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This episode comes from our new series “This or That,” in which the NerdWallet Travel team reviews different travel options.

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You might be considering whether you should redeem your points for cash or use them to purchase airline miles, hotel points, or credit card points. It is a mistake to keep your points safe indefinitely. It is a bad idea to hoard points as airline miles and hotel point generally decrease in value over time. Loyalty programs gradually increase the amount of points required to book a hotel room or flight.

Once you have enough points to redeem for award travel, calculate the redemption value. You can either divide the cash price by points or use a calculator. This will give you the cent-per-point value for your redemption. Compare it to NerdWallet baseline values for how much each point should cost.

You will get a great deal if your redemption value is equal or greater than your credit card points. You may also be able transfer credit card points to a hotel loyalty program or airline and spend less points there than booking via the credit card’s travel portal. This step might be best if you consult another calculator.

If the redemption rate that you calculated is too low, you should pay cash if you are able to afford it and not go into debt. Cash payments have many advantages. You can earn elite status points and more points for your bookings by paying with cash. If you want to fulfill the credit card sign-up bonus spending requirements, cash is also a good option.

1. Calculate the cent-per point value of your redemption. For example, if a flight costs $500, multiply $500 by 50,000. Compare that value to NerdWallet baseline values for how much your points worth. Book it if your redemption value is greater!

2. Find out if transfer partners offer a higher redemption value. Do you have a travel credit or are you considering one? If so, look into whether you can book through a transfer partner to save points.

3. Don’t hoard points. Get them now and use them soon before they lose value.

Learn more about points and miles with NerdWallet:

Sean Pyles: Do you have a trip in the works? If so, what should you do with all those points? Are you better off using them to book your trip or cash? The NerdWallet Smart Money podcast is where you can send your money questions to us and we will answer them with the help our brilliant Nerds.

Sean Pyles is my name. This episode of “This or That” is about paying with points. What are the best times to redeem your points? Do you prefer to pay cash all the time or save your points for big redemptions? Should you use your points for your next trip even if it isn’t very expensive?

Meghan Coyle is here to share her experience. Meghan Coyle is an editor for NerdWallet’s Travel Team. She helps to calculate how many points you have. Meghan, welcome to Smart Money.

Meghan Clyle: Thank you for having me, Sean.

Sean Pyles: Let’s start by being very specific about the types of points that we are referring to. To book a flight for free or a hotel stay for free, travelers can use hotel points or airline points. You can also book flights and hotels with credit card points.

When people want to choose between cash or points to book, how does the calculation differ for different types?

Meghan Coyle There are many types of travel rewards. There are many types of travel rewards. The good news? You can choose between cash and points. However, the actual value of your points will vary.

For example, hotel points are not worth the same as airline miles. Even within hotels, points from different hotel brands can be worth different amounts. It can quickly get confusing.

Points can be described as a currency. We’re basically trying to convert them into cash, to see which one is better. It’s almost like comparing apples and oranges. We need to have two of each.

Sean Pyles Now you can boil them down to U.S. Dollars.

Meghan Coyle: Yes. The simplest way to calculate this is to take the cash price, and divide it by how many points it would take for the same reservation.

Sean Pyles : Okay.

Meghan Cyle: No.

Sean Pyles: Based on your findings, how can people decide if the point value is fair? Is it worth half a penny per point? Is 1 cent per point better or more common? Do you agree?

Meghan Coyle (Yes, so NerdWallet publishes an annual list of how much points are worth every year. My team reviews thousands of hotel stays and flights, and then we calculate that math. We then come up with a baseline value. This is the amount of a point in dollars.

Let’s face it, they aren’t worth that much. It is usually a few cents or less. This means that every time you search for a flight or hotel, you need to divide the cash price by the number points. Then you will get the value.

Book it if it exceeds the baseline value. This means that you are getting a great deal. If it’s not, you should pay cash.

Sean Pyles : We also have a calculator to help you determine this, right?

Meghan Coyle (Yes, absolutely). This math is not your responsibility. The calculator is something I use all the time.

Sean Pyles: In our show notes, we will include a link to this. Folks can find that at nerdwallet.com/podcast.

You’ve been keeping track of points and their value for quite some time now. Are there any trends in the value of points and flights and when they should be used?

Meghan Coyle: Yes. Higher value redemptions are often more expensive. Because your points are so valuable when you book business class, people recommend that you book these flights. This is true. However, if you don’t fly business class often or have too many points, this might not be the best option.

Importantly, points tend to devalue each year. The basic idea is that every program gradually increases award prices. A flight that costs 10,000 miles may cost 11 or 12,000. It keeps going up and up.

Sean Pyles Inflation isn’t just affecting the grocery store, it’s also affecting your flights and points.

Meghan Coyle: Yes. It’s a good idea to start using your points soon after you have enough to pay for the trip. You will lose value if you have a lot of points. Imagine that you are sitting on a pillow and it starts to deflate. This is what your points are experiencing.

Sean Pyles: So you said that it is good to use them when you have enough. It’s hard to know what enough means. Is this the only flight they are looking for? Or is it a trip that will be available in six months? What do you think they can figure out?

Meghan Coyle: Absolutely. It is up to you. However, if you have a trip in the next year and it costs 30,000 point, I wouldn’t be tempted to earn more. People have a million points and don’t plan on using it. Right?

Sean Pyles : Yes.

MeghanCoyle: That’s what you want.

Sean Pyles: Okay. You mentioned that points’ value can decrease over time due to inflation. Is it true that inflation actually has had a positive effect on points, making them more attractive for booking in recent years?

Meghan Coyle: Yes. We all need good news from all the new inflation data, and this is it. If you look at December prices, flight prices have increased more than 25% year-over-year.

You might find that your redemptions are better than the baseline value you were referring to because cash prices are so high and points prices haven’t increased as much as inflation.

Sean Pyles: Okay. I am curious about one thing. Different airlines and hotels have different valuations and some are quite high-value. Could you please discuss which are better than others?

Meghan Coyle (Yes, so some international airlines did really well during our analysis. As you probably know, U.S.-based travellers think United, American and Delta. Maybe Alaska. You shouldn’t pass up on these international airlines, which offer points worth a lot. For example, Air Canada. You can book United flights using your Air Canada Miles, because Air Canada is a member of the Star Alliance.

Sean Pyles: This is very handy. When I heard you say that, my thoughts turned to “I usually fly out of Portland.” It’s not clear if Air Canada has any flights through Portland. It’s good that they are at least partnered to other airlines so you could use them on United, as you mentioned.

Meghan Coyle (Totally) or any other international carrier in their alliance or any partner. You have many options.

Sean Pyles Okay.

Meghan Coyle says: Hyatt is one of my favorite places. Their points are worth a staggering 2.8 cents per unit. They are a Chase transfer partner. This is an incredible value compared to other loyalty programs such as Hilton and Marriott, which average 0.7 cents, or 0.5 cents in Hilton’s instance. It’s also much more than what you could get if your Chase booking portal is used.

Sean Pyles: That’s quite sweet. Are Hyatt points also flexible, so you can use them in other hotels or for fun?

Meghan Coyle: Hyatt has many brands. They have Hyatt Place, one of their all-inclusive resorts. In the last few years, they have opened a few.

There are many hotels to choose from, but Hyatt has the most diverse hotel programs. They don’t have as many hotels as Marriott so it is a little more limited.

Sean Pyles Maybe they have a higher value to encourage people to use them than a larger chain.

Meghan Cyle: Correct.

Sean Pyles: For U.S.-based travellers who don’t travel abroad often, what is the best way to earn Air Canada Miles? They can fly only domestically or they could fly internationally a lot.

Meghan Coyle (Yes, that’s right. That’s where many travel credit cards come in. Transfer partners are available for most major credit cards, including Citi, Chase, Amex and Capital One. These are often airline or hotel programs to which you can transfer credit card points. This is where the math gets tricky, as all credit card programs have a travel portal.

Let’s suppose you have a Chase Sapphire Card. You could use the points you earned with Chase to book directly through their portal, app, or website. However, your points are worth only 1 cent when used that way. You might get a Sapphire for 1.25 to 1.5 cents per point.

You’re thinking, “Oh, that’s pretty great.” Transferring Chase points to Air Canada will increase their value by about 1.9 cents. If you know how to book, you’ll be able to see how it all works.

Sean Pyles : You have to be able to play the system a bit.

A quick disclaimer. NerdWallet is a partner with the banks Meghan mentioned. However, that doesn’t affect how we talk to them.

Okay, back to the should I pay with points or cash calculation. This is not the same as asking if you should pay with cash or points. The question is, should you pay using credit card points or hotel points or airline points or cash? There are many things you can factor in and compare.

Meghan Coyle: Yes. It’s hard work. This is why we do all the work. People who want to travel to a place they know well should look for articles about how to best use miles or how to get to New York. Because there are many people who have done the legwork.

Sean Pyles: Yes. Some people, like you, are passionate about gaming the system and gaining tons of points. They even try to achieve elite status. Could you please explain what elite status is and how it may impact the decision to pay in cash or points?

Meghan Coyle: Yes, elite status can give you all kinds of perks on an airlines if you’re loyal to them. The same could be true for hotels.

The greatest perk I believe is being upgraded. People might say that they were upgraded to business class, but they only paid for an economy seat at the back. That’s why elite status is sought after.

The problem is that if you pay using points, you will not be able to get elite status credits. These are the items you must collect to be eligible for elite status in the next year. This applies only if you are using hotel points or airline miles, but there are other options.

Some credit cards also offer fast track to elite status or elite status earning. You might consider prioritizing hitting the minimum before you begin paying with points for your next vacation.

Sean Pyles: Meghan, I must admit that I am a lazy traveler. I have a cash back credit card that I use for almost everything. I also don’t do much with airline points. If you have elite status or points, I’d love to know how you go about booking your trip. What is your personal approach?

Meghan Coyle: I did the calculation you were referring to. I calculate how much it would cost to fly with my preferred airline in points. One of my elite statuses allows me to look up the cost in points. I will compare the price to cash and then I will use those miles to book flights. I keep my credit card points in major credit card rewards programs, and I will transfer them if I ever need to book anything.

I don’t book any travel through the portal. After all my research, it’s not the best way for you to get the most out of your points. It’s possible for some people to do it more easily.

Sean Pyles: Yes. How long did all that take?

Meghan Coyle: Oh man. It can take quite a while. It can take a while. I think I look up three to four flights each time I book. This is why I do this calculation multiple times. It’s easy to save time by simply looking up the best ways to travel with points and miles. This way you can easily piggyback on other research, without actually doing it.

Sean Pyles: Yes. It makes me reflect on how it helps to be a bit more self-aware when you do the cash versus point calculation. As I said, I am too lazy to do the things you mentioned. I am happy to earn a decent amount of cash on my credit card by simply buying my flights through it.

You know what you should do. You know how to get points and maximize their potential. All of the work you put in is worth it.

Meghan Coyle says: Absolutely. This is how I have saved thousands of dollars and thousands upon thousands of points. Your strategy should not be discounted. You are using your points so that is the most important thing. When someone asks me how to best use them, I respond, “As long you’re using them,” .”

Sean Pyles : Correct.

Meghan Clyle: These are almost free flights and hotel accommodations that you wouldn’t have to pay otherwise.

Sean Pyles: People might want to consider the fact that, in addition to points losing value, some can also expire. What happens to points when they expire? This can really take people off guard.

Meghan Coyle: Yes. Each airline and hotel has its own rules about when points expire. Amazingly, some of these rules don’t even expire anymore.

However, the general rule is that there must be some activity in your account within a specified time period, such as a year or 24 months. You also need to have used a loyalty program and traveled for at least one year.

However, “using that loyalty programme” is a very broad term. You have many options to keep your account active. You can shop through their shopping portal to buy things like a Nike T-shirt, shoes, or other items. You can also earn miles if you purchase it through their portal.

That’s how you can keep it active. You can travel with any of these companies by using the credit card. There are many things you can do. Try your best to not let them go.

Sean Pyles : Okay, great.

Many people love credit card sign up bonuses. For many, it can be their best chance to get a boatload of points. What do you think it means for someone to use cash or points?

It seems to me that once you receive the sign-up bonus it is a no-brainer. It’s best to use it for a trip as soon possible.

Meghan Coyle: Absolutely. It is a great place to find out how much your points are worth. This allows you to compare credit card offers.

If you think, “Wow, this credit card offers 100,000 points as a sign up bonus,” then you go online and look at the value. It’s worth only $500. You could also get another credit card for travel, which may only give you 80,000 points but it’s worth more that $1,000 of travel.

The bonus points are so valuable that you must prioritize them, just like you stated. Knowing that the bonus points are worth $1,000 will make it more difficult to reach your spending minimum. You don’t want that large of a chunk of points to be missed. Sign-up bonuses are often the most valuable part of a credit card. You don’t want miss this opportunity to earn.

Sean Pyles: Yes. As a former NerdWallet debt writer, I have to add that credit cards that offer a lot of points or a sign-up bonus should be paid off monthly. The interest rates on these cards can be very high. This can erode any value you get from these bonuses. These cards can also have annual fees.

Meghan Coyle. That’s a great point Sean. This is especially true when you think about “Oh, should i spend $1,000 on something?” Then, when you realize how valuable the points are, you might be like “Do I need $1,000 to get 10 points?” I’d also say that if you don’t have $1,000 it can help you budget.

Sean Pyles Meghan, what other things should people keep in mind as they decide whether to spend points or cash when booking a trip?

Meghan Coyle: The No. One thing I will say is that there are many ways to use your points. It’s important to continue using your points so that your pillow doesn’t collapse. Have fun! These are your trips and they’re for YOU.

Sean Pyles: Yes. Sean Pyles: Yes.

Meghan Coyle: Yes. Always calculate the cent per point value of your redemption. You can divide 500 points by 50,000 to get a flight costing $500. Then, compare this value to NerdWallet’s baseline value to see how many points your points are worth. Book it if the redemption price is higher.

Second, there are a lot of point currencies. Look for ways to save points if you already have a credit card for travel or are thinking about getting one.

Lastly, don’t hoard points. You should earn them, then use them as soon you can to avoid your points becoming worthless.

Sean Pyles: It’s great. Meghan, thank you so much.

Meghan Clyle: Thank you for having me, Sean.

Sean Pyles: This is it for this episode. Have a money question? Call or text the Nerds at 901-730-6370 to ask your questions. That’s 901-730-NERD.

You can also email us at [email protected] Visit nerdwallet.com/podcast for more info on this episode. Remember to rate, review, and follow us wherever you get this podcast.

Meghan Coyle produced this episode. Tess Vigeland edited our audio. Kaely Monahan mixed the audio. A big thank you to all the NerdWallet pros at the copy desk.

This is our disclaimer. We are not investment or financial advisors. This information is intended for entertainment and general education purposes only and may not be applicable to your particular circumstances. With that being said, you can always turn to the Nerds until the next time.