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I want to focus on a topic that seems to come up a lot during my credit card consultations. It’s the issue of point valuations. I often get questions like, “how much are Amex points worth?”, and “how do I know if I’m getting a good earning and redemption rate?” In this post and video, I want to focus on some points and miles basics. For those of you experienced in this hobby, this might seem like basic information. Though I’m hoping you can help share your tips and knowledge with others who are new to the hobby. Everyone can benefit from hearing other personal experiences of calculating and maximizing the value of points and miles currencies.
To best explain point values, I decided to break down the topic into three parts:
- Assessing the value of your point currency
- Understanding how point values relate to earning rates
- Measuring the value of a booking
1. Assessing the value of your points currency
Easiest way to assess the value of a point
Point values are important to understand when you’re collecting or building a collection of cards. The easiest way to get a baseline on how much a points currency is worth is to look at The Points Guy’s monthly valuation. The Points Guy releases a list every month and shares his team’s valuation of every major travel points and miles currency. They compare the previous month’s value to the current month and note any changes in the valuation.
I’ve heard many people criticize The Points Guy for their calculations. However, I think it’s a great starting point (pun intended!). Obviously, your experience or situation may be different. For example, a lot of people get the most value per point when redeeming for business or first class redemptions. Though for others (including myself), the focus is to squeeze more travel through economy class redemptions. This means that the target value per point will likely be lower than someone who travels in business or first class.
For example, The Points Guy values Chase Ultimate Rewards points at two cents per point. I personally value Chase Ultimate Rewards points at a more conservative 1.5 cents per point. Since I have a Chase Sapphire Reserve, I’m able to get a 1.5 cents per point redemption rate on the Chase Travel Portal. I strive to get the best redemption value that I can, but I’m willing to redeem at a minimum of 1.5 cents per point.
Emotional value of points
While measuring the value of points is a quantitative exercise, there’s also a qualitative or emotional component that factors into the value. For example, The Points Guy values American Express Membership Rewards points at two cents per point. Though if I were given the choice between 50,000 Membership Rewards or Ultimate Rewards points (both valued the same by The Points Guy) I would choose the Ultimate Rewards points. My choice is strictly an emotional bias. I feel like Chase UR points are easier to redeem, with multiple high-rate redemptions for airlines and hotels. You might feel differently, which is completely valid. Though for my travel style and personal experience, Chase points are more valuable to me. Though this bias might not be captured by looking strictly at the numbers.
The same holds true for hotel and airline points. Assuming that I could get a hotel or airline point at the same value as a Chase Ultimate Rewards point, I would opt for the Chase point. This is because I perceive value in having extra flexibility when redeeming the points. Again, this might not be factored into the actual numerical value, but it’s something that I consider.
Applying point values to welcome offers
Understanding how much a point is worth also helps to understand the value of a welcome offer. For example, as of March 2019, the American Express Hilton Ascend card offers a welcome offer of 125,000 Hilton Honors points for spending $2,000 within the first three months of account opening. If you factor that Hilton points are worth 0.6 cents per point, then the offer is worth $750.
Another popular card is the Chase Sapphire Preferred. As of March 2019, it’s offering a welcome offer of 50,000 Ultimate Rewards points after spending $4,000 within the first three months of account opening. If we go with The Points Guy valuation of two cents per point, you’re looking at $1,000 worth of travel. If you use a more conservative 1.25 cents per points, then you’re looking at $625. I think that this is
2. Understanding how point values relate to earning rates
Now that we understand how much a points currency is worth, you can now measure how much a card earns. The way I calculate the adjusted earning rate is by multiplying the card’s earning rate with the points value. This gives me the adjusted rate.
A great example of how earning rates might be affected by the points value is the Chase Freedom Unlimited. I’ve talked to folks who have asked me why I use the Freedom Unlimited for the bulk of my non-bonus spend when I could be getting 2% cash back with the Citi Double Cash. Even though the card earns 1.5X or 1.5% on all purchases,
Example: Chase Sapphire Reserve/Preferred vs World of Hyatt
Suppose you have the Chase Sapphire Reserve or Sapphire Preferred card and the World of Hyatt card, and you stay at a Hyatt hotel, which card should you use? If we break down the points, we can see that the World of Hyatt card has a 4X bonus on purchases at Hyatt hotels. The Sapphire Reserve and Preferred card have 3X or 2X bonuses on travel purchases. If each Hyatt point is worth 1.7 cents (according to The Points Guy), then you’re earning about 6.8 cents by using your World of Hyatt card. If we use The Points Guy’s value for Chase Ultimate Rewards points, you’ll see that it still makes more sense to use the World of Hyatt card since it earns more at Hyatt hotels and resorts.
Delta Amex vs Amex charge cards
This can also work the other way. For example, a friend of mine was interested in earning Delta points. While getting a Delta-branded card from American Express is an obvious choice, I suggested that he also get an American Express Membership Rewards card. Cards like the Amex Gold could help him earn points due to the bonus structure. For example, since he spends a lot on dining and groceries, he could earn a lot more Membership Rewards points. These points can then be transferred over to Delta. Even with a transfer fee, he would likely earn more points and value with an American Express card than a Delta card when it comes to his everyday spend.
I know there are other variables that have to be weighed and considered, like qualifying miles and other card perks. However, don’t assume that the branded credit card is always the best card for earning a specific points currency.
3. Measuring the value of a booking
Now that we know how to measure the adjusted earning rate of a card by factoring in the value of the points currency, you might be asking, “how do I know how much value I am getting in my redemption?”
Formula for calculating the per point value of an award booking
To calculate the value of a booking, I divide the cash value of the booking by the equivalent number of points needed. This gives me the per point value. Knowing this information can help inform whether I want to transfer the points to a travel partner or book through a travel portal.
Example: Hyatt Place Moab booking
For example, we recently booked a five-night stay at the Hyatt Place Moab in Utah since we’ll be exploring some of the national parks in September. If I booked the five-night stay using cash, it would cost over $1,400 to stay at the hotel. However, it costs 8,000 points to stay per night. So at 40,000 points total, I’m getting a per point value of 3.6 cents per point!
You can use the same method for any type of booking where you can compare both the cash and points cost. We previously did a post/video on when to use the Chase Travel Portal and why it’s sometimes a better deal than transferring points to a travel partner. I basically used the same method to calculate whether I am getting at least 1.5 cents per point. If not, it makes more sense for me to use the Chase Travel Portal to book the hotel or flight. This is due to the fact that I can redeem Chase points at 1.5 cents since I have the Sapphire Reserve card.
What if I don’t want to deal with the hassle of calculating point values?
You might be saying, “All this math is making my head spin. Isn’t there an easier way for people who don’t want to spend time figuring out all this stuff?” The answer is yes! There are several flat-rate travel rewards cards out there that will earn 2% back for travel expenses. Since these cards typically redeem at one cent per point, you only have to think about the front part of the equation. These cards can be a great way to earn and redeem points towards travel without the hassle of trying to figure out best redemption rates.
Example: Barclaycard Arrival Plus
An example of such a card is the Barclaycard Arrival Plus. As of March 2019, there is a limited time welcome offer for 70,000 bonus miles after spending $5,000 on purchases in the first 90 days of account opening. The offer is worth $700 since each Barclaycard Arrival mile (which is not really a mile, but instead a point), is worth one cent per point. The card earns two points per dollar, so it’s essentially a 2% cashback card that you can apply toward travel expenses. It does have an annual fee of $89, but it waived the first year. UPDATE: CARD OFFER NO LONGER AVAILABLE
Example: Capital One® Venture Rewards® Credit Card
Another example of a flat-rate travel rewards card is the Capital One® Venture Rewards® Credit Card. As of March 2019, the card has a welcome offer of 50,000 miles after spending $3,000 on purchases within the first 90 days of account opening. Like the Barclaycard Arrival Plus, the card redeems “miles” as one cent per point, so the welcome offer is worth $500. The card offers credit toward Global Entry/TSA Precheck and offers the ability to transfer miles to several airlines. It has an annual fee of $95, which is waived in the first year. Learn more about Capital One cards.
These cards are great for those who want a simple way to earn and redeem points. While you can usually squeeze more value from a flexible points program like Chase Ultimate Rewards or American Express Membership Rewards, they do require more time and effort to research redemption rates. Even if you’re heavily invested in a flexible points program, it’s often worthwhile to have a flat-rate card to cover miscellaneous travel expenses.
What do you think about point values? I’d love to hear how much you think your favorite points currency is worth.
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