Edited by Joe Cortez, March 2018
The exact dollar value of a point is impossible to nail down. Let's say you used 25,000 miles to fly from New York to Dallas instead of paying $250 for a ticket. At that rate, you managed to get about one cent in value from each of your miles. That same mile may represent 10 cents of value for someone using it for a 135,000-mile round trip first-class flight from New York to Hong Kong that would have otherwise cost $13,500.
Airlines assign a value to their frequent flier miles only when you go to make a purchase. But just like real-life currencies, those values can change at the drop of a hat. How can you calculate the value of a frequent flyer mile or point before you purchase that ticket? Depending on how you use them, it is possible to get a lot of value out of each and every point.
Calculating the value of airline miles
How much you pay for airline miles and how much you redeem them for are often two different things. For instance: if you use an airline credit card to make a purchase without a bonus category, you are paying $1 per airline mile. If you make a purchase in a bonus category where you get two miles per dollar, you would only be spending 50 cents per mile. The cost of miles decreases further based on the number of miles you receive per dollar spent. You can also earn frequent flyer miles for flying, but how many you earn is often based on how much your base airfare is and if you have elite status.
If you are buying miles from the airlines, the value can vary based on how much you get. For instance, you can buy 1,000 American Airlines AAdvantage miles directly from the airline for $29.50, or 2.95 cents per mile. But if you buy 150,000 AAdvantage miles and receive 115,000 bonus miles for $4,425, you would pay 1.67 cents per mile for 265,000 miles.
But when it comes time to use those miles, how can you make sure you are getting the most value? The simple way to determine how much you are getting out of each mile is to divide the price of your flight over the price in miles. In the example at the top, dividing the price of the $13,500 first class ticket by the ticket's price in frequent flyer miles (135,000) results in a value of 10 cents per mile. A far cry from the one cent per mile for spending 25,000 miles on the $250 economy ticket.
Is there a standard by which you can hold your miles? The Points Guy (where the original author of this post is editor at large) publishes monthly values for the biggest frequent flyer programs. For the major frequent flyer programs in the United States, you should shoot to get a value of more than 1.5 cents per mile for your tickets - but with planning, you can definitely do better.
Calculating the value of hotel points
Airline miles are not the only ones that hold a certain amount of value. Hotel points are equally valuable when used correctly. But calculating their cost and value is slightly different than those of airline miles.
Much like airline miles, you can earn hotel miles in a variety of ways, from staying at chain hotels, to using hotel credit cards. Unlike airline credit cards, you will often earn more points from a hotel credit card for everyday spending, as well as any targeted category bonuses. This doesn't mean you are getting more value for your spending, because hotel points often hold less value than airline miles.
Let's consider a one-night stay in New York City in summer. The St. Regis hotel, part of Starwood Preferred Guest, may cost $695 per night. But the same room is available for 30,000 Starpoints. This represents a value of 2.3 cents per point.
Over at the Grand Hyatt, a room might cost $253 per night. Instead, you could spend 25,000 World of Hyatt points, for a value of just under one cent per point.
Meanwhile, the JW Marriott may be available for $398. That same room for one night would also cost 45,000 Marriott Rewards points, for a value of .8 cents per point.
Does this mean that Starwood Preferred Guest points are more valuable than Marriott Rewards points? Not necessarily: although you are getting a better value from Starpoints, consider that Starpoints can also be converted to Marriott Rewards points at a one-to-three ratio: one Starpoint equals three Marriott Rewards points. In that situation, the 30,000 Starpoints you would spend at the St. Regis would turn into two nights at the JW Marriott, potentially giving you a greater overall value.
Once again, The Points Guy is a good resource to consider the rough target redemption rate of any given hotel point. While hotel points target values range from .5 cents per point at the low end, to over two cents per point at the high end, a high-value redemption will give you more than two cents per point.
Calculating the value of bank points
Unlike airline and hotel points, bank points are very straightforward to calculate the value of. Each of the three major credit-issuing banks – American Express, Chase and Citi – allow you to use their points directly through their portals towards free or discounted trips. But the actual value of those points may vary.
With American Express Membership Rewards, you can use points for trips through American Express Travel. No matter what airline or hotel you book, your points will always be worth one cent per point. Because you are spending much more to earn those points, your best shot is to transfer points to another partner instead.
Chase lets you use your Ultimate Rewards points on most airlines through their Ultimate Rewards Travel Center. How much value you get is based on which card you hold. If you have the Chase Sapphire Reserve, your points are worth 1.5 cents each, meaning 50,000 Ultimate Rewards points are worth $750 in travel. Chase Sapphire Preferred cardholders' Ultimate Rewards points are worth 1.25 cents per point, meaning that same 50,000 points is worth $625 in travel. While this is not a bad value for points, it is always worth considering the transfer partners before booking through the Ultimate Rewards Travel Portal.
Much like Chase, Citi also offers a flat rate for using Citi ThankYou Points through their redemption center, based on which card you have. If you have the two higher-tier cards, the Citi Prestige Card or the Citi ThankYou Premier Card, your points are worth 1.25 cents each. If you hold any other Citi card that earns ThankYou Points, your points are only worth one cent each. If you hold the higher tier cards, using points through the portal isn't a bad way to go. But if you hold any other Citi card, definitely look at transfer partners first.
What are the best points and miles calculation tools?
There are several points and miles calculation tools that you can use today to ensure every point is worth its weight in discounted travel. ExpertFlyer.com is one of our favorite tools for finding award seats, calculating fares against points, and determining the best way to use all of your points. However, ExpertFlyer does come with a fee: the basic version is $4.99 per month, while the premium version is $9.99 per month or $99.99 per year.
Other tools to calculate the value of points and miles are:
- Seat 17A "Should I" Calculator: If you are wavering between using points or paying in cash, use this simple calculator to see how much value you would be getting from each point.
- Miles.biz: This simple-to-use calculator allows you to put in your origin and destination points to see how much your flight would cost in multiple programs. With this information, you can decide whether or not you should pay in cash, or transfer points to get the most value.
How can I get started calculating points and miles?
Calculating the value of points and miles is not an easy task, especially for the new points and miles collector. If you are not comfortable trying to understand how much value you should get out of each point, start with either a cash-back credit card, or a bank points credit card. These points programs give you a fixed redemption rate, allowing you to decide when to cash in for the trip of your dreams.
As you get more comfortable and know which airlines you like flying the most, consider adding additional points programs to the mix. Between cash back, transfer partners and other points earning programs, you will be on your way to racking up points and cashing them in for trips in no time.