Getting hotel points, airline miles, or bank program points is one of the great perks of using a rewards credit card. You name a place you want to be and there is likely a hotel program for you to use to stay there and airline miles that can get you there. Or maybe you want different types of perks like discounted merchandise or straight cash back. Bank reward programs help you reach those goals.
The only real problem with hotel, airline, and bank program rewards is figuring out how to value them. If you don’t know what each mile or point is worth, then you can’t optimize your credit card spending toward the appropriate program.
How to Value Your Credit Card, Airline, and Hotel Rewards
There is no point in racking up thousands of low value points that you will never use.
On the other hand, you might find a very high value for spending on a certain credit card if you can really squeeze some value out of the rewards you get for that spending.
Before you can do that you must come up with an idea of what each airline mile, hotel point, and bank program point is worth to you. Here are some steps to do that.
Know How You Will Use the Rewards
Before you can value each program you have to have goals for the use of each program. Without goals there is no way to value them since you don’t know how you will use the points you earn.
Most of these goals will revolve around travel.
Do you want to earn miles and points to take as many trips as possible (flying economy seats, booking lower end hotel rooms, etc.)?
Or would you rather rack up a bunch of miles and points for that once in a lifetime vacation by flying first class and staying in the upper tier of hotels?
These are two different goals with two different valuations, so know your goals first.
Know Which Programs Help You Reach Your Goals
Once you have goals in place it is time to look for programs that most effectively get you there based on your spending. It is best to pick one of each type of program.
That is, don’t try to rack up miles with American Airlines and United at the same time. Likewise don’t get a Hilton credit card and also try to get Starwood Preferred Guest points as well.
Picking one of each program lets you focus your efforts on those programs. To do that, you must know which programs help you reach your goals. Maybe Hilton has the exclusive properties you are looking for in remote destinations. Maybe American Airlines has the best alliance and most options to get you to your first class flights.
Whatever the goal is, make sure your specific programs line up to get you there.
Know Your Program’s Partners
A big perk that comes with specific airline, hotel, and bank reward programs is not only can your rewards be used with that one company but also with the company’s partners.
For example, American Airline AAdvantage miles can be used on American Airlines as well as the One World partner airlines such as British Airways, Iberia, and Cathay Pacific. Starwood Preferred Guest points can be used with SPG but also transferred to airlines at a 1:1 ratio plus a 5,000 mile bonus when you transfer 20,000 points. (So 20,000 SPG points become 25,000 airline miles with SPG’s airline partners.)
There are too many programs to list all of the partners, but make sure you research how creatively you can use your rewards before locking in to one program.
Creating a Value Chart for Your Credit Card Rewards
Now that you know which programs you are going to focus on, it is time to figure out how much each airline mile or hotel point is worth.
For our example we will use American Airlines as our preferred airline and Hyatt as our preferred hotel program. We’ll use the example of getting the top end travel — first class, elite resort overseas — as our target.
Valuing Airline Miles
Let’s say we want to fly to London from Chicago. We want first class, lie down bed seats, and the lowest cost available to use our rewards. We will leave on October 14 and return on October 19.
The lowest cost for a first class round trip ticket as of the time of this writing is $7,156. Instead of spending that much money we could use American’s AAdvantage miles to book the same flight for 62,500 miles each way for a total of 125,000 miles.
Then we just do the math. Divide $7,156 by 125,000 and you get $0.057 per mile. If you get one mile for every dollar spent on everyday spending with your AAdvantage card, then each dollar spent is worth almost 6 cents. Compare that to most cash back programs that average about 2% in rewards over all spending (and 1% for everyday spending) and you are looking at significant value.
(For comparison purposes if you instead booked an economy seat on a flight from Knoxville to Chicago on those dates it would cost $346 or 25,000 miles round trip. That gives a per mile value of just $0.0138; a significantly lower amount compared to the elite overseas travel.)
You need to do the math for your goals and your trips. You may find more value out of flying off-season economy to Europe for 20,000 miles each way. If you had 125,000 miles you could have 1 round trip in first class or 6 trips in the off-season in economy. It all depends on your goals.
Valuing Hotel Points
Now that we have a way to our London destination, let’s find a place to stay using Hyatt.
A night at the Hyatt Regency London – The Churchill in the Regency Executive Suite is £864 or approximately $1,307. This is a Category 6 hotel with Hyatt and the Regency level per night cost is 27,000 points in the Hyatt Gold Passport program.
For that stay your points would be worth $0.48 per point, another terrific value.
(Compare that to staying in a normal room at the Hyatt Place Chicago/Schaumburg for as low as $106 per night or 5,000 points since it is a Category 1 hotel. That gives us a per point value of $0.021.)
Your Valuation Will Be Different From Others
The last thing to know about valuing points and miles is your valuation will be different from everyone else’s. Again, the best programs for you might be different than someone else just based on the goals you have for your travel.