The Simple Explanation
Points and miles are loyalty currencies—rewards you earn from airlines, hotels, and credit cards that you can later exchange for travel.
Think of them like this: every time you fly with an airline, stay at a hotel chain, or make purchases on certain credit cards, you're earning a bit of "play money" that can later be traded in for flights, hotel stays, or other travel perks.
The terms "points" and "miles" are often used interchangeably. Airlines typically call their currency "miles" (because you earn them by flying miles), while credit cards and hotels usually call them "points." But they work the same basic way.
Why Do Companies Give Away Free Travel?
This is a reasonable question. Why would airlines and hotels give you free stuff? The answer is simple: loyalty.
Airlines and hotels operate in brutally competitive markets. A flight from New York to Los Angeles is essentially the same whether you fly United, Delta, or American. So how do they keep you coming back?
By creating loyalty programs that reward you for choosing them repeatedly. The more you fly with United, the more miles you earn, and the more invested you become in continuing to fly with United to earn even more. It's a brilliant business strategy—and it can work in your favor if you understand how to use it.
Where Points Come From
You can earn points and miles from several sources:
1. Flying on Airlines
This is the original way to earn miles. When you fly, you earn miles based on the distance flown or the price of your ticket. Frequent business travelers can accumulate substantial balances this way.
2. Staying at Hotels
Hotel chains like Marriott, Hilton, and Hyatt have their own loyalty programs. Stay at their properties, and you earn points toward future free nights.
3. Credit Card Spending
This is where things get interesting for most people. Travel rewards credit cards let you earn points on everyday purchases—groceries, gas, dining, online shopping—not just when you travel. For many people, credit cards are the fastest way to accumulate meaningful point balances.
4. Bonus Activities
Shopping portals, dining programs, and partner offers can add extra points to your balance without much extra effort.
What Can You Do With Points?
The most valuable use of points and miles is booking award flights and award hotel stays. Instead of paying cash, you pay with your accumulated points.
Here's what makes this exciting: the value you get from points can far exceed what you'd get from cashback rewards. A $10,000 business class flight to Europe might cost 70,000 points—points you could earn in a year or two of normal spending. That's potentially 14 cents of value per point, compared to the 1-2% you'd get from a simple cashback card.
🌍 Real Example
A round-trip business class flight from New York to Tokyo typically costs $8,000-12,000 in cash. But it might be bookable for 120,000 airline miles. If you earned those miles from credit card spending, you're getting incredible value—roughly 7-10 cents per point, instead of the 1 cent per point you'd get from basic cashback.
Why People Get Excited About This
The points and miles hobby attracts people because it offers a genuine opportunity to travel better for less. We're talking about:
- Flying business or first class for the cost of an economy ticket
- Staying at luxury hotels for a fraction of the cash price
- Taking trips that would otherwise be financially out of reach
- Turning everyday spending into meaningful travel rewards
Of course, there are trade-offs. This isn't free money—it requires learning a system, planning ahead, and sometimes accepting limitations on when and how you can travel. But for many people, the rewards are well worth the effort.
What's Next?
Now you understand the basic concept: points and miles are loyalty currencies you can earn and redeem for travel. But not all points are created equal.
In the next lesson, we'll explore the three main types of travel currencies—credit card points, airline miles, and hotel points—and why understanding the differences matters for your strategy.