I received an email the other day from Diamond Dave Travels reader, Matt, who was struggling to determine which credit card would be best for him to get started earning and using points. Here’s what he had to say:
“I wanted to get your insight to how points actually work and how to even determine how many you would need for a trip. I looked through the Amex website and it’s hard to get many details without having a login and account. But it looks like the 50k points varies in value when trying to apply them to a trip. The value seemed to vary between $350 and $500 depending on when/where but wouldn’t give too many details. It also doesn’t say what the points can be used for; are they only redeemable for flights?”
What Matt was trying to figure out is what his potential bonus points would be worth if he signed up and hit the spend threshold to receive 50k points. He was especially worried because the credit card in question has a $250 annual fee. Ultimately, Matt wanted to make sure that he wasn’t going to go through a lot of work and just end up breaking even.
So how much are the those 50k points worth and what did I recommend that Matt do?
I told Matt that I estimate those points to be worth about $1000 since I think it’s pretty easy to get at least 2 cents per point of value from Amex points when transferring them to a travel partner. Worst-case scenario, he could get at least $500 (1 cent per point) if he decided to take them as cash back on purchases (which I never recommend).
Based on that math and considering how much money Matt would likely spend on his new card in its highest point-earning categories he should be able to come out on top by about $1000 in his first year of card ownership after paying the annual fee.
How did I come to that valuation and how can you easily figure out what your own points are worth?
Let’s dig in.
Calculating Point/Mile Values
Knowing and understanding what points or miles are worth is the foundation of getting the best travel deals. The only way to know which type of points you should use or whether you should use points at all ultimately comes down to being able to assign a value that you can calculate against the cash cost.
The easiest and fastest way to get a good gauge on the value of any type of points or miles is to use the Monthly Point Valuation Chart over at the Points Guy website.
Every month, the staff over at The Points Guy re-evaluates program changes and current redemption rates to give you a pretty good idea of what points/miles are worth. Here’s what the site says about how those valuations are calculated:
“These valuations are based on a combination of what I would pay to buy points if given the opportunity and the overall value I could get from redeeming them, factoring in variables like award availability, fees and change/cancellation policies.”
Personally, I use these valuations as a guide instead of hard values. Your goal should be to receive at least the value listed per point for each booking, but it’s certainly possible to get an even higher return on your points. This is how you can determine whether the deal you are getting is good, great, or poor. The more cents per point you can extract, the better.
Additional Point Value Considerations
While the TPG List may be a great benchmark, there are also some considerations that need to be taken into account for each individual that this list may not reflect. In some situations, getting maximum value for your points may not be the only thing that matters.
Here are some examples:
Current Point Balances – If you have a lot of points because you earn them quickly or just have a ton saved up, then you may not need to maximize the value out of every booking. Many people in this situation would rather get less value from their points and spend little or no cash. This can be a good strategy if you’re confident that you’ll have plenty of points when you need to make your next booking.
Convenience – In my opinion, you really can’t put a price on convenience. Sometimes it makes sense to get less value per point if it means saving a couple hours of travel time or flying into/out of a closer airport. It’s very tough to put a value on these types of nuances and in situations like these you might instead try to get close to the proposed values even if you fall a bit short.
Travel Frequency – If you don’t travel often, then earning travel points may not be the best way for you to earn rewards in the first place. However, there is another danger of letting points sit inactive for a long time: devaluation. One thing that has been made abundantly clear over time is that airlines/hotels are making it harder to use your points or making them less valuable. This is a natural effect of more people taking advantage of these programs every day and companies trying to maintain or increase their profit margins. What your points are worth today isn’t necessarily what they’ll be worth tomorrow, so it’s best to use them sooner rather than later – even if that means taking a small hit.
Conclusion
Point values are constantly changing due to a myriad of factors. Fortunately, there are sites like The Points Guy that publish monthly valuation lists. While being able to assign a value to different points/miles is important so you can make the best travel booking decisions, there are periodically exceptions to the rule. Your goal should always be to maximize the return on your points while still considering other factors that may be important to your travel preferences.
