New to the Miles & Points Hobby? Here’s a Simple Way to Understand the Value of Your Travel Rewards

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INSIDER SECRET: Both the points earning rate AND the value of points determine your return on spending.

Newcomers to the use of miles and points are often confused by the countless reward programs out there. Almost every credit card issuer, airline, hotel and online travel site has their own points system, and it can be difficult for even the seasoned traveler to keep things straight. The sheer range of terms for all of these programs — points, miles, rewards, cash back, rebates, etc. — can throw people off. Even after getting the different program names straight, there is the challenge of trying to understand what your miles and points are worth.

Fortunately, there is a simple way to evaluate miles and points. Whether you are collecting credit card points or miles associated with an airline or hotel, you can examine two simple factors to determine value:

  • The earning rate of your rewards
  • The redemption rate of your rewards

Let’s take a look at these two factors individually.

Understanding what your miles and points are worth can be very confusing! (Photo by FGC/Shutterstock)

Determining the Value of Your Miles and Points

Consider the Earning Rate

In the same way that money doesn’t just appear in your bank account, miles and points aren’t just handed out freely. They are earned, typically through credit welcome offers, credit card spending and spending done directly with airlines, hotels, and other travel companies. So if you earn certain types of miles and points faster than others, you’re getting a higher return on your spending.

The rate that you earn rewards can vary tremendously. For example, most airlines will award more miles for first class and business class fares than they will for economy plus or coach fares. Most airlines will also award more points for flights taken by folks with frequent-flyer status than they will to those who never fly the airline.

Separate from the miles awarded directly by the airline, you can also earn miles by using any one of the best credit cards for travel. And the earning rate here can vary too. For example, you’ll earn 2x Chase Ultimate Rewards points on travel purchases with the Chase Sapphire Preferred® Card. By comparison, you can earn 5x Amex Membership Rewards points on purchases made directly with the airline with The Platinum Card® from American Express.

Consider the Redemption Rate of Your Rewards

Understanding how you earn rewards is important, but understanding the value you’ll get when redeeming your rewards is equally important. There are various types of rewards, but all generally fall into one of the following four categories:

1.  Cash Back

Cash back rewards are the simplest kind, as the value is just in US dollars (for cards in the US). So, for example, if you have a credit card that offers 1% cash back, you will receive $1 for every $100 in spending you make on the card.

2.  Static Value Rewards

Some types of miles and points are static in value — meaning they are worth the same thing every time. For example, Barclaycard Arrival Plus Miles are worth 1 cent per point when redeemed toward travel purchases of $100 or more. Regardless of the type of travel, or the company you make the purchases with, the miles are worth 1 cent per point.

3.  Dynamic Value Rewards

Unlike the static-value rewards explained above, some miles and points systems have a dynamic value. These miles and points can vary in value based on when you use them, where you use them and what company you use them with.

For example, IHG Hotels, which has thousands of hotel properties around the world, has an award chart that ranges from Category 1 (less expensive) hotels for 10,000 points per night to Category 13 (more expensive) hotels for 70,000 points per night. If you are staying at a Category 1 hotel, as long as the property has award rooms available, the stay will cost 10,000 points per night. And the cost will be 10,000 points regardless of the time of year you are staying.

But if you were paying cash for that same hotel room, the cash cost can vary substantially based on the time of your stay. A Tuesday night stay in April will cost substantially less money than staying the night before Thanksgiving. For miles and points with dynamic value, the cost to redeem typically stays the same, but because the amount that the flight or hotel stay would cost in cash can change, the value of the miles and points also changes.

4.  Flexible Rewards

Some types of travel rewards can be used in a variety of ways and the value will depend on how you choose to use the points. For example, if you have the Chase Sapphire Reserve card, you will earn Chase Ultimate Rewards points, which can be used in each of the three ways described above. If you collect 10,000 Chase Ultimate Rewards, your points could be redeemed for:

  • $100 statement credit (cash back)
  • $150 toward travel in the Chase travel portal (static value)
  • 10,000 miles for a flight on a transfer partner like United Airlines (dynamic value)

So in this case, the value of Chase Ultimate Rewards points depends on how you use them. Other points systems, such as Amex Membership Rewards points, can also be redeemed in a variety of ways, meaning the value also varies based on how they are used.

Calculate the Return on Spending

To reiterate, there are two main factors to consider when evaluating miles and points: your earning rate and your redemption rate. By multiplying these numbers together, you can get a clear picture of the return you are getting on your spending. In other words:

Return on Spending = Earning Rate X Redemption Rate

This simple equation works whether you earn the miles and points from credit card purchases or from spending directly with an airline or hotel. The key here is that both the rate at which you earn rewards and the value you get when you redeem them are important factors in evaluating a particular travel rewards currency.

Some types of points are valuable but are earned slowly, whereas some types of miles are earned quickly but have a low value.

Here are some tips to help you evaluate miles and points for your situation:

  • Determine the Value of Your Miles/Points
    • If you have a cash back credit card, the value is simply US dollars
    • If you have miles/points with a static value, the terms and conditions of your card should state what they are worth
    • If you have miles/points with a dynamic value, it may take some time to figure out how valuable they are to you
    • The Points Guy posts a monthly valuation of points that is great starting point for determining the value
  • Determine the Earning Rate of Your Miles/Points
    • For credit cards, these should be stated on the terms and conditions
    • For purchases made directly with airlines or hotels, the earning rate should be stated on the website
    • Remember that folks with airline/hotel status will have a higher earning rate
    • Purchasing first class or business class flights will also typically have a higher earning rate
  • Calculate your Return on Spending
    • Multiply the value of your miles/points by the earning rate

So let’s run through a few examples using this equation.

Cash Back Rewards

One popular rewards card is the Capital One Savor Cash Rewards Credit Card. Since this is a cash back card, determining the return on spending is easy:

  • The value of your rewards is in US dollars.
  • The Savor Cash Rewards card earns an unlimited 4% cash back on dining, entertainment and on popular streaming services, 3% cash back at grocery stores and 1% on all other purchases.
  • Since points value is already in dollars, your return on spending is equal to the earning rate:
    • If you use the card at a restaurant or for entertainment, the return on spending will be 4%
    • If you use the card on popular streaming services, the return on spending will be 4%
    • If you use the card at grocery store, the return on spending will be 3%
    • If you use the card for any other purchase, the return on spending will be 1%

The information for the Capital One Savor Cash Rewards card has been collected independently by Million Mile Secrets. The card details on this page have not been reviewed or provided by the card issuer.

Dynamic Rewards

Now let’s look at a more complicated example. Many folks enjoy collecting World of Hyatt points for their value and flexibility. If you pay for a stay at any Hyatt hotel, you can earn points just by being a member (free to join) of the World of Hyatt program.

  • The value of Hyatt points can vary based on the time of year and type of hotel you are staying at, but a reasonable estimate of their value is 1.7 cents per point.
  • As a World of Hyatt member, you earn 5 points for every dollar on your stay at Hyatt hotels.
  • Your return on spending is 8.5% (1.7 cents per point x 5 points per dollar, so you get 8.5 cents in value for every dollar spent).
    • This return is only based on being a World of Hyatt member; it does not include any additional points you get from spending on a credit card.
    • Again your valuation for Hyatt points may be different, so you should always compare the cost of Hyatt stays to the cash cost to see the value for your particular situation.
With a good earning rate and an incredible value, Hyatt points are a great way to travel cheaply! (Photo via Hyatt)

Flexible Rewards

Since some types of miles and points can be used in various ways, your return on spending will depend on how you choose to use them. For example, two popular ways to redeem Chase Ultimate Rewards for folks with the Chase Sapphire Reserve is to book travel through the Chase travel portal or to transfer the points to Hyatt.

If you book travel through the Chase portal, your return on spending can be calculated as follows:

  • Chase points are worth 1.5 cents per point when used in the Chase travel portal with the Chase Sapphire Reserve
  • The Chase Sapphire Reserve earns 3 points per dollar on travel and dining and 1 point per dollar on other spending
  • So if you use the card for dining purchases, your return on spending is 4.5% (1.5 cents per point x 3 points per dollar)

But if you transfer your points to Hyatt, your return on spending is more:

  • Hyatt points can be valued at 1.7 cents per point as explained above
  • The earning rate is the same — 3 points per dollar on travel and dining
  • In this case, your return on spending is 5.1% (1.7 cents per point x 3 points per dollar)

So if you have a credit card that has multiple ways to redeem points, it’s best to do the math to determine how to use your points to get the best return on spending.

Bottom Line

Understanding the value of miles and points can be confusing, but there are two key factors that determine the return you are getting on your spending:

  • The redemption rate of your rewards
  • The earning rate of your rewards

By multiplying these together, you get a clear understanding of your return on spending. By comparing this across multiple types of miles/points or across multiple credit cards, you should have a clear sense of which types of miles and points are best for you.

Here are some articles that can help you find the best uses of some common miles/points, which will help to maximize their value:

Flexible Rewards
Airline Miles
Hotel Points

For the latest tips and tricks on traveling big without spending a fortune, please subscribe to the Million Mile Secrets daily email newsletter.

Chris Campbell is a contributor to Million Mile Secrets, he covers topics on points and miles, credit cards, airlines, hotels, and general travel.

Editorial Note: We're the Million Mile Secrets team. And we're proud of our content, opinions and analysis, and of our reader's comments. These haven’t been reviewed, approved or endorsed by any of the airlines, hotels, or credit card issuers which we often write about. And that’s just how we like it! :)

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