How to Value Credit Card Points

With cash back credit cards, the reward you earn is clear: it’s a percentage of every dollar spent. For example, you may earn 1% cash back on all purchases. With rewards credit cards, however, the exact value of the reward isn’t always so clear; that’s because you earn points, not cash back. As they accumulate, these points can then be redeemed for goods and services at a later date, like flights, hotels or electronics. But how do you know which credit card used and point earned will give you the best value for your spending habits? The answer can be tricky to calculate and determine.

How much are credit card points worth? It depends

To find out which credit card provides the best rewards, we need to know how many points are awarded for every $1 spent. We also need to determine the value of the goods and services the points can be redeemed for. For example, 10,000 points that can be redeemed for $250 in travel is worth more than 10,000 points that can be redeemed for only $100 in merchandise. Your individual preferences also play a role in how much your points are worth. For example, do you value store merchandise at the Gap more than a flight on Air Canada? Think about this, as you begin to compare and consider which is the best rewards credit card for you.

With cash back credit cards, the reward you earn is clear: it’s a percentage of every dollar spent. For example, you may earn 1% cash back on all purchases. With rewards credit cards, however, the exact value of the reward isn’t always so clear; that’s because you earn points, not cash back. As they accumulate, these points can then be redeemed for goods and services at a later date, like flights, hotels or electronics. But how do you know which credit card used and point earned will give you the best value for your spending habits? The answer can be tricky to calculate and determine.


How much are credit card points worth? It depends

To find out which credit card provides the best rewards, we need to know how many points are awarded for every $1 spent. We also need to determine the value of the goods and services the points can be redeemed for. For example, 10,000 points that can be redeemed for $250 in travel is worth more than 10,000 points that can be redeemed for only $100 in merchandise. Your individual preferences also play a role in how much your points are worth. For example, do you value store merchandise at the Gap more than a flight on Air Canada? Think about this, as you begin to compare and consider which is the best rewards credit card for you.

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Start with the critical information

1. How many points are awarded per $1 spent: Be aware that not all purchases result in the same number of points earned. The points you earn depend on the credit card and purchase category. For example, swiping your Capital One Aspire Travel World MasterCard anywhere earnss you 2 points per $1 spent. On the Scotiabank Gold American Express, however, you earn 4 points for every $1 spent on gas, groceries, dining out and entertainment, and 1 point per $1 on all other purchases.

2. What those points can buy: The credit card issuer will also specify how many points must be redeemed for a given good or service; this is where valuing points can become difficult.

For example, with Aeroplan, a round-trip flight from Toronto to Los Angeles will cost you 25,000 miles, and you will also have to pay for taxes and surcharges. How much is this flight worth? Depending on the day and time, it can regularly cost anywhere from $550-$850. In addition, taxes have to be paid with cash on top of the required points. To determine the value of an Aeroplan mile for a flight to Los Angeles, we will use an average flight price of $700. Aeroplan taxes on a flight to Los Angeles are around $180. To determine the value of an Aeroplan mile, we will first deduct the taxes to find your net gain when redeeming 25,000 miles: $700-$180 = $520. As taxes have to be paid in addition to the required point amount, 25,000 miles is worth $520. To find the value of one Aeroplan mile, divide $520/25,000 = $0.0208. Toronto to Los Angeles is a great flight to redeem your Aeroplan miles on, as each mile is worth $0.0208.

Movies are another instance where a set number of points don’t necessarily translate into one specific dollar value. For example, 1,000 Scotiabank Scene Points will get you a free movie, but this can be for a regular screen, IMAX or 3D. In this case, what you can say is that at a minimum 1,000 Scene Points are worth 1 general admission ticket, but they can get you a seat in a bigger/better theatre.

Since the value of points varies drastically by credit card type, we have done analysis for each of the major credit card providers and programs (it is important to also consider how many points each program rewards for every dollar spent):

Card Value of Points Blog post
Aeroplan $0.0120 PDF
Capital One Aspire Travel $0.02 PDF
RBC Avion $0.0114 PDF
Scene Points $0.014 PDF
Starwood Preferred Guest $0.0223 PDF
TD Points $0.005 PDF

Follow the formula

To compare the value of different rewards programs, keep the following question in mind:

On a percentage basis, what is the reward per $1 spent?

To answer this question, follow these steps:

  1. Determine the number of points earned per $1 spent
  2. Determine the value of one point (Reward value / Points required for reward)
  3. Multiply the value of one point by the points earned per $1 spent

For example, let’s say you have the Scotiabank Gold American Express credit card that gives you 4 points for every $1 spent on gas, groceries, restaurants and entertainment, and 30,000 points gets you $300 worth of travel.

  1. Points earned per $1 spent: 4
  2. Value of one point: ($300/30,000 = $0.01)
  3. Value of $1 spent: $0.01 x 4 = $0.04 or 4%

The Scotiabank Gold American Express credit card gives you 4% back per dollar spent on gas, groceries, restaurant and entertainment. How does your rewards credit card compare?