Determining The Value Of Your Credit Card Rewards Points

Honolulu, HawaiiI’ve only got one personal credit card and that’s my Discover rewards card. I like concentrating all my spending on one card so I can get maximum points to buy things like a home theater system, nights at the Halekulani Hotel, gasoline cards, and tennis racket grips!

Credit card reward points have value and like anything with value we tend to hoard. I know plenty of people who never use their reward points for years, only to see the cost of things skyrocket. Worse yet, some credit card reward programs expire after so many years.

My favorite example of a rise in rewards points cost is a round-trip ticket to Hawaii from California. Over the past 12 years, I’ve gone to Hawaii over 20 times. It’s a direct 4.5 hour flight from San Francisco, and I absolutely love it there for obvious reason. If any readers want to meet up in Honolulu the second half of April let me know!

Before the year 2000 it cost 25,000 points for an economy class round-trip ticket valued at roughly $350. In other words,  it took 75 points to buy $1. In 2013, the same flight now costs 35,000 to 50,000 points depending on the time of the year. Meanwhile, you can get tickets during the off season through Hawaiian Airlines, Alaska Airlines, or United for just $300 from San Francisco! It now takes ~120-170 points to buy $1.

Not only does it now take 60-100% more points to get a similar ticket, the cost of directly purchasing a ticket has stayed relatively flat. As a result, whenever I can purchase a ticket for less than $350 to Hawaii, I do so without points.


The one thing I’ve struggled with my entire post college life is spending money. Saving money is part of my DNA, therefore it should come as no surprise that I tend to hold on to my rewards points until it’s absolutely necessary to spend. I had over 100,000 rewards points with my American Express Corporate card when I left my job and didn’t even realize it until six months later! Luckily AMEX was kind enough to let me redeem my points six months after I closed the account.

Nowadays, I’m much more in tune with my credit card usage and rewards points. Before spending any money on travel or any material items I do the following:

1) Calculate: Take the number of points divided by the market price of the item you find online. If it takes 100,000 points to buy a $1,000 LED TV, then 100 points equals $1. Some of us are better bargaining shoppers than others, so to keep the definition of “market price” standard, just use the price you would find at Amazon.

2) Compare: 100 rewards points for $1 is generally a good barometer to have. The higher the number above 100, the less value you are getting for your rewards points (takes more points to buy $1 of goods). Spend time comparing the different product substitues available in your reward network. Higher end versions of a product tend to require incrementally more points I’ve noticed.

3) Contrast: Now it’s time to find the differences between the final products in terms of price, quality, features, and so forth. There’s always going to be a selection of two or more things that are good enough for purchase.

I started off using my credit card points for gasoline cards given gas is a reoccuring expense. It wasn’t until I really began hoarding my points and finding something more satisfying did I use my points to buy more expensive items. One caveat to remember is that many rewards cards have caps on how much you can get back on their teaser rates e.g. 5% cash back if you spend UP TO $5,000 and no more.

These are my simple Three C’s to calculating the value of credit card rewards points.


1) Costs always rise. Just like rent, gasoline, food, and college tuition, it will take more and more rewards points to buy the same item. Therefore, I recommend you use your rewards points as soon as you’ve accumulated enough to buy what you want. Hoarding is a losing proposition and credit card companies every year hope that users forget, lose, or cancel their programs before use.

2) Costs depend on product. There is no set rewards points cost per item. Generally, the more expensive an item is such as a $1,000 LED TV, the less value you get out of your points. Conversely, you get a bigger bang for your rewards points by getting lower cost items such as $50 gasoline cards. The reason is because there is more margin for profits, and less elasticity in demand by the consumer the pricier the item.

3) Spending $1 is $1 more than spending nothing. Buying something without points is almost always “better value” than buying something with points. The simple reason is because the credit card company is an intermediary which involves a cost. Although it is almost always better value to buy something directly without points, it will ALWAYS cost you more because you are shelling out cash!


My simple philosophy on spending is to never spend if you don’t have to. Always first consider paying with points first. All of us have to spend money on necessities such as dry aged rib-eyes, Porsche 911 Turbos, Panerai GMT watches, and Hermes handbags so we might as purchase everything using a rewards card and let our points accumulate to purchase some more.


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Updated 2H2015

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship. Sam focuses on helping readers build more income in real estate, investing, entrepreneurship, and alternative investments in order to achieve financial independence sooner, rather than later.

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  1. Jacob@CashCowCouple says

    I’d love to join you in Hawaii! All I need is a ticket covered by those points of yours!

    The flight ticket inflation is insane! I don’t have any point cards at the moment. My main cash back card just gives me cash back into my bank account. I’m sure we’ll pick up a new card at some point. Like you said, it’s foolish not to earn something if I’m spending money!

  2. says

    Wrong year for Hawaii, we were there last April! =)

    Expiration and changing values are the main reasons we like the cash back rewards cards. We feel like the value we’re getting there is pretty clear and it’s not a guessing game.

    I’ve watched the value of some of my airline miles diminish over the years as it becomes harder and harder to find round trip tickets available for the $25K miles that used to be standard. Now it seems whenever I try to spend airline miles I end up having to buy a more expensive AAnytime ticket for at least half of the trip, which raises the “cost” of the trip by 50%.

    • says

      Every year is always a good time to go to Hawaii! Perhaps I’ll look for a cash back rewards card. Every time I think I find one, I read the fine print and see there’s a limit on how much I can get back based on what I buy.

  3. Ashley says

    How do you feel about cash back rewards cards? I do not travel by air much due to a back injury (flights are murder on it!) but I use a card that gives me 1% cash back on everything. I put 2-3k in regular expenses on it a month and it adds up pretty quick. I usually redeem it for an account credit when it gets to $25 or more. Do you not find cash back cards a good value, or do you just enjoy getting free travel?

    • says

      It’s a good idea if there are no limitations. I know I will always take at least one trip a year and spend money on gas, so whatever the rewards program, I’m focusing my money on these two items on a recurring basis. Any recommendations?

  4. Ashley says

    Also: 2 credit cards. 1 reward points card, and 1 5.99% interest card for if I have to spend more than the Rewards card limit in a month. It’s basically a card to use while waiting for emergency money to transfer to my main bank account. I use the low interest card maybe once per year, and I’d never use it if they’d raise the limit on my rewards card.

  5. says

    I just have one credit card and I’ll admit to being a point hoarder. I’m saving up for a new laptop. The question is can I put off buying a new laptop until I have enough points to get it entirely for “free” or will I finally get so frustrated with my old one that I’ll break down and just use the points to shave a large amount off the purchase price.

  6. says

    I’ve just begun to experiment with rewards cards– I have a 2.25% cash back card from USAA for gas and groceries and a shifting category cash back card from Discover. Both offer something like a percent on other purchases. It will be interesting to see how they add up over time, but it is at least better than using my debit card, which is how I used to do business!

    • says

      Yeah, better than the debit card. I’m frustrated with the 2.225% cash back ONLY for gas and groceries. It might tempt me to gas up and eat all the time! If there was a card that had no such limitations, I’d be all over it.

  7. says

    I don’t have travel rewards cards because I need food and gas. I use the Costco AMEX for the best gas reward, my TD Visa for cash back and I am shopping for a new Mastercard with better rewards.

    I have let a lot of free stuff pass me by in years past because I paid cash or used debit. 2013 is the year of free stuff on the credit card.

    • says

      I guess it would be nice to have a rewards card for each category. I just don’t have the patience. My Citi card isn’t a travel rewards card, but simply a rewards card which I use for travel.

      • says

        I would love to have something similiar to your Citi card but we don’t seem to get the same great offers here in Canada. I get more points at certain retailers if I use a specific card when I shop there.

        I would use my Amex for more purchases instead of just Costco and gas but many retailers don’t accept Amex. My dentist, hairdresser, local non-chain restaurants and a discount gas bar that I like don’t accept it.

        • says

          That’s strange to me the rewards offerings in Canada lack the robustness of the robust program in America. It’s the same in Europe too where cash is preferred almost 100% of the time.

        • says

          I spent several hours this weekend hunting for a new credit card. I gross just under 50K per year and so I cannot even apply for the best cards out there. You must make 60K to qualify for the good cards.

          I have selected a 1% cash rewards Mastercard that gives a bonus when you have been with them for 1 year. The hunt made me very angry at the discriminating practices of our big banks. I have an amazing credit report and I have never been late or missed a payment. I do not carry a balance on my credit cards but they don’t want me. I wrote a rather angry blog post to vent some of my frustrations. Lots of great deals out there for people who have money but no good offers for people who need money.

          I wonder if people with larger bank balances get offered higher GIC/CD rates than the rates that are available to me?

  8. says

    We put almost everything on our rewards cards and usually just get an account credit whenever we have built up $100 or more. Definitely addicted to them!

  9. Mitch says

    I have 1,100,000 marriott rewards points and will probably take a free trip to europe in a couple of years. Their system is very user friendly. Redeemable for hotels stays of course, shopping, convertible to miles, cruises, etc.

  10. says

    For me the value of my frequent flier miles trump the other programs. Over the last 20+ years, I took roughly 8-10 overseas flights going first or business class. The annual fees ere roughly $1,500 for the 20+ years. I am now accumulating points for hotel stays on my Hilton card. I plan to use them overseas too.

  11. says

    This is a real easy system to apply when purchasing gift cards. Through American Express, sometimes you can purchase two $15 gift cards for less than one $25 card. When that happens, I will by as many of them as possible then list them on eBay.

  12. says

    The credit cards I use all have rewards programs, which have given me quite a lot back over the years. I also pay all my balances off in full each month so it really does feel like a win win. What I primarily use my reward points for nowadays is getting retail gift cards that I give to family for holidays and such. I’ve also used points to get statement credit on my credit card bills a few times which is nice too.

    I’m trying to get better about using frequent flier miles which I don’t use as much as credit card reward points. I recently booked a flight with miles though, and am quite close to having enough for another flight on a different airline! I recently realized I forgot to input my mileage account number on a couple flights I took last year so I put in a request to get credit for those trips.

    • says

      That’s a nice gesture Sydney. I’ve never used points to get credit on my CC bill before, so that’s a good idea. I guess it depends on the value of the credit. Might be greater.

  13. says

    You get better value for overseas travel. I use Marriott and United cards. We’re going to Hong Kong on a free and paid ticket, cost 60,000 miles for a $1600 ticket. That a 2.5 cent value for the points. Marriott points domestically aren’t a great deal, 30000 points gets you a $200-250 room in Hawaii. However overseas the points go further, our room in HK would cost $550. I always recommend using airline and hotels points for out of the country travel.

  14. says

    I used to fly all over when I lived in the UK for dirt cheap but gone are those days living in Canada now. I don’t have a card that gives me reward points for flying but the wife has Air Miles but at the rate we collect them we’ll never get anywhere but maybe a ride to the airport. We do use other rewards cards and do the math and know which ones give us the best bang for our buck. If it makes sense, I’m all over it and like you saving was easy it’s the spending I can struggle with sometimes. Great post mate as always

  15. Patrick says

    I live in Hawaii, am a new subscriber to your blog, and work as a marketer in the hospitality industry here (managing 20+ hotels around the islands) as well. Please email me, if I’m in town while you’re here it would be fun to meet up and trade some tips. I moved here 8 years ago after college and there’s no place like it!

  16. says

    I have the AMEX blue cash preferred card. I can get up to 5% cash back on groceries and gas and 1% cash on everything else. I have been using it for years and have used my rewards cards quite a bit. The only negative is that AMEX is not accepted everywhere so I am thinking of getting another credit card. Still don’t know which one.

    • says

      I used to have the Blue Card too, but got frustrated by the limitations of access. Besides, I had an AMEX corporate card with rewards so I didn’t need another AMEX. I feel better knowing my Citi MasterCard is accepted pretty much everywhere.

  17. Money Beagle says

    We strictly use cash back reward credit cards. That way, we can get whatever we happen to want and not have to choose from a catalog, or find that what we’re saving for is suddenly no longer the focus of the rewards programs. As my dad says, ‘cash always spends’.

  18. says

    I spend every dime I can on a rewards card. Right now I have an Amex I use for my main card and carry the before mentioned capital one cash back card just for those rare cases that amex isn’t accepted.

    Card companies are making their rewards programs increasingly complex to understand and value, so I found that a site like nerdwallet which calculates and compares all the rewards programs is really helpful when searching for a new card.

  19. says

    I love the idea of reward credit cards – points /money for nothing really. I tried to get a reward card 8 years ago when I was travelling everywhere for work. I thought, put it on my card and my company will pay the expenses and I’ll keep the reward!

    Turns out, you need a good credit rating to get these cards! But in principle, it’s a great plan.

  20. Dave says

    I’ve been calculating the value of my credit card points for a few years now. My points have the option of being converted to cash back into my checking account, however I determined that redeeming them for pre-paid VISA cards is a better deal point-wise.

  21. Michael says

    Upromise MasterCard. Easy-peasy. At least 1% on everything, with categories that go higher, and online purchases (where UPromise gets a referral from the retailer) can have high percentages as well.

    The kickbacks accumulate and once a quarter they send money to my student loan. That money on top of my normal payments means I’m paying down the principal faster and incurring less interest charges over the life of the loan. Since my family makes too much to take the student loan interest deduction any more, I don’t feel bad about paying it off quickly. And once the loans are done with, you can have the kickbacks deposited into a 529 plan for education expenses for “re-education” expenses, or to fund a child’s education if that’s your thing. If you just want the cash, they’ll even cut you a check.

  22. Lovetofly says

    I think one of the best cash back rewards card is the Fidelity American Express which gives 2% cash back on everything. Although cash back is nice, I agree with @Krantcents above in that travel credit cards that earn frequent flyer miles can be much more valuable if you like to travel and value business and first class travel. There are many times where I have redeemed miles accumulated from credit cards for business class travel that would not have been possible with using a cash back card. As always, it depends on what you value, and I value travel.

  23. ahp999 says

    I have the same card as you, and I also had the older Citibank Thank you Rewards card (its the green one). Having multiple “Thank you” reward cards from citi, citi allows you to combine the points together easily. For the longest time I wanted an iPad but held off on the purchase, but with my points I was able to get 700 dollars worth of BestBuy gift certificates. Finally got my ipad and enjoying it!

  24. Credit Kangaroo says

    It’s interesting that you focus on putting all your spending on one card. Personally, I do the opposite – I put different category purchases on different cards so I can maximize the value I’m getting. For example, I put all my grocery purchases on a card that earns 5% on groceries and all my restaurant purchases on a card that earns me 4% (in Amazon money) on restaurants. It takes longer to get up to big amounts of points/cash back, but I’m able to maximize the value of my rewards.


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