Knowing your rough value of a point is an important step up when it comes to thinking about earning and using points systematically and rationally.
With constant changes to the way points are being issued by banks this year, it’s even more important to compare and consider their value.
Rather than seeing them as being ‘free’ and using them anytime an opportunity comes up, knowing what you think they are worth allows you to make more informed decisions about the costs you are willing to incur to earn them in the first place.
There are a number of different methods out there for valuing your points but this is how I think about the subject, and how I personally value the major points currencies out there, along with an update to my points own valuations.
In this round of updates I have:
- Slightly decreased the value of Singapore Airlines KrisFlyer miles due to their changes in March
- Reduced the value of Citi Rewards points given their changes from mid-June
Why care about point values?
If you’re looking for a place to start (or to point someone else) to get on the road for earning more points from your day to day spend, check out the Earning Points email course here →
I feel this is important: knowing your own value of a point allows you to make more informed decisions around earning and using points.
This lays the groundwork for you to assess all the different offers that are out there on a far more accurate basis – whether from credit card bonuses or points earned from ongoing spend.
If you’re not interested in the methodology – I get that.
But I think understanding this stuff will help you earn and manage your points more effectively in the long run. Knowing how you value your points will greatly help you to assess different deals, products or services that can earn you points for their real value to you.
The two kinds of points values
There are two valuations I use consistently.
First, there’s the approximate cost per point at which I’m willing to use cash to earn some points – either by paying a surcharge with my credit card, or by factoring in bonus points earned on a purchase as a discount on the cost. We’ll call this the ‘earn cost’.
Secondly, there’s the ‘redemption value’ – the value per point at which you say, ‘yes, this makes sense to redeem my points for this trip’.
To simplify as much as possible: your redemption value should be more than your earn cost.
Why? Otherwise you are overvaluing your points, and spending more to acquire points than you value them at when you come to use them.
Settling on values – what I think different points are worth
I personally try to set my earn cost threshold and stick to it – but I consider my redemption values to be flexible given other factors, such as those I outlined before.
Some people like to go a step further and articulate a final, single point value which sits around the upper bound at which they like to earn points, and a lower bound at which they tend to redeem them.
This can be useful, but I personally don’t like using this technique as I think there are too many other non-cost factors in making points redemptions – such as which airline has seats for the route you want to travel on, which offers you more readily available upgrades for your points, or which you actually prefer to travel with.
The rough values I place on my points
So here are my earn and redemption value thresholds – the maximum at which I’d likely pay to accrue miles, and the minimum at which I would consider redeeming them.
|Rewards Currency||My Max Earn Threshold||My Redemption Target||Change since last update||Rationale for Change|
|Frequent Flyer Programs|
|Qantas Points||1.4c||2c||No change||No significant changes to availability, partners or pricing|
|Velocity Points||1.2c||1.9c||No change||No significant changes to availability, partners or pricing in the last 6 months|
|KrisFlyer Miles||1.6c||2.1c||↓ 0.1c||Increase in award prices and reduction in fuel surcharges|
|Asia Miles||1.7c||2.1c||No change||No significant changes to availability, partners or pricing|
|Etihad Guest Miles||1.2c||1.7c||No change||No significant changes to availability, partners or pricing|
|Flexible Points Programs|
|American Express Membership Rewards Ascent Premium||2.0c||No change||No program changes|
|American Express Membership Rewards Ascent||2.0c||No change||No program changes|
|American Express Membership Rewards Gateway||1.7c||No change||No program changes|
|American Express David Jones Membership Rewards||1.2c||No change||No program changes|
|Diners Rewards||0.8c||↓ 0.1c||Reduction in transfer rate to SPG from 15 June|
|Amplify Rewards||0.9c||No change||No program changes|
|Westpac Altitude Rewards||0.75c||↓ 0.2c||Factoring in changes to Altitude transfer rates to Asia Miles & KrisFlyer|
|Citi Rewards||0.65c (Prestige), 0.6c (Signature)||↓ ~35%||Values are for balances post changes on 15 June|
|ANZ Rewards||0.75c||No change||No program changes|
|Commonwealth Bank Awards||0.75c (Diamond & Platinum), 0.6c (Awards & Gold)||No change||No program changes|
|flybuys||0.6c||Just added||Added now with transfer option to Velocity & Etihad Guest|
Note that you can’t really compare the per point rate above between all of these programs as their transfer rates to airline programs are not the same, and neither are their points per $ earn rates on their cards. But I have ‘back of the envelope’ ranked my opinion on their value, most valuable at the top.
These values are my take and of course your values may well be different due to your own personal preferences on how you are prepared to earn points and how you like to redeem them. Don’t rely on them for important decisions!
We also have a transfer calculator that helps you work out how many points in one program can be transferred to others – useful for comparing bank rewards programs. Check out the transfer calculator here →
Methodology : Considering your earn cost
We are constantly being presented with opportunities to earn more points – whether that’s by switching our custom to a different retailer, paying a credit card surcharge instead of paying cash, or by buying a product or membership where a points bonus was used as a marketing tactic.
Our collective real-world behaviour gives an indication of what we are prepared to pay (or forgo) to earn points.
Some examples might help illustrate this:
- Woolworths Everyday Money Platinum Visa offers a 0.5% (or 0.5c per $) return on all spend – with 1% return on Woolworths and Caltex Woolworths spend American Express offers cashback straight to your account for using points of 0.7c per Membership Rewards point, or a purchase through Amex travel for 1c per Membership Rewards point
For anyone choosing points rewards over these hard cash benefits, we are all immediately valuing points at around 1–1.5c at the lower end – and I think this is a fair range for the lowest possible value of airline points.
Correlate that to the thinking around redemption value (which I’ll come to in a bit) and that tells you should almost never redeem your points for less than around 1.5c per point, otherwise you are shelling out too much for them in the first place.
What does this mean in real life?
Well, so we’re not seduced into handing over our cash without thinking about the decision in enough detail, if you have an idea of the cent per point (or CPP) cost to earn those extra or bonus points, you can quickly articulate to yourself exactly how much those points are costing you.
For example if a retailer adds a surcharge for either or both of American Express or Visa/MasterCard payments, you need to be able to quickly figure out whether that surcharge is worth paying to decide whether it’s still worth using your card while you’re at the point of purchase.
With the thinking above, we’re looking at credit card surcharges of up to around 1.5% being reasonable to bear to earn more Qantas or Velocity points (when earned on a 1 point per $ basis).
Alternatively, if there’s a points bonus on offer – say 10,000 points for a cost of $100 – then you can decide whether to take it up or not. I would take 10,000 points at a rate of $100, as that’s a cost per point of 1c.
Remember this is our lower bound. Points can be worth much more when you come to use them.
Considering redemption values
This is where personal opinion and subjectivity around the value of points comes in – as how we would be prepared to use points gives some variability in their personal value to each of us.
Your redemption value can be approximately calculated by considering your own hard preference for using points instead of cash. There are plenty of methods out there for doing this, but my preferred tactic is to consider one or several real-world examples of trading off points vs cash and seeing what cent per point value that turns out for you.
Redemption value example 1 – A domestic Business Class redemption
For example*, say I want to travel to Perth from Sydney in a few weeks time. The outbound flight I can fly during daylight hours, but due to prior commitments I have to fly on a redeye back to the East Coast.
Paid economy fares are up at the $350 mark, while Business Class is at least $1,750 in either direction. For travel on Qantas, I would have to redeem 18,000 points + $32 in Economy, or 36,000 points + $32 for a Business Class fare.
I really want to travel Business Class for the return flight – so much so that I would consider paying $750 cash to get a good night’s sleep. Less the $32 in taxes, that means I would be valuing my 36,000 points at a value of 1.99 cents per point.
The value of the redemption compared to the actual cash price is another indicator of the value of the redemption – compared to the $1,750 fare, I would be getting 4.86c per point in value.
But as I explained, I wasn’t actually prepared to pay $1,750 for that overnight flight, so 4.86c per point is not a true indicator of my redemption value – 1.99c per point is. That’s above my 1.5c per point earn cost, so I’m happy with making that redemption.
For the outbound, I’m OK with flying in Economy, and to get there I have to pay at least $350 – otherwise I can’t take the trip. So the redemption value can be calculated as $350 less the $32 in taxes I’d have to pay on a points redemption, vs 18,000 points – giving a redemption value of 1.76c.
This is creeping closer to my break-even point of 1.5c. At this point though, maths and rationality would dictate that I should still make the redemption.
However in reality, my willingness to redeem at this rate is impacted by other factors outside of this valuation such as how many more points I have in my account, what I would like to use them for (i.e. saving up for a different trip), and whether I want to earn points and status with the flight as well. Given that – I would probably purchase the ticket, and not use my points.
Redemption value example 2 – An international Business Class redemption on Singapore Airlines
Singapore Airlines KrisFlyer miles are some of the most valuable airline points/miles we have readily available in Australia. Redemption availability is generally good, their in-flight product is great and their pricing is competitive.
Here’s an example redemption – a return Business Class flight to Europe, from Sydney. Long-haul redemptions on Singapore Airlines, to say, London, Amsterdam, Paris or Frankfurt are all some of the best value uses of KrisFlyer miles from Australia.
A Sydney to London redemption would usually cost 161,500 KrisFlyer miles return plus around $900 in taxes, all up. That’s amazing value. Qantas would have you pay 128,000 Qantas Points one way for the same trip on Qantas/Emirates flights.
Onto redemption values. I personally would be happy with an out of pocket cost of up to, say, $4,000 for this Business Class return trip to Europe. Beyond this, and I would start questioning either my desire to fly in Business, or my need for the trip.
That means I am valuing those 161,500 KrisFlyer miles at $4,000 less $900 for the taxes, or $3,100, which gives a cents per point redemption value of 1.91 cents. At a cash cost of around $7,500, I would be getting a cent per point value of 4.84 cents.
In many ways, it’s worth considering your redemption value as a target for the minimum value you are trying to achieve from your points, rather than a hard and fast number.
The cents per point math
For both the earn cost and redemption values, we are working in cents per point. These are pretty simple equations, which look like this:
CPP for Earn Cost = $ cost of points in cents / number of points
To factor in taxes on a redemption, use this:
CPP for Redemption Value = ($ value you assign in cents – $ taxes with redemption in cents) / number of points
Making the calculations easier
I’ve built a couple of calculators on the site that help with running some of these numbers.
The first is a simple points vs value calculator – take one example like the Perth one above, or an upgrade, and compare points vs cash.
The second is a more methodical way to generate an average redemption value – taking 3 examples you input, you’ll get an average cent per point value back.
Use these to help get a feel of your own personal redemption values using some real world examples. Neither factor in taxes, you’ll have to add those into your numbers yourself.
What about credit card / flexible points currencies?
I spent the whole of the last topic talking about flexible points programs, and haven’t touched on valuing them until now.
They are inherently harder to value given the large range of transfer partners – but this absolutely makes them more valuable than their transfer partners too, given their additional flexibility and general lack of expiry.
As such, I would be willing to pay more (a higher cent per point earn cost) to acquire flexible program points than frequent flyer points, and logic would dictate they are generally worth at least as much as the highest valued frequent flyer transfer partner.
However, setting a personal redemption value is not so easy to calculate due to the wide range of redemptions available from flexible points currencies.
- Earn cost per point sets a maximum threshold at which you can acquire
- Understanding your earn cost per point gives you an indication of whether a specific deal to earn more points is worth taking up (or not)
- Redemption cost per point gives you an indication of your value of points when you come to redeem
- Working through some real world values of redemption costs informs your thinking on how and when you’re willing to redeem your points
Finally, don’t get too hung up on all of this. It’s a methodology – one of many – and not an exact science, but getting your head around it ‘levels you up’ to the thinking and understanding of those running the programs and putting out offers for us to take up.
*Note that this simple method also does not factor in the ‘cost’ of the lost points or status credits I would not earn from paying for the ticket outright. Factoring in lost points is easily done, I just didn’t want to add more complexity to these calculations at this point.