your loyalty? No.
2. When the airline’s minimum upgradeable fare is too high Many airlines do not allow trans-Atlantic upgrades on their lowest discount economy fares. In our research, Delta consistently had higher fares for upgradeable economy class tickets than most. In one test booking, we found that Delta’s lowest upgradeable fare was $1,466 (compared with less than $600 on another carrier). In this case, you’d be better off buying a 50-day advance-purchase Business Class fare if the cost was less than $2,200.

When to Pay with Miles

1. To get free First Class award tickets These seats cost a fortune, and they’re not easy to get. Compare the cost of the lowest Business Class ticket to a First Class ticket on the same United flight. [table id=1690 /] First Class can cost 366% more than Business when paying cash. But a First Class award ticket between the US and London costs only 50% more miles than a Business Class ticket, as you can see below. [table id=1691 /] Conclusion: Using miles for First Class award tickets is generally a good redemption value. First Class is usually much better than Business, and the extra comfort is worth the splurge.
2. To upgrade from Economy to Business Anything to get out of steerage, right? And you still earn miles and elite status for the economy ticket (non-negotiable for many of you). Carriers reserve many more seats for upgrading than for straight awards—a huge factor. You can also try to upgrade by wait-listing and checking at the counter just before departure.
3. To upgrade from Business to First But only on carriers such as British Airways that let you do this even with the lowest Business Class fares. You can end up saving a small fortune.
4. For Business Class travel when you miss the advance-purchase window If you’re booking on short notice, fares can be sky-high. Using miles can save you a small fortune here, too.

Follow these guidelines and you’ll solve some of the indecisions that come with managing mileage assets.