4 Ways To Determine the Value of Your Credit Card Points
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Written by
Jason Steele
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Edited by
Levi Leidy
What are your credit card points and miles worth? Unfortunately, there’s no quick and easy answer to this question, as each kind of point or mile can be worth different amounts, just like each country’s currencies have different values. Points and miles can even be worth more or less to you depending on how you can redeem them. For example, frequent flier miles from your hometown airline will always be more valuable to you than miles from a carrier that doesn’t serve your city (or have any partners that do).
Here are four ways to determine the value of your credit card points.
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What Is the Value of the Reward You Received?
The simplest way to value credit card points and miles is to look at the retail cost of the reward.
For example, if you redeem 25,000 miles for a flight that costs $500, you may decide that you received two cents per mile in value. However, you should also consider the cost of any taxes and fees you paid for your mileage redemption, and subtract that from the value you are receiving.
What Would You Have Actually Paid for the Reward?
Sure the flight you redeemed your miles for may have cost $500, but if you would have purchased an alternative flight for $300, that better represents the actual value of the points you redeemed, which is now closer to 1.2 cents per point. And if you redeem your rewards for merchandise, don’t accept the manufacturer’s suggested retail price — look for the lowest price you can find, the one you would have actually paid for if you were using cash.
What’s the Highest, Best Use of Your Points or Miles?
There are many ways to redeem credit card rewards. For example, one credit card may have points can be redeemed for 0.5 cents each as cash back, which is an especially poor value. Meanwhile, when you redeem those rewards for high-value flights or hotels instead, you can often receive two to three cents in value per point. It all depends on your credit card’s rewards structure.
Obviously, a travel credit card will lend itself best to having its points and miles redeemed via travel purchases like flights, rental cars and hotel stays. Other types of credit cards may offer more in cash back or better rewards for purchasing things like groceries, gas and streaming subscriptions.
Don’t Fall Into the Luxury Trap
Say you redeemed 150,000 points for a business-class ticket to Europe that would normally cost $5,000. Did you save $5,000? Perhaps, but only if you would have actually paid cash for that ticket if you didn’t have the miles. More likely, you splurged with your rewards in a way you wouldn’t have with your dollars.
To find its value to you, imagine the ticket was on sale. At what price would you have bought it with cash? Divide that amount (minus the taxes and fees paid on the award ticket) by the miles spent, and that’s the actual value you received.
When you know how much your points and miles are worth, you can make the right decisions on which credit cards to apply for and use, and how best to spend your rewards.
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