How to Appropriately Assign Value to Points and Miles

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One of the biggest challenges in effectively communicating the value of points and miles is quantifying the value you get from points. I’ve done it. Matt’s done it. We’ve all done it. 

How we explain the value of points matters. It has an impact on how people decide to redeem points and miles. Unfortunately, this can sometimes be more harmful than helpful. 

The number of times I’ve seen someone exclaim that they aren’t sure about redeeming their points for a trip because they’re not getting more than a certain financial value per point is high. It is natural to chase that feeling of being the best at something, and when you’re able to get a really high return for your points it can feel awesome. However, if you’re not getting some outsized value, it can often paralyze you from booking a trip in the first place.

That’s not why you’re here. You’re here to earn free, or close to free, travel. At the end of the day, the value that you get from points and miles is getting to take that “free” trip. Think of all the great experiences you’ve had during your trips. Now try to put a financial value to that.

Struggling? Me too. That’s because there is more than just financial value to points and miles, and getting caught up in the value of your points and miles can be a fools’ errand.

Today, I’m going to share with you how to appropriately assign value to points and miles you use and the pitfalls to avoid.

Cents Per Point: The Metric Used

Before diving into how you should appropriately assign value to points and miles, it is important to have a standardized measurement approach. In the points and miles world, that standard “metric” is cents per point.

Cents per point takes the cash value (more on how to determine that later) of the redemption you’re getting, and divides it by the total number of points you’re spending. Let’s take an example.

Let’s say you used 30,000 points to fly to Europe in economy. The cash fare you could have booked would have cost $600. First, take $600 and convert it into cents by multiplying by 100 (since there are 100 cents in a dollar). This works out to 60,000 cents. Next divide this by the total number of points used: 30,000 points. You’ll end up with 2 cents per point when all is said and done. 

This metric gives you a value for the points that you’re redeeming. Knowing the value you’re getting for the points you redeem is the first step in appropriately assigning value to points and miles. Once you know how many you’re redeeming, you can evaluate it to determine if it is a worthwhile redemption or not.

What’s a Typical Cent Per Point to Earn?

Having a good baseline for the cents per point you’re earning can help guide your decision making process. 

Generally, flights in economy will run between one and 2 cents per point. This isn’t a hard and fast rule, but is a pretty standard expectation. It is hard to get outsized value from your points by booking flights in economy. That isn’t to imply that there’s anything wrong with doing so. The fact is economy flights have been at historically low prices over the past few years, which makes it harder to get extra value from them.

If you’re looking to fly in business or first class, you can often get somewhere between 4 and 10 cents per point. This is primarily because business and first class flights just cost more than economy class tickets, sometimes up to 10 times the cash price. In comparison, the points required for business and first class don’t typically scale at the same rate. 

You can expect to pay about 2 times as many points for a business class flight and about 3 to 4 times as many for a first class flight. When the required points don’t scale at the same rate as cash fares, the value you’re able to extract can go up tremendously.

Hotels also aren’t often a place that you’re going to get a tremendously high value for your points. Similar to economy flights, 2 to 4 cents per point is fairly typical. However there are situations where you can get great value if prices are really high during an in-demand time like The Super Bowl or something, but generally these are outliers.

These values aren’t a hard and fast rule, but merely they should give you an idea of typical values. Sometimes you’ll get more, sometimes you’ll get less. 

What Is the Minimum Value You Should Redeem Points For?

Now that you know how to calculate the value you’re getting for redeeming your points and what a typical value you can expect to get when booking travel, we need to answer the question of what is the minimum value you should redeem points for.

The biggest variable that you need to know before answering this question is what cards you have available. The minimum value will vary depending on what cards you have available.

If you’re in the Chase Ultimate Rewards ecosystem, the absolute minimum you should redeem your points for is 1.25 cents per point. If you have a Chase Sapphire Reserve®, that value is 1.5 cents per point.

For your Citi ThankYou Points, the minimum you should redeem your points for is 1 cent per point. Citi Premier® Card and Citi Prestige Card holders should increase that to 1.25 cents per point.

American Express Membership Rewards will also be, at a minimum, 1 cent each. However, if you have The Platinum Card® from American Express or The Business Platinum Card® from American Express, that number increases to about 1.54 cents per point if you’re redeeming it for airfare.

Capital One Rewards Points are worth 1 cent each.

Why Setting a Minimum Value Is The Responsible Choice

There are a lot of different ways to set a minimum value for points. If you read other blogs (which you should to diversify the information you’re getting and read different perspectives), you will see some blogs set different values to points. You’ll often see things like “Membership Rewards are worth 2 cents each.”

Rather than try to determine an average value, I believe that setting a minimum value for points is the more responsible choice to make. 

The reason why I advocate for using these minimum values is because these minimum values are based on the amount you can redeem the points for in the bank’s travel portal. 

This methodology helps you answer the basic question of whether or not you should transfer points or book through the portal. 

I believe this is a responsible way of assigning value to points because it isn’t arbitrary. When assigning the minimum value to a point, rather than trying to assign some typical value at which you can buy or redeem the point, you don’t have the ability for an individual perspective to skew the value. Someone who prefers to fly economy over business or first class will have a very different perspective on the value of their points. If I am to assign a value, it will take into account my travel perspectives which may differ significantly from yours.

Instead, by comparing a minimum value by which you can redeem points, it levels the playing ground. It doesn’t allow me to insert my own biases about points into the equation. It instead lets you, the reader, ascertain what the minimum value is that you should get from a point before transferring it from a bank.

For example, let’s take that same $600 flight referenced above to Europe but instead you redeemed 30,000 points by transferring American Express Membership Rewards points to a partner airline. If I told you that the value of Membership Rewards was 2.1 cents per point, you might hesitate to transfer them.

But if you still wanted to take the flight and you booked through Amex Travel, you’d pay at least 39,000 points. 

By using the arbitrary value, it doesn’t help you decide whether you should transfer the points or not. In both situations, you’re not getting the “minimum value” that you should get for Membership Rewards as dictated by a blogger. By this logic, you shouldn’t take the trip at all. Or if you do want to take the trip, you should just pay cash for it.

Using the minimum value that you can redeem for in the travel portal, you get a basis to decide what way you should redeem your points, rather than whether you should redeem them or not. 

The responsible decision isn’t to give you a value that aligns with our paradigms for travel that can tell you whether you should book it or not, but instead to give you a metric by which you decide what way you book the travel.

What About Hotel and Airline Points Compared to Bank Points?

A fair criticism of hotel and airline points compared to bank points is that airline and hotel points don’t always have a minimum redemption value. 

For many programs, you can just use the same minimum value as if you had transferred bank points. Most major programs out there are connected to a bank program, but admittedly not all. 

When this comes up, the judgment is in the eye of the beholder. Take Alaska MileagePlan miles. You can really get some great value from Alaska miles, so how do you place a value on them?

This is where accepting that not everything in points and miles has to be quantified comes into place. Simply, we can accept that we don’t have to set a minimum value for every airline and hotel program out there. Instead, we can just use our best judgment when booking.

Here’s what we do know. We do know that Alaska has some great sweet spots, such as booking Cathay Pacific business or first class. You don’t have to assign a value to Alaska miles to know that. On the contrary, using Alaska miles for Korean Air isn’t always a great use.

Rather than set a value to an Alaska mile, we instead recognize the utility of the award charts to drive our decision making before booking. The same goes for American Airlines AAdvantage, Wyndham Rewards, etc. 

Simply put, we don’t need to assign a minimum value to recognize a good value, so we don’t have to assign a minimum point value to every program out there. We can use knowledge and information we have about the program to make decisions about whether to use those programs to book or not. 

The Importance of Setting a Minimum Value

There’s a big reason you should care about all of this. The decision shouldn’t be whether or not you should book the trip or not, but instead it should be how you redeem points for the travel you plan to take.

If you’re booking a flight and you found award availability with the airline, but you need to transfer miles to book it, you need to compare the cost to book it through the relevant bank travel portal before you decide to transfer points, especially for economy redemptions. 

Put directly, if you’re going to transfer points, check the transfer portal before transferring to be sure that you’re using the least amount of points to book the same trip.

This is what the minimum value of points tells you. If the cash price is $400 and you need 30,000 points transferred from Chase, you’ll be getting a value of 1.3 cents per point. If you have the Chase Sapphire Reserve®, you’ll save more points by booking in the travel portal. If you have any other Chase card, then it makes more sense to transfer the points to book the flight.

Although this calculation does help you assign a financial value to the points you have, it serves the even more important role as a tool to be used before you ever book your trip. 

Using Minimum Value Points Analysis Helps Avoid Point Paralysis

I often see people trying to decide which points to use when booking a trip. Sometimes this leads to points paralysis, where you get too caught up in trying to decide what points to use that you end up not booking travel at all. 

By using a minimum value analysis, it helps avoid point paralysis. Go back to the scenario where the value you’re getting for your redemption is above the minimum value, but all options fall below a prescribed value. What do you do? There’s no clear answer to this.

Using a minimum value analysis easily answers this: which redemption option is getting a greater value? 

Let’s take the following scenario. You’re booking a cash flight that costs $1,000. You can transfer either 50,000 Chase Ultimate Rewards points or 45,000 American Express Membership Rewards. You have both a Chase Sapphire Reserve® and the Business Platinum Card.

Given these parameters, we’ve determined that your Chase Ultimate Rewards are worth 1.5 cents each and your Membership Rewards are worth 1.54 cents each.

You would be transferring $750 worth of Chase Ultimate Rewards or $693 worth of Membership Rewards to book a $1,000 flight. 

In this case, the winner is Membership Rewards. You’re transferring a lower cash value of points to book the same flight. You didn’t get paralyzed by which to use. You just used the minimum value analysis to make a decision about how to book your flight.

Does All of This Even Matter?

So I know I am advocating for a position, but at the end of the day what you should be asking yourself is this: does this overcomplication of points and miles even matter? 

To some people, it absolutely does. They want to be sure they’re maximizing the value of their hard earned points and stretching them as far as possible.

But that doesn’t apply to everyone. The evaluation of points values always ignores tons of situations. If you wouldn’t travel as much or even consider the trip you’re taking without points and miles, then arbitrary points valuations are pointless. I’ve been to the Maldives twice and never would pay cash for the flights or hotels that I took. Points and miles made those trips possible.

What about flying business or first class? How many of you would pay the regular cash price to fly in premium cabins if you didn’t have points and miles? For many people, myself included, points and miles are a way to enjoy experiences that we otherwise wouldn’t have the financial means to pay for.

Those luxury hotels cost $500, $600 or even $1,000 a night? How many of us can say that we would actually pay for those out of our own pocket for multiple weeks a year without points and miles? I know I’d be doing a lot less St. Regis and a lot more Days Inn without points and miles.

My point is this. Chasing down the most optimized financial return for your points and miles has the intangible benefit of providing access to travel that many people otherwise wouldn’t have the opportunity for. It can be challenging to place a true financial value on all of the experiences we’ve had traveling the world at a greater frequency, in greater luxury or both. 

If anything, this reinforces to me the reason for evaluating your points redemptions on a minimum value analysis rather than trying to exceed the value that some website has told you you should strive to beat.

How Does This Apply to Fixed Value and Low Value Programs

You might be thinking “gotcha!” if you are questioning how this line of reasoning applies to fixed and low value programs. After all, if the fixed value or low value is less than the value of points that you could transfer there, it never makes sense to use them.

That’s not the correct conclusion to draw. Instead, what you should conclude is that it rarely makes sense to transfer points to those programs.

Let’s take IHG as an example. IHG recently significantly devalued their points, putting them in a position where they are rarely worth more than Chase Ultimate Rewards which are points you could transfer to IHG. 

Rather than say IHG points are useless in this scenario, instead what you should conclude is that it rarely makes sense to transfer Chase points to IHG unless you’re topping off for a redemption. If you have 97,000 IHG points and you need 100,000 points, then yes it makes sense to transfer 3,000 Chase UR to IHG in order to book the hotel. Where it doesn’t make sense is to transfer all 100,000 points. Since IHG points will likely never be worth more than UR now, you simply need to use UR points through the portal.

But transferring isn’t the only way to earn IHG points. You can earn them from one of the IHG credit cards. In that case, with the devaluation IHG has basically set a fixed value themselves. This is similar to programs like Southwest Rapid Rewards or JetBlue True Blue.

When the hotel or airline has de facto established a fixed rate, then that’s the only time when it makes sense to say the points are worth that much. But it doesn’t mean anything and has no consequences whatsoever.

Since Southwest determines their points are worth only about 1.2 to 1.3 cents each, it means you’ll always get the same value when redeeming them. As a result, you can’t exceed the minimum value. You’ll always get the same value. It only makes sense to determine whether or not you should transfer other points to the program, in which case the answer is always that you should transfer points only to top off your account rather than to make a complete booking.

Final Thoughts

Assigning value to points and miles doesn’t mean you have to rely on what someone else tells you the values should be. In fact, I’d advise you not to look to the value set by someone else. Instead, look to the minimum value you can get when transferring points. 

For hotel and airline programs that don’t readily have transfer partners, you can rely on intuition to know when you get a good deal. There’s no need to rely on a numerical value to guide your decision making.

The minimum value analysis to points and miles shifts the mindset from “should I book this with points” to “which points should I use.” 

Seeking to extract the most value possible from points and miles rarely leads to happiness and often leads to points paralysis. Just be sure you’re booking with the right points through the minimum points analysis and go enjoy your trip. 

I promise that when you’re enjoying the best cafe in Paris, the premier omakase in Japan or feeling the sand between your toes on the beach that you won’t be worrying about if you could have gotten an extra 1 cent per point redeemed for that trip. You’ll be too busy making memories and simply hoping that you’ll be able to return someday.