Hey, Happy Mardi Gras everyone! Hope you all are having a great week. It's Ernest
from Trip Astute. In this video, we're focusing on point valuations and why
it's important to understand how much your points are worth when evaluating
and using credit cards for travel.
(light chiming music)
First off, I want to thank Jorge for sending
over some Mardi Gras supplies from New Orleans. I really appreciate the love.
Also, I want to give a shout-out to Masoom for suggesting that I explore
this topic. Today, I want to focus on the topic that seems to come up a lot during
my credit card consultations. It's the issue of point valuations. I often get
the question, "how do I know how much a point is worth?" and "how do I know if I'm
getting a good earning and redemption rate? So in this video, I want to take a
step back and focus on some points and miles basics when it comes to
understanding your point values. For those of you who've been doing this for
a while, this might seem like basic information. But I'm hoping that you all
can share your tips and knowledge with others who are new to the hobby and who
can benefit from your experience. Before we jump in, if you're new here, welcome to
our channel. Trip Astute is a travel channel that is focused on sharing ways
to make travel easier, affordable, and more enjoyable. Traveling can be
stressful and expensive, so we're looking for ways to help you maximize your
experience through travel tips, points and miles, and innovative gear. If that sounds
interesting to you, please consider subscribing. A few weeks
ago in my AwardWallet video, I mentioned how we can be confusing that a 1.5
percent card could earn me more points or value than a two percent card. Since
it's also a recurring theme in a lot of my consultations, I figured I'd break
down the topic of measuring points value into three parts.
Number 1: Assessing the value of your points currency. Number 2: Understanding
how it relates to your cards earning rate. And number 3: Determining the actual
redemption rate for bookings. So let's start with assessing the value of your
points currency. Point values are important to understand when you're
collecting or investing efforts into building a collection of cards. The
easiest way to get a baseline on how much a points currency is worth is to
look at The Points Guy's monthly valuation. The Points Guy releases a list
every month and does a great job of breaking down his team's perceived value
for each point currency. They usually show the
previous months value and compares it to the current month, and notes the reason
why there might be a change in valuation, I've heard people criticize The Points Guy
for their valuations, but I think it's a good starting point. Pun intended.
Obviously, your experience or situation may be different. For example, a lot of
people get the most value per point when redeeming for business or first-class
redemptions. For a lot of people, including myself, the focus is trying to
squeeze more travel through economy class redemptions, which means that the
target value per point is probably going to be lower than someone who travels in
business or first-class. So if that's you, you might be getting slightly less value
than what The Points Guy lists. For example, The Points Guy values Chase
Ultimate Rewards points at two cents per point. When I tend to measure the value, I
usually use 1.5 cents per point since it's a bit more conservative
and it's the least amount that I would redeem, since I can get that rate on the
Chase Travel Portal with the Sapphire Reserve. Obviously, I always like to get
the best redemption value that I can get, but I'm willing to redeem my points at a
minimum of 1.5 cents per point. Also, while measuring the value of
points is a quantitative judgment, there's also a qualitative or emotional
component that factors into the value. For example, The Points Guy also values
American Express Membership Rewards points at two cents per point. Though
if I were given the choice between 50,000 Membership Rewards or Ultimate
Rewards points, which are both valued the same by The Points Guy, I would choose
the Ultimate Rewards points, only because I feel like I have more options to
redeem the points. You might feel completely different about it, which is
totally valid. Though for my travel style,
I value Chase points more, which means that it's a more valuable currency to me,
which might not be captured by looking solely at the numbers. The same holds
true for hotel and airline points. Assuming I could get a hotel or airline
point at the same value as I could get a Chase Ultimate Rewards point, I would opt for
the Chase point. This is because there is value to me in having that extra
flexibility to use the points in different ways. Again, that might not be
factored into the actual numerical value, but it's something that I consider.
Understanding how much a point is worth also plays into understanding the value
of a welcome offer. For example, as of March 2019, the American Express Hilton
Aspire card offers a welcome offer of
150,000 Hilton Honors points for spending $4000 within the first three
months of account opening. If you factor that Hilton points are worth 0.6 cents
per point, then the offer is worth $900.
Another popular card is the Chase Sapphire Preferred. Also, as of March 2019,
it's offering a welcome offer of 50,000 Ultimate Rewards points after spending
$4000 within the first three months of account opening. If we go with
The Points Guy's valuation of two cents per point, you're looking at $1000
worth of travel. If you use a more conservative 1.25
cents per point, then you're looking at $625,
which I would argue is probably more realistic for the average traveler. So
now that we understand how much a points currency is worth, you can now understand
how much a card actually earns. A common example of how earning rates might be
affected by the points value is the Chase Freedom Unlimited. I've talked to a
few folks who have asked me why I use the Freedom Unlimited for a lot of my
non bonus spend when I could be getting 2% cash back with a Citi Double Cash or
another card. My response is that even though the card earns 1.5 X or 1.5% on
all purchases, it's actually earning a rate of 2.25% since I value Chase
Ultimate Rewards points at 1.5 cents. Again if I use The Points Guy's
valuation of two cents per point, I would be looking at a 3% return.
So even though the card has an earning rate of 1.5 X or 1.5%, it has an
adjusted to earning rate of 2.25% when I factor my value for the points
currency. The way I calculate the adjusted earning rate is by multiplying the
cards earning rate with the points value. This gives me the adjusted rate. So,
here's another example. Suppose you have the Chase Sapphire Reserve or Preferred
card and the World of Hyatt card, and you stay at a Hyatt Hotel. Which card should
you use? If we break down the points, we can see that the Hyatt card has a 4 X
bonus on purchases at all Hyatt Hotels, while the Sapphire Reserve and Preferred card
have a 3 X or 2 X bonus on travel purchases. If each Hyatt point is worth
1.7 cents according to The Points Guy, then you're earning about
6.8 using your World of Hyatt card. If we use
The Points Guy's value for Chase Ultimate Rewards points, you'll see that it still
makes more sense to use the World of Hyatt card since it earns more at Hyatt
hotels and resorts. This can also work the other way. For example, a friend of
mine was interested in earning Delta points. While getting a Delta-branded
card from American Express is not a bad idea, I suggested that it might be better
for him to get an American Express Membership Rewards card like the Gold
card that could earn points at an increased rate. For example, since my
friend spends a lot on dining and groceries, he could earn a lot more
Membership Reward points which could then be transferred over to Delta. Even
with a transfer fee, he would likely be able to get more points with an American
Express charge card then a Delta card when it comes to his daily spend. I know
that there are other variables that have to be weighed and considered like qualifying
miles and other card perks. But for simplicity sake, don't assume that
branded credit cards are always the best card for earning that specific points
currency. Now that we know how to measure the adjusted earning rate of a card by
factoring the value of the points currency, how do I know how much value
I'm getting in my redemption or booking? To calculate the value of a booking, I
divide the cash value of the booking by the equivalent number of points needed.
This gives me the per point value. Knowing this information can help inform
whether I want to transfer points to a travel partner or book through a travel
portal. For example, we recently booked a five-night stay at the Hyatt Place Moab
in Utah since we'll be exploring some of the national parks in September. If I
book the five-night stay using cash, it would cost me over $1400
to stay at the hotel. However, it only costs 8000 points to stay
per night, so at 40,000 points total, I'm getting a per point value of
3.6 cents per point, which is great. You can use the same method for
any type of booking where you can compare both the cash and points cost. In
fact, we did a video a while back on when to use to Chase Travel Portal and
why it's sometimes a better deal than transferring points to a travel partner.
In that video, I basically used the same method to calculate whether I'm getting
at least 1.5 cents per point. If not, it makes more sense for me to use
the Chase Travel Portal to book the hotel or flight, since I can redeem Chase
points at 1.5 cents because I have the
Sapphire Reserve card. Definitely check out the video for more information on
the process. Now, if you're watching this video and saying, "All this math is making
my head spin. Isn't there an easier way for people who don't want to spend time
figuring all this stuff out?" The answer is yes. There are a lot of flat rate
travel reward cards out there that will give you a flat 2% back towards your
travel expenses. Since these cards typically redeem at one cent per point, you
only have to think about the front part of the equation. And actually, for most of
these cards, you don't have to think about it at all since they earn a flat rate.
These cards can be a great way to earn and redeem points toward travel without
the hassle of trying to figure out best redemption rates. An example of such a
card is the Barclaycard Arrival Plus. As of March 2019, there is a limited time
welcome offer for 70,000 bonus points after spending $5000 on
purchases in the first 90 days. This offer is worth about $700
since each Barclaycard Arrival mile, which is not really a mile but
really a point, is worth one cent per point. The card earns two points per
dollar, so it's essentially a 2% cash back card that you can apply toward travel
expenses. It does have an annual fee of $89 but it's waived the first year. These
types of cards are great for those who want a simple way to earn and redeem
points. While you can usually squeeze more value from a flexible points program
like Chase's Ultimate Rewards or American Express' Membership Rewards, they do
require a lot more time and effort to research redemption rates. In fact, even
if you're heavily invested in a program, it's often worthwhile to have one of
these flat rate cards to cover miscellaneous travel expenses. What do
you all think about point values? I'd love to hear how much you think your
favorite points currency is worth. Please share your thoughts and any additional
tips in the comment section below. If you're interested in applying for a new
credit card, we would love it if you used our link in the video description or on
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You'll basically fill out a questionnaire and schedule a 15-minute
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channel and our community. Until next time, travel safe and travel smart.