How To Calculate the Value of Your Credit Card Points

Credit card rewards can provide an excellent way to get value back whenever you use your card. However, not all credit card points are created equal, and you may be earning less than you think.

Credit card points are a form of rewards currency you receive when you use a rewards credit card. Those rewards are often referred to generally as “points” but can be earned as points, miles, or cash back.

If you’re wondering how many credit card points equal a dollar, the answer is: It depends. Here’s what you need to know about valuing credit card rewards — and how you can be sure to get the most out of your rewards.

How to calculate the value of credit card points

Because credit card rewards points and miles vary in value based on the program issuing them and how you use them, there’s no single way to calculate how many credit card points equal a dollar. But there’s a way to calculate the value when trying to determine if you’re getting a good deal by redeeming your points or miles.

Here’s how:

1. Determine the cash price of your intended purchase (such as a gift card, flight, hotel booking, statement credit, etc.)
2. Find out how many points are required for the same purchase from your credit card dashboard.
3. Divide the cash price by the price in points.
4. Multiply by 100 to get the points value in cents.

Cash Price / Points Required x 100 = Point Value in Cents

Let’s say you’re trying to use your rewards to book a plane ticket that costs $1,000. You find out you can use 100,000 points for this flight. To determine this transaction's point value using the formula, the calculation would be:

$1,000 / 100,000 points x 100 = 1 cent per point

In this scenario, your points are worth one cent apiece. This is fairly average for credit cards, but you’ll get more or less value depending on how you redeem and which card you have.

How credit card point values vary

Some general travel credit cards offer a flat value per point when redeemed for travel, so you always know how much your points are worth based on your rewards balance. If one of these cards had a set value of $.01 per point, you could confidently say that 100 points are worth a dollar. But while it would be simple if all credit card points were worth one cent apiece, many rewards programs assign different values to their points or miles based on how you use them.

Here are some resources for learning about points programs with a few top issuers:

• Chase Ultimate Rewards points
• American Express Membership Rewards points
• Citi ThankYou points

There are three ways credit card issuers often assign value to points.

1. Different rates for different categories

Redeeming rewards for travel is usually the best way to get the most value out of your points or miles. But many travel cards also allow you to use your rewards to get cash back, buy gift cards, purchase merchandise, and more. While these extra redemption options give you more flexibility, you may get a lower value per point if you use them.

With American Express Membership Rewards, for instance, you’ll get up to one cent per point if you redeem your rewards for flights and hotels through American Express Travel but only 0.6 cents per point if you use them for a statement credit to pay yourself for past purchases. Even for cash back cards, redeeming points for cash doesn’t often give you the most value.

2. Dynamic pricing structures

You’ll often see a dynamic pricing structure with airline and hotel rewards programs. For example, redeeming your hotel points for a four-night stay in December could give you a different value per point than the same stay at the same hotel in May of the following year. In the same vein, you’ll generally get much more bang for your buck staying in an economy suite somewhere quiet than you would using your points for a luxury room in a big city.

While this can make it difficult to know whether you’re getting a good value for your rewards, thankfully, some experts have done the research on what these credit card points are worth on average. And once you know that average value, it just goes back to doing the math.

Say you have airline miles with American Airlines, which are worth 1.4 cents apiece on average. To determine if the redemption you’re considering is a good value, you simply divide the cash price by the number of miles needed to find out if you’re getting less, more, or average value with rewards.

Cash Price / Number of Miles x 100 = Miles Value in Cents

For example, let’s say you find a round-trip flight that costs $500 or 50,000 miles. If you divide $500 by 50,000, you get just one cent per mile, which is a below-average value for the airline.

$500 / 50,000 miles x 100 = 1 cent per mile

But you’re flexible, so you find another flight that departs a week later and costs $600 or 35,000 miles.

$600 / 35,000 miles x 100 = 1.7 cents per mile

This redemption would save you 15,000 miles and give you an above-average 1.7 cents per mile.

3. Transfer partners

Some travel rewards programs allow you to transfer your hard-earned points or miles to other travel programs. With Chase Travel, for example, you can transfer your points to 11 airlines and three hotel brands at a 1:1 ratio — meaning one Chase Ultimate Rewards point equals one airline or one hotel brand point. So, you don’t lose anything by transferring.

But that 1:1 value isn’t always the case with transfers. Depending on the value you can get per point or mile from one partner program, your rewards earned with the original program can technically be worth more or less.

For example, if you have the Chase Sapphire Preferred^® Card, your points are worth 1.25 cents apiece if you use them to book travel through Chase. But one of Chase’s transfer partners, World of Hyatt, gives you 1.5 to 1.7 cents per point or more, so transferring your Chase points to that program before booking a hotel stay could make sense.

How to choose a rewards credit card with the most value

We know that credit card point valuations can vary based on the rewards program you have and how you redeem rewards. Here are some tips for finding a new rewards card that will offer the most value potential.

Look at the effective rewards rate

Because some programs value their points differently, you need to look at both the point-earning rate and the point value to get an effective rewards rate. The point-earning rate is how many points you earn per $1 spent. The point value is what we calculated earlier to determine your points’ value in cents. Here’s how to use these numbers to calculate an effective reward rate:

Point-Earning Rate x Point Value = Effective Rewards Rate

For example, let’s compare two hotel credit cards with wildly different rewards and redemption rates: the Hilton Honors American Express Surpass^® Card and The World of Hyatt Credit Card. The Hilton Honors program has a point value of 0.5 cents, and this card’s lowest point-earning rate is 3X for every eligible dollar spent. Meanwhile, the World of Hyatt program has a point value of 1.5 cents, and this card’s lowest point-earning rate is 1X for every eligible dollar spent.

Using the formula above, you can calculate the effective reward rates for both of these cards:

Hilton Honors American Express Surpass^® Card: 3 x 0.5 cents = 1.5%

The World of Hyatt Credit Card: 1 x 1.5 = 1.5%

While Hilton Honors reward rates are much higher, they don’t give you more total value because these points are worth much less when translated into the real world.

Pay attention to redemption rates

Many travel credit cards give you more value with travel redemptions than another card in the same family. For example, you can redeem rewards earned with the Chase Freedom Flex^® for travel through Chase. But if you have the Chase Sapphire Preferred^® Card, your points will be worth 25% more on the same redemption, and the Chase Sapphire Reserve^® would give you 50% more value.

To rack up rewards with a specific rewards program, compare the different cards available and choose the one with the best redemption value for your intended spending.

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• The Bank of America^® Travel Rewards credit card is great for individuals who enjoy earning rewards and traveling.

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