Calculating the Value of Redeeming Points for Travel

To build a robust credit card rewards strategy, your first step is selecting a diverse portfolio of credit cards. Ideally, this includes a mix of general travel rewards cards offering transferable points, cobranded cards linked to preferred airlines and hotels, and possibly a cash-back card or two for flexibility.

Once you’ve accumulated points across various cards, the next crucial decision is how to maximize their value. Some redemptions can transform even a modest points balance into substantial benefits like long-haul flights or luxurious hotel stays.

As someone immersed in credit card rewards, I’m often asked, “Should I use points for this travel purchase or pay cash?” While there’s no universal answer, several methods can help you determine if a points redemption is worthwhile. Here’s a guide on calculating whether redeeming points for travel makes financial sense.

Understanding Reward Types

Not all credit card rewards hold the same value. For example, the worth of a Chase Ultimate Rewards® point varies depending on the specific card. Similarly, the value of a Marriott Bonvoy® point differs from that of a Hilton Honors point.

To gauge the value of points or miles for a particular flight or hotel stay, divide the cash price by the redemption price in points or miles. For instance, using 50,000 SkyMiles® for a $500 Delta Air Lines ticket equates to a value of one cent per mile.

Different types of points and miles offer varying degrees of flexibility in redemption. Here’s a brief overview:

Fixed Value: Many cards provide a set value for points when redeemed for cash back, travel, gift cards, or statement credits. This value remains consistent, though it may differ across redemption categories. For example, 10,000 points might equal a $100 statement credit or $150 towards travel booked through the card issuer’s portal.

Variable Value: Airlines and hotels often employ dynamic pricing for award tickets, meaning the value of points or miles fluctuates based on factors like distance flown or travel season. While this approach eliminates traditional award charts, diligent research can uncover optimal redemption opportunities.

Transferable Points: Cards offering general travel rewards often permit point transfers to various loyalty programs. Examples include American Express Membership Rewards®, Chase Ultimate Rewards, and Citi ThankYou® Points. Transferring points can yield higher values when redeemed with partner airlines or hotels compared to fixed-rate travel portal bookings.

Example Hotel Scenario

Imagine planning an August getaway to the Dominican Republic. You’re eyeing a luxurious beachfront hotel for relaxation and indulgence in local cuisine. Holding cards like the Marriott Bonvoy Boundless™ Credit Card, which offers automatic Gold Elite status and a fifth night free benefit, alongside transferable points cards like the American Express® Green Card and Chase Sapphire Reserve® (both linked to Marriott Bonvoy), enhances your options.

By leveraging these benefits, you can optimize your points for maximum value and enjoy a rewarding travel experience.