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We talk a lot about credit card scores and how they can allow us to travel the world in ways that would otherwise be impossible with most budgets. However, it’s easy to get lost on how to calculate credit card points.
The question of how to evaluate bonus points is a simple and important question with a somewhat complex answer that depends on several factors. Knowing how much credit card points cost and how to calculate credit card reward points can help you choose the best reward credit card for your wallet.
What types of credit card points can you earn?
There are two types of credit card points you can earn – check out both below:
Fixed Value Credit Card Points
Let’s start with the simplest, which is assigning a value to credit card points, which already have a fixed value. This type of points is fairly common in the credit card rewards world and can be found on rewards cards such as the Capital One Venture Rewards credit card, where the base value is equivalent to 1 cent per mile. This makes for simple math and simple redemption.
If you exchange a credit card point worth 1 cent per point for a cash refund, then you can use the 75,000 points signup bonus to receive $750 cash. However, some cards have different credit scores for different repayment options.
With that in mind, be sure to redeem your fixed value points at their maximum redemption rate, which is usually 1 cent per point.
Flexible and transferable credit card points
Many popular point types offer flexibility in the form of multiple redemption options. However, it can be difficult to determine the true value of points as they can vary greatly between cards and rewards programs.
Two popular credit cards that earn flexible and transferable points are the Chase Sapphire Preferred Card and the Chase Sapphire Reserve Card. There are many ways to use the Chase Ultimate Rewards points that these two similar cards earn, but two of the most beneficial are to use them by booking trips through Chase or transferring them to partner hotels and airlines such as United, Hyatt, Southwest, Singapore. Airlines, JetBlue Airways and others.
If you use points to book trips through the Ultimate Rewards portal, the point is worth 1.25 cents when using the Sapphire Preferred Card and 1.5 cents when using the Sapphire Reserve Card.
However, you can usually get more out of each point if you go to one of Chase’s travel partners.
In fact, according to the Bankrate pricing table, both cards are currently priced at 2 cents each, although they cost less if you use them to book travel directly with Chase rather than through its travel partners.
How to determine the value of credit card points
If you prefer a more hands-on approach and want to calculate the cost of redeeming your rewards manually, such as when choosing the best itinerary for an upcoming trip, Bankrate offers a formula to find out how much your points are worth. Start by determining the cost of your desired booking and then divide it by the cost in points or miles.
For example, if a flight costs $150 or 25,000 miles, your miles will cost 0.6 cents each (150/25,000 = $0.006). If the same flight costs $300, your miles will be worth 1.2 cents each ($300 / $25,000 = $0.012).
Is this ultimately a good reward value? It’s up to you what the purpose of your trip is, but you can maximize your use of points by calculating the redemption value when you book your next trip. Compare your estimated value with your Bankrate Points and Miles assessment data and decide whether to use your rewards, pay cash or look for another booking.
bottom line
A credit card score is ultimately worth what you spend it on. It is up to you to decide if you are exchanging your credit card points at a relatively low cost for cash back, especially using cards that provide more value when redeemed for travel, or if you actually increase the value of your transferable points by booking through airline and hotel programs.
There is no right or wrong way to use credit card points, but some redemptions will give you a higher rate of return than others. After all, calculating the value of credit card points is what will ultimately help you decide which repayment method is best for you.
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