I’m sure you’ve seen some amazing introductory offers out there when shopping for a new credit card. But how much is 50,000 points, really? And how much is one point or mile actually worth?
You see, not all rewards are created equal. Fifty-thousand points on one card might be worth less than 30,000 miles on another card. Keep reading to find out how you can calculate the value of your points and miles and maximize their value.
Note: If you spend quite a bit on travel, why not be rewarded for it? I recommend checking out the Wells Fargo Propel card, the Chase Sapphire Preferred card, or the Capital One Venture Rewards card to earn one of the best cash back rates on your travel purchases! See more credit card bonus offers here.
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Points vs. Miles
Points and miles work in similar ways. Depending on the program and the rewards card, you’ll earn either one with each eligible purchase. Once you’ve compiled enough, you can redeem your points or miles for a variety of rewards.
So what’s the difference? Airline co-branded cards usually refer to “points” as “miles.” You can redeem them for flights, which will get the most value. Because they have no set value, it takes a bit more brainpower to maximize the value of your miles.
On the other hand, points often have given values, and they’re usually more flexible when it comes time to redeem them. Options might include cash back, gift cards, merchandise and travel purchases.
What are Credit Card Miles?
Credit card miles—the same thing as points—are the currency of loyalty programs attached to certain travel rewards credit cards.
With these rewards credit cards, you earn miles or points that you can later redeem for airfare, hotel stays, or other travel expenses. Under most programs, you’ll earn miles or points for every dollar you spend as well as bonus miles or points for spending in certain categories or spending a minimum amount of money within a certain period of time after opening a new account.
Credit card miles are different than airline-specific frequently flyer miles. Both, however, can be redeemed for free travel.
Cashback Credit Cards
You have credit card that gives you a cash rebate on your charges ranging between one and two percent of whatever you buy and sometimes you may even get up to six percent on specific purchases.
Keep in mind that this may accumulate in your rewards account as points that you could redeem for gift cards or other merchandise, but the points you earn are equal to a percentage of your purchases.
Cash back credit cards are simple and straightforward—earn cash and use it for anything. But miles credit cards can give you more for your money if you know how to use them.
Travel Rewards Credit Card
You would rack up points or miles every time you make a purchase, so for every dollar you spend, you’d get a mile. Or you might get two miles for every dollar spent when booking flights with specific airline. Eventually, you’ll earn a ton of miles which then you can redeem for airline tickets or hotel rooms, cruises, rental cars and more!
It doesn’t matter as much whether these rewards are called miles or points; what matters the most is how much they’re worth given your redemption options. Many cards also include special travel discounts, use of airport lounges, companion tickets and other perks, such as trip cancellation insurance, trip delay reimbursement and lost baggage reimbursement.
Points Credit Card
These credit cards are a hybrid of travel credit card and a cashback credit card. Generally, for every $1 you spend you get a point or points and then you can redeem those points for cash, travel, or merchandise or maybe an experience! They are also the most common rewards version for store credit cards like those that allow you to accumulate points with each dollar your spend at the given merchant and then reward you with a discount coupon or gift certificate for that store or retailer.
So if you really want to use a rewards credit card to its full benefit, you’ll need to get familiar with how the rewards work – and stay familiar, because the rules often change from quarter-to-quarter.
Doing the Math
To determine your rewards redemption value, use this equation:
Redemption Value = 100 X Cash Price ÷ Reward Price
First, get the cash price of your reward and multiply that by 100. This will convert the dollar amount into cents. Then, divide that by the number of points or miles you need to redeem the reward. What you end up with is the per-point or per-mile value in cents.
Factors to Consider
The redemption value is just one part of the overall rewards value. You should also factor in the earn rate, reward fees, card costs and points transfer potential.
This rate is the amount of points or miles you receive for every dollar you spend. Some cards have a flat earn rate for every purchase. Others give you double, triple or more for purchases within bonus categories.
In the equation above, the cash price should include the full amount of the paid booking. That includes any taxes and fees, and excludes any added expenses as a result of booking the reward. For example, if you have to pay $50 to redeem for a hotel stay that normally costs $300, then you’re only getting a $250 value for your points.
To get a truer sense for the value of your points or miles, deduct these kinds of expenses from the cash price before you dive into the rest of your calculations.
How much does your rewards card cost? This includes annual fees, interest and other costs that decrease the value of your points or miles. If you carry a balance, the interest charge will easily negate your rewards value.
Here’s a good rule of thumb: If you pay more in fees and interest than you earn in points or miles, get rid of the card. And by all means, pay your credit card balance – full and on time – every month.
Some rewards cards will let you transfer your points to a partner program. You might want to do a transfer if you need more miles to purchase a flight or if you want to take advantage of a better points or miles value. Before you do the transfer, it’s important to not only consider the transfer ratio, but also the new redemption value. You don’t want your points to lose their worth when you make the switch.
How Much They’re Worth
Here’s a list of how much points and miles are worth according to reward program when you redeem them. We tried to be as accurate as possible, but value is always subject to change:
|Rewards Program||Value In Cents|
|Accor Le Club||2.0|
|Aeroplan Loyalty Program||1.5|
|Alaska Mileage Plan||1.8|
|American Express Membership Rewards||2.0|
|Amtrak Guest Rewards||2.5|
|ANA Mileage Club||1.4|
|Bank of America Premium Rewards||1.0|
|Barclaycard Arrival Miles||1.0|
|Best Western Rewards||0.7|
|Capital One Credit Card Rewards||1.4|
|Chase Ultimate Rewards||2.0|
|Citi ThankYou Points||1.7|
|Diners Club Rewards||2.1|
|IHG Rewards Club||0.5|
|JetBlue TrueBlue Rewards Program||1.3|
|Korean Air SkyPass||1.7|
|LATAM Pass Points||1.5|
|Miles & More||1.4|
|Qatar Airways Qmiles||0.8|
|Southwest Rapid Rewards||1.5|
|Spirit Airlines Free Spirit||0.4|
|Turkish Airlines Miles and Smiles||1.3|
|U.S. Bank FlexPerks||1.5|
|Virgin Atlantic Flying Club||1.5|
|Wells Fargo Go Far Rewards||1.5|
|World of Hyatt Loyalty Program||1.7|
Maximizing the value of a rewards card may require some legwork, but it’s usually worth it in the long run. To get the most out of points or miles, make sure to meet the introductory offer requirements and pay your balance in full every month.
Lastly, don’t spend more than you usually would just for the rewards. It won’t be very “rewarding” in the long run. So, while you’re here on HMB, learn how to earn even more bonus points and miles that you can use towards your future travels!