How much are my miles and points worth?
If you read my Napa trip post, you saw that we were able to get flights and hotels in Napa for $11.20 (taxes and fees for the plane tickets). As I was writing that post, I realized I need to talk about how to make sure you’re getting a good value when using points.
Miles and points are going to have different values for different people. I’ll show how you can calculate the value of miles and points when redeeming.
Calculating a cents per point value should help guide you, but it is certainly not the only way to determine whether or not a redemption is a good value
You’re probably going to get the highest numeric value out of miles and points when you use them to book premium cabin travel and/or high-end hotels. For example, redeeming 100,000 airline miles for a business or first class flight to Asia that normally goes for $10,000 would be a value of 10 cents per point. I’ll show the math in a moment. This is a great redemption, but I would never actually pay $10k for a flight.
On the other hand, if I am paying out of pocket, I’m probably booking economy unless a fantastic business class sale occurs. But if I have the right points or miles, I can book 2 economy award tickets for the same amount of miles as 1 business class award ticket (this is why I encourage you to learn to use transfer partners and airline alliances). Paid fares for 2 economy tickets to Asia probably aren’t going to add up to $10,000, so the cents per point value will be less. But the cents per point value doesn’t matter much if the goal is to get 2 tickets to Asia that I would have otherwise paid for.
The point is, the value of miles is going to vary depending on your travel goals. Some people prefer to use miles for premium class award tickets. Others would rather stretch miles and points into more tickets and/or trips by booking economy. It really comes down to personal preference.
Just because your calculated value isn’t 5-10 cents per point every time you redeem does not mean you’re doing it wrong. Now with that said, I do try to get at least 2 cents per point if I am transferring my Chase Ultimate Rewards or Amex Membership Rewards to airline and hotel partners.
I’m kind of a math nerd so I’ll “show my work”…
To calculate the value of a point, simply divide the plane ticket or hotel room value by the amount of points you’re spending, then multiply by 100.
The Park Hyatt Tokyo is a World of Hyatt category 7 hotel. You can redeem 30,000 World of Hyatt points for a free night at a category 7 hotel. Rates at this property are often $600 or more, but on the dates I searched, the average rate was $808.
- A cash rate of $808 is a value of about 2.7 cents per point.
- 0.0269 X 100=2.7
- ~2.7 cents per point
So you are getting 2.7 cents per point. I consider this a great value. In general, I consider redeeming for 2 cents or more per point a good value, but of course there are exceptions and situations where it may be worth it to use points even if the value is under 2 cents.
For example, since Ultimate Rewards are so easy to earn if you utilize category bonuses and shopping portals, I will still use them for some redemptions even if the value is under 2 cents per point.
I have also booked hotel rooms through the Chase Ultimate Rewards redemption portal. If you have the Chase Sapphire Reserve, you can redeem at a rate of 1.5 cents per point on travel booked through their portal (or 1.25 cents per point if you have Sapphire Preferred). As stated above, since earning more than 1 point per dollar is so easy with Ultimate Rewards, it sometimes makes sense to book travel through them even at a rate of 1.5 cents per point.
Click here for some examples of not-so-good values.
As you can see, doing a little simple math when redeeming points can help you determine whether or not you’re getting good value out of your points.
So now you’re asking, “why not just get one of those 2% cash back cards?”
Depending on your travel goals, you may find some value in using a cash back card. But for the most part, you will get more value out of a card that earns transferable points if you learn how to earn and redeem efficiently.
Yes, you’re earning 2% cash back, but when it comes to redeeming, you redeem at a 1% rate. Here’s an analysis:
With a card than earns 2% cash back:
- you spend $20,000 a year on your 2% cash back card.
- this gets you 40,000 points to redeem
- which gets you 400$ in travel
With a Chase Sapphire card:
- You spend $20,000 a year
- This gets you at least 20,000 Ultimate Rewards
- All you have to do is look at the example of the Andaz Napa rates during our Napa trip … 20,000 points can be redeemed for a hotel room with a rate of $659
- 20,000 points can also get you a trip to Mexico or Canada if you redeem with the right partners, so once again, more than $400 in value
This is assuming that your $20,000 spend was without any bonus categories or shopping portals. If you utilize those, you will earn even more points. So most likely if you spend $20,000 a year on your Chase Sapphire Preferred or Chase Sapphire Reserve, you’re going to have even more than 20,000 points. Most cash back cards don’t really give opportunities to earn more than the 2% cash back.
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