Consumer Reports: Best way to spend airline miles

Collecting frequent-flier miles is easy because many credit cards offer miles as rewards for all types of purchases.

But spending those accumulated miles on travel is more difficult, according to Consumer Reports Money Adviser.

Because airlines have a limited number of seats allocated for award tickets, it's not easy to book a dream vacation paid for by points.

Instead, frequent-flier programs are trying to get you to spend your miles on other things, such as merchandise, gift cards for a variety of retailers and even tickets to sports and cultural events.

Late last year, American Airlines added the option for customers to redeem miles, or a combination of miles and cash, for hotel stays and car rentals.

Delta and United/Continental frequent fliers already had that option. Delta and Continental even have websites where you can use your miles in an auction to bid for tickets to concerts at Carnegie Hall, footballs signed by NFL players, and rodeos.

Running the numbers

But is it worth using your precious miles for anything other than airfare?

"In general, redeeming points for nonflight awards is a pretty lousy deal," says Tim Winship, publisher of FrequentFlier.com. "And using them for merchandise is the worst deal."

He said you generally get the best value when you redeem miles for airfare, followed by hotels and then car rentals.

Consumer Reports Money Adviser offers the following ways to compare options to see if you're getting the best deal:

•Frequent-flier programs typically offer a restricted round-trip domestic economy ticket for 25,000 miles or points. If that ticket is worth $350, which is about the average cost, then your miles are valued at about 1.4 cents each.

Now let's factor in the complications of blackout dates and availability restrictions, which might boost your cost for that ticket to anywhere from 35,000 to 50,000 miles, according to Winship. Now the value of your miles is closer to 1 to 1.2 cents each.

•Compare that with the value of miles spent on merchandise.

For example, Delta SkyMiles recently offered a $50 gift card at 1-800-Flowers or Macy's for 18,000 miles. That equates to a value of about 0.28 cents a mile — not a very good deal.

Also on Delta's SkyMiles was a pair of Bose noise-canceling headphones for 68,100 miles. You can buy those same headphones on Amazon.com for $300. That comes out to about 0.44 cents per mile.

American Airlines allows you to redeem miles for retailer gift cards through a partner service called Points.com. To get that same $50 gift card from Macy's using this service, you'd have to spend 12,295 American Airlines miles, which comes to 0.41 cents per mile.

Hotels and rental cars

You'll do better spending your miles on hotels and car rentals, though the value of your points will depend on the program you're in.

One night at the Hilton in Los Angeles near the airport over a weekend in late May cost 22,832 miles with Delta, 13,795 miles with Continental and 8,900 miles with American.

American also offered the best deal in rental cars, followed by Continental and Delta.

For example, Consumer Reports Money Adviser compared the cost of renting an economy Chevrolet Aveo for that same Los Angeles trip through Alamo. On Alamo's website, the rental would cost $60.77 per day. Using reward miles, it would cost 2,800 miles on American (2.2 cents of value per mile), 5,575 miles with Continental (1.1 cents) and 8,506 miles with Delta (0.71 cents).

There is one merchandise category that qualifies as a good deal: using your miles for magazine and newspaper subscriptions.

For example, a one-year subscription to Entertainment Weekly, which is $20 on Amazon.com, costs 1,300 miles with American and Continental. That works out to a value of about 1.5 cents a mile.

That might be a good way to spend leftover miles instead of waiting to accumulate enough for a ticket or upgrade.

Consumers Union Inc.