One of the best ways to travel economically is to know how to get good value from travel rewards and credit card points. This post will provide techniques for accurately valuing travel rewards points by measuring and comparing their worth, primarily to ensure you make informed decisions that reflect their true value.
Contents
- 1 Valuing Travel Rewards Points
- 2 Credit Card Miles vs. Cash Back: How to Choose Between Cash Back and Travel Rewards Cards
- 3 How to Value Travel Reward Points
- 4 Valuing Travel Rewards Points: Methodologies
- 5 Travel Rewards Points Value – Latest Valuations
- 6 Unlocking the Potential of Airline Miles for Frequent Flyers
- 7 Mastering Point Transfers: Leveraging Flexibility and Value
- 8 Essential Tools for Accurately Valuing Loyalty Rewards Points
- 9 Valuing Travel Rewards Points – Conclusion
Valuing Travel Rewards Points
Have you ever wondered what those travel loyalty reward points you’ve been racking up are worth? If you are facing a decision to pay cash or use your points, do you have a way to make a smart decision?
What about when best to transfer credit card points to an airline or hotel program? Tough questions that start with having a handle on what your points are worth.
It’s time to crack the code on valuing loyalty rewards points to make sure you’re getting the most bang for your buck. In this article, we’ll share techniques and essential tips to help you accurately measure and compare the worth of loyalty rewards points. Whether you’re a frequent flyer, a hotel enthusiast, or love using credit card rewards, we’ve got you covered.
Get ready to unlock the full potential of your loyalty rewards and make informed decisions that reflect their true value. By the end of this article, you’ll have the tools you need to become a master at valuing loyalty rewards points and maximizing their worth. So, let’s start getting the most out of those hard-earned points.
Credit Card Miles vs. Cash Back: How to Choose Between Cash Back and Travel Rewards Cards
First, let’s get past some of the basics. Aside from getting rewards points for travelling on a specific airline or staying in a favorite hotel, most loyalty points are earned by using a credit card. American Express Membership Rewards and Chase Ultimate Rewards are the two most popular programs for getting travel reward points from everyday spending. Credit Card Companies offer cash back or travel rewards programs because they make more profit from having more customers. They can make money from fees and interest that customers pay, and they make money from merchants who pay them each time the customer uses the card to buy something. Simply, the more volume the more profit they will make.
It is important to understand that there are two types of reward credit cards: some are travel credit cards that earn you travel rewards points and those that get you cash back. The cards that get you cash back will generally return anywhere from 1 -2% on most purchases, and some cards in extreme rare cases might offer up to 5% on select categories of purchases. There are a lot of specific rules, limits and fees on the 5% returns, so let’s focus on those getting 2% back. This establishes a benchmark where we can value spending $1 on a credit card at 2 cents, which gives us a basis to start looking at a fixed rate for valuing travel points. In other words, most travel reward points are usually only worth one cent, so to make travel reward credit cards a good value we need to find ways to earn at least 2 cents of value per dollar spent on the credit card.
The following chart briefly summarizes the pros and cons of points and miles credit cards and compares them to cash rewards cards.
| Pros of Points and Miles Credit Cards | Cons of Points and Miles Credit Cards |
| Reduce the cost of travel. | Some cards can’t transfer points to another airline loyalty program. |
| Provide travel-related perks. | Value of points and miles will vary. |
| May come with sign-up bonus points. | Points and miles cards may charge large annual fees. |
Important Disclosure: Please Read Before Going Forward
Travel reward credit cards only work if you have a good credit score, are able to pay your card in full on time and are ok to withstand a temporary 3-5 point decrease in your credit score after applying for such cards. If you don’t feel comfortable with any of these, please refrain from opening a new credit card.
Understanding the Value of Travel Rewards Points
To truly master the art of valuing loyalty rewards points, it’s essential to have a strong understanding of their overall worth. Once you understand this, you’ll be better equipped to evaluate and compare the value of different rewards programs, as well as how to decide between paying in cash or using points.
How to Value Travel Reward Points
Example:
- Cash price: $500
- Points needed: 25,000
- CPP calculation: ($500 * 100) / 25,000 = 2.0 cents per point.
- Different programs have different values:Some programs, like Hyatt, consistently offer higher redemption values, while others like IHG Rewards may be lower.
- Transferring to partners can increase value:Some programs allow you to transfer points to airline or hotel partners, which can sometimes lead to better redemption rates.
- Taxes and fees can affect value:When redeeming points for flights, be sure to factor in any taxes and fees, as these can sometimes offset the value of your points
The following section shows how three different well-known organizations calculate the average value of loyalty points for most of the travel programs. We selected The Points Guy, NerdWallet, and Bankrate as our three miles valuations evaluators. All three are primarily in the business of selling credit cards, especially those that are tied to loyalty programs.
Valuing Travel Rewards Points: Methodologies
The three companies that we choose have similar but difference approaches as to valuing travel rewards points. Essentially, for airline and hotel rewards they compare thousands of bookings and value the points that would be used based on the cost of the booking (in dollars) versus the number of points that might be used. This provides a $/point value; by selecting a large number of different types of bookings they come up with an overall estimated value. Here is how each company came up with their valuations:
Valuing Travel Rewards Points: Bankrate
Bankrate chooses 40 flights for an individual airline or 36 bookings for a hotel. For airlines, they select different types of flights: Domestic (short, medium and long), international and hubs to small airports, using flights near and six months out to compare. They calculate the value of each flight or booking and the median value of all the calculations. But, rather than using the median value, they weight the result 80% domestic, figuring most flights are domestic.
For hotels they select 12 locations for hotels across domestic, mid-size and large US cities, as well as international cities. In each city they selected hotels across budget, mid-tier and luxury tiers and chose three different time periods to evaluate the points value. Unlike airlines, for hotels they use the median for their overall valuation.
For credit cards, both they and NerdWallet produce two valuations. One is the base rate that is available if you use the credit cards travel service to book your flights or hotels. This rate is less than the transfer rates that are quoted based on which airline or hotel programs you can transfer your credit card points to. Transferring credit cards points to airline or hotel awards programs will usually provide a better value for your credit card points.
Valuing Travel Rewards Points: Nerd Wallet
Nerd Wallet has a somewhat similar approach to valuing airline and hotel points with the major exception that, rather than selecting the median value, they select the 75th percentile value. They argue that this better reflects the choices that most people make in choosing between points or cash. This tends to give them higher values than either Bankrate or The Points Guy.
Valuing Travel Rewards Points: The Points Guy
The Points Guy historically made the calculations primarily using a combination of the price at which they could purchase the miles and the personal experience of their travel experts.
However, they recently changed their methodology to be more in line with the other two valuators. They focus on the top six US airlines (Alaska, American, Delta, JetBlue, Southwest and United). They weight their overall valuation as follows:
-
- Domestic Economy 20%
- Domestic First or Business Class 10%
- Hawaii 10%
- Short to Medium International 25%
- Transatlantic Economy 15%
- Long-haul Business 20%.
As expected, they found that there was a wider range of values for individual redemptions with four of the airlines that use standard redemption rates. Southwest and JetBlue, who use revenue-based redemption rates, had less variance. We’ll find a similar pattern when we discussed hotel reward valuations.
Comparison of Different Points Valuation Approaches
In comparing these different approaches to valuing points, we find that NerdWallet’s approach of using the 75th percentile rather than the mean valuation point may somewhat overstate the value of the points. Undoubtedly, when evaluating an individual flight or hotel choice, the valuation can be much higher or lower than any of the stated values. Therefore, you cannot take these values as gospel. In fact, the value can differ by where you are traveling, the time you are traveling, and your personal travel goals. Please note, that these valuations should only be used as a guide in making general decisions about which points to save and when is the best time to use them.
Travel Rewards Points Value – Latest Valuations
If you wish to get a copy of the latest (December 2023) travel points valuations for credit cards, airline and hotel programs, please click on the button below and it will take you to a PDF chart that you can download to your computer:
Travel Points Values
In this section, we narrow our focus to evaluating hotel points and maximizing the benefits they offer. By delving into this topic, you’ll gain valuable insights on how to optimize your hotel loyalty rewards. Understanding the value of hotel points is essential for making informed decisions and getting the most out of your rewards. Prepare to explore the intricacies of hotel points and discover the secrets to extracting their maximum value.
Here is an example of two hotel rewards points decisions that literally made today when we wrote this article. The first was for a two night hotel stay in Santiago, Chile, and the second was for a five night stay in Buenos Aires, Argentina. Please follow the information below, and, before you read my answer, figure out what you would do.
Valuing Hotel Travel Reward Points: Santiago, Chile
I was considering staying at one of two hotels for two nights and paying either in cash or using points. One was a Hilton Hotel and they wanted $128/night or 70,000 points for the stay. The other hotel was a Marriott Le Meridian and they wanted $109/night or 40,000 pts/stay. I had never been to Santiago, Chile, so I didn’t know very much about these two hotels. Fortunately, both are located very near to each other, in the center of the city. Location is normally the first thing I want to know about a hotel. Also, they both were offering king-size beds, so that too was a positive. However, neither was a good case for using points.
The Points Guy (TPG) values Hilton points at $.005 per point and Marriott points at $.008 per point. So this says, if I were using points I would be using $350 worth of Hilton points (70,000 X $.005). For the Marriott Hotel, the points would be worth $320 (40,000 x $.008). In both cases, the two night stays are less expensive paying with cash: $256 for the two nights at Hilton, and $218 for the two nights at the Marriott Le Meridian. So, unless there were other factors to consider, such as resort fees or other hidden charges, I would go with the Marriott Le Meridian and pay cash.
Valuing Hotel Travel Reward Points: Buenos Aires, Argentina
In Buenos Aires I was staying for five nights, and again choosing between a Hilton Hotel and a Marriott Hotel. The Hilton Hotel wanted $461/night or 240/000 pts/stay, and the Marriott wanted $281/night or 130,000 pts/stay. For these dates, Buenos Aires was clearly more expensive than Santiago. I have been to Buenos Aires, and was familiar with the two hotels. I suspect that the hotels are getting close to capacity and therefore both hotels are upping their prices. Since both Hilton and Marriott use flexible award pricing, they have increased the number of points needed to book a room along with the increase in the $ cost of the room. Nevertheless, both are offering a deal on the points. If you choose to use points, they are both giving you the 5th night free. Therefore, does this make it wise to book one of the hotels using points? Lets see.
Hilton vs Marriott
If using points you would be using $1200 worth of Hilton points (240,000 X $.005). For the Marriott Hotel, the points would be worth $1024 (130,000 x $.008). If paying cash, the Hilton will cost a whopping $2305 ($461 x 5) . Also, the Marriott would cost $1405 ($281 x 5). In addition, you will likely have taxes and other expenses when paying cash. Therefore, despite the high number of points needed, points are the better deal for both hotels. By using your points, you are getting $.0096pp for your Hilton points or $.0108pp for your Marriott points, both better than their TPG valuations. So, you would likely decide to use points and stay at the Marriott, unless you really liked the Hilton as it has a premier location.
For more information about Santiago, Chile please see our post on Safe Travel to Chile. For travel to Buenos Aires, please see our post Best Time to Travel to Argentina.
Valuing Hotel Travel Reward Points: Other Factors
To truly master the art of maximizing hotel loyalty rewards, it’s also worth considering elite status benefits. Both Hilton and Marriott and other hotel programs offer tiered memberships that provide enhanced perks and privileges to loyal customers. These benefits can include complimentary room upgrades, late check-out, access to exclusive lounges, and even personalized amenities upon arrival. I have elevated status with both Hilton and Marriott, but higher status with Hilton that includes free breakfast. So, in the previous example, I might stay at the Hilton in Buenos Aires, even though it would require more points than at the Marriott, because I will get the free breakfast. In addition, I prefer the Hilton location, and my chances of getting upgraded to a better room are also possible.
For more information about Hilton vs Marriott Point Values, please see our post-Hilton vs Marriott Points.
Now that you have a solid foundation in evaluating hotel points, we can turn our attention to the world of airline rewards points. By applying similar principles and strategies, you’ll be able to navigate the realm of airline rewards with confidence, thus, ensuring you make the most of every dollar spent. So, let’s unravel the secrets to getting the most value from your airline rewards points.,
Unlocking the Potential of Airline Miles for Frequent Flyers
For frequent flyers, unlocking the potential of airline miles is essential to getting the most value for your points. By understanding how to navigate the world of airline miles and leveraging their flexibility and value, you’ll be well on your way to becoming a master at valuing loyalty rewards points.
Factors to Consider in Valuing Airline Travel Reward Points
When deciding whether to use airline points, there are several factors to consider. Here are some of the most important ones:
- Value of points: Just like we did with hotels, we calculate the value of your points by dividing the cost of the flight in cash by the cost of the same flight in points. This will give you the cents per mile (CPM) value of your points. If the CPM value is higher than the value of your points from our spreadsheet, then it’s a good idea to use your points.
- Availability of flights: Check if there are available flights for the dates and destinations you want to travel to. If there are no available flights, then you may have to pay cash for the flight.
- Flexibility: If you have a flexible travel schedule, you can wait for a sale or promotion to use your points. This way, you can get more value out of your points.
- Travel goals: If you have a specific travel goal in mind, such as flying first class or visiting a particular destination, then it may be worth using your points to achieve that goal. Generally speaking, the best deals for using airline points is often on international flights with an elevated class.
- Level in Airline Frequent Flyer Program: Some Airlines, Delta is one, will discount the number of points needed for a flight based on your level in their frequent flyer program.
- Expiration date: Check the expiration date of your points. If your points are about to expire, then it’s better to use them before they expire. Below are some examples of domestic and international airlines and their expiration policies.
Airline Reward Points Expiration Policies
- Delta Air Lines SkyMiles: Miles do not expire.
- JetBlue TrueBlue: Miles do not expire.
- Southwest Airlines Rapid Rewards: Miles do not expire.
- United Airlines MileagePlus: Miles do not expire.
- American Airlines AAdvantage: Miles expire after 18 months of inactivity.
- Alaska Airlines Mileage Plan: Miles do not expire, but the account may be closed if it is inactive for 24 months.
- Frontier Airlines Frontier Miles: Miles expire after 12 months of inactivity.
- Hawaiian Airlines HawaiianMiles: Miles do not expire.
- Spirit Airlines Free Spirit: Miles expire after 12 months of inactivity.
- Aer Lingus Aerclub: Miles expire after 36 months of inactivity.
- Aegean Airlines Miles+Bonus: Miles do not expire, as long as the account remains active.
Please note that the information provided is subject to change. It is always a good idea to check with the airline for the most up-to-date information. Also, keep in mind that the best time to use your points depends on your personal circumstances and travel goals. For more information about the major airlines please see our post: United vs American and Delta or our post Airline Choices.
Mastering Point Transfers: Leveraging Flexibility and Value
Lastly, it is time to turn our attention to getting maximum value from credit card rewards. There are five credit cards that most of the services recommend for maximizing travel rewards. They are:
- American Express: Platinum or Gold
- Capital One: Venture or Venture X
- Chase Sapphire Preferred Card.
Most of the Points Valuation Services will say that the Chase Sapphire Preferred Card is the best. Specifically, it offers the most ways to transfer your points and because it usually offers a large sign-on bonus. As pointed out in our points valuations chart, transferring your points from these credit cards is the best way to maximize your value.
Point transfers are an invaluable tool for maximizing the value of your loyalty rewards points. With point transfers, you have the ability to transfer your points between different loyalty programs. Thus, giving you the flexibility to redeem them for flights or other travel-related expenses. This opens up a world of possibilities, allowing you to take advantage of special promotions, better redemption rates, and more.
To master point transfers, it’s important to first understand the different transfer partners available to you. Take the time to research and familiarize yourself with the transfer partners associated with your credit card and loyalty program. This knowledge will prove invaluable when it comes time to book your next trip.
Watch for Transfer Bonus Promotions
Once you have a good understanding of the transfer partners available to you, it’s time to start strategically transferring your points. One key strategy is to wait for transfer bonus promotions. These promotions often offer a higher transfer ratio, meaning you get more value for your points when transferring them to a certain program. I just did a transfer from American Express Membership Points to Hilton Honors Rewards. I got a 30% bonus, which made a big difference in deciding which transfer partner to use. Keeping an eye out for these promotions and timing your transfers accordingly can significantly increase the value of your points.
Another important factor to consider when mastering point transfers is the redemption value of your points within different loyalty programs. Not all programs offer the same redemption rates. In fact, some may have partnerships that provide better value for specific routes or destinations. By researching and comparing the redemption rates of different programs, you can ensure you’re getting the most value out of your transferred points. As shown in our points valuations chart, the World of Hyatt has one of the best transfer valuations. This is primarily because it is one of the few hotel chains still using a fixed points redemption chart. See our Post Hilton vs Marriott Rewards, or our post Lodging Choices for more information.
Most timeshare programs today operate on a points basis. Thus programs that are aligned with a hotel chain will allow you to transfer points to the associated Hotel Rewards Program. Hilton Timeshare Points and Marriott Vacation Clubs are both good examples. For more information, please see our post on Best Timeshares for Families.
In conclusion, mastering point transfers is a crucial step in valuing loyalty rewards points. By understanding the available transfer partners, strategically timing your transfers, and considering the redemption value within different loyalty programs, you can leverage the flexibility and value of your points to maximize your travel rewards. Now that we’ve explored the art of point transfers, let’s move on to the essential tools that will help you accurately value your loyalty rewards points.,
Essential Tools for Accurately Valuing Loyalty Rewards Points
Next, here are the essential tools that will help you accurately value your loyalty rewards points. These tools are crucial in ensuring that you make informed decisions when it comes to maximizing the value of your points. Here are four different essential tools that we use to tracking and valuing travel rewards points.
1. Travel Points Calculator
One essential tool for valuing loyalty rewards points is an online points calculator. These calculators allow you to input the number of points you have and the redemption option you are considering, and estimate the value of your points in terms of cash or other rewards. With this tool, you can quickly compare the value of your points across different redemption options, helping you make the most rewarding choices. We plan to build one this year (2024). Meanwhile, why not try this one: TPG Points Calculator.
2. Travel Rewards Websites
In addition to online calculators, there are also websites and forums dedicated to discussing and analyzing loyalty rewards programs. These resources provide valuable insights from experienced travelers and points enthusiasts who have already mastered the art of point valuation. By reading through their experiences and recommendations, you can gain a better understanding of the value and potential pitfalls associated with different loyalty programs. We recommend the three websites where we have gathered our valuation data: The Points Guy, NerdWallet and Bankrate.
3. Travel Rewards Points Valuators
Additionally, there are mobile apps available that can assist you in managing and valuing your loyalty rewards points. These apps allow you to track your point balances, search for redemption options, and even receive notifications about limited-time promotions or bonus offers. With these tools, you can stay organized and ensure that you never miss out on valuable opportunities to maximize the value of your points.
4. Travel Rewards Points Tracker
A travel rewards points tracker is the most basic of all the tools. If you enter you credit card, airline and hotel rewards programs identifications, these tools will automatically keep track of the points you have earned. We use a tracker that comes with the Trip-IT trip planner. We plan to integrate it or build our own as a front-end to our travel rewards valuator in 2024. Thus, fully automating the valuator.
By utilizing these essential tools, you can accurately value your loyalty rewards points and make the most of your travel rewards. They provide the necessary information and insights to help you navigate the complex world of loyalty programs and ensure that you are getting the best possible value for your hard-earned points. So, armed with these tools, you will make better use of your travel reward points and save some money.
Valuing Travel Rewards Points – Conclusion
In conclusion, mastering the art of valuing loyalty rewards points is a crucial skill for anyone looking to make the most of their earned points. Throughout this article, we have covered a range of essential tips and tricks, from understanding the true value of loyalty rewards points, to maximizing their benefits in hotels, credit cards, and airlines. By applying these techniques and utilizing the provided tools, you will become a true master at valuing loyalty rewards points.
Make informed decisions and unlock the full potential of your loyalty rewards by understanding their worth. Remember, knowledge is power when it comes to maximizing the value of your earned points. So start now, armed with the tools and strategies you’ve learned, and embark on a journey to make the most of every loyalty rewards opportunity.
As the saying goes, “The value of loyalty rewards points lies not in their quantity, but in the wisdom of how you use them.” So don’t let your points go to waste – take charge of your rewards and make every decision count. Start valuing your loyalty rewards points like a pro, and watch your experiences soar to new heights.
Travel smarter, dine better and explore deeper: we’d love to share our handpicked insights and exclusive guides in our monthly newsletter below.
0 Comments