Home > 2013 > Credit Cards

How Much Is a Credit Card Reward Point Worth?

Advertiser Disclosure Comments 2 Comments

It’s often a challenge to figure out which credit cards offer the most valuable rewards. In many cases, banks offer rewards in the form of points or miles, yet the only way to compare these cards to cash-back credit cards is to establish a value for each point or mile.

Unfortunately, determining the value of credit card reward points and miles can be a challenge as it always depends on the value of what the points and miles can be redeemed for.

Where to Start

First, you have to read the fine print of your credit card user agreement. For example, Capital One’s Venture Rewards card offers two miles per dollar spent on every purchase, and each mile is worth one cent each as a statement credit toward any travel expense. Therefore, each mile is worth about one cent each, although they are not quite as valuable as having cash at your disposal.

In another instance, U.S. Bank offers its 1-2-3 rewards card in partnership with Kroger stores. It features one rewards point per dollar spent on most purchases, double points on purchases in their stores, and triple points for purchases of their store-brand goods. Yet in this case, 1,000 points are needed for a $5 certificate, making each point only worth one half of a cent each.

When it comes to hotel points, the calculation is much more complicated. Cardholders will want to estimate the value of their points to themselves by looking at how they can and will redeem them. For example, my Hyatt Gold Passport points could be worth more than four cents each if I redeem 22,000 of them for a $1,000 room at the Park Hyatt in Milan. Yet, since I am actually using 8,000 them for a $119 room at the Hyatt in St. Louis, they are only worth about 1.5 cents each.

By far, the hardest rewards to quantify are airline miles as it all depends on where you’re going and what award seats are available. For example, Delta offers domestic award flights for as little as 25,000 miles roundtrip, but it makes award seats at the lowest mileage level extremely scarce. And as Delta executive Jeff Roberson recently noted, frequent flier awards requiring the fewest Delta SkyMiles are only available for the lowest-priced seats. Therefore, the value of their miles are limited to between one and two cents per mile, at least when it comes to domestic awards in economy class. Nevertheless, it is still possible to find international business class awards that return four cents a mile or more.

Determining a Value

Yet there are several reasons that cardholders should be cautioned not to simply divide the sales price of their award seats or hotel room by the number of points or miles required. First, travelers will have to be extremely flexible and persistent to find airline award seats at the lowest mileage levels. Also, travelers using award seats will not be able to earn points or miles and receive upgrades (with a few exceptions), which can be worth about 10% of the cost of the ticket.

In addition, cardholders must always consider their least expensive alternative, not just what the airline ticket or hotel room would have sold for. Finally, reward card users can’t claim that the value of their rewards is equal to the full value of business class seats or luxury hotel rooms, unless they regularly pay cash for these reservations. Cardholders must also realize that these rewards are only worth what the cardholder would have paid for them if he or she had paid cash.

By carefully considering the value of one’s points and miles, cardholders can make the best decisions when it comes to choosing a rewards credit card.

Image: iStockphoto

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • http://www.matthewgoldman.com/ Matthew Goldman

    Great article, Jason. Understanding the value of points is critical to finding the right card for your particular spending and your travel or vacation goals!

  • Pingback: Credit Cards for Sports Fans Rated()

  • Pingback: 7 Things to Ask Before Getting a Store Credit Card » |()

  • dustin

    I just did a comparison on my amex/united/wells fargo points and found out I am not getting the deal I expected.
    Amex is 43K points for a flight to mexico and 166 points per dollar.
    Wells fargo rewards is 100 points per dollar and 30K points for the same flight.
    United 70K points for the same flight.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team