Calculating the Value of Your Reward Points

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Calculating the value of your reward points is essential when travel hacking. Since every flight and hotel you book has a different price, the value you get when redeeming your points will change. In an ideal world, you’ll always be looking to maximize the value of your points, but it’s not always that simple.

Loyalty programs make it easy to redeem your points and miles, but they don’t always spell out the exact value you’re getting. As a consumer, you need to establish a base value for your points. Once you have that, you can easily compare different redemptions to see if what you’re getting is worth it or not.

Here’s how to calculate the value of your points and what numbers you should use for the base value of one point.

The value of one point for each travel rewards program

Before you start calculating the value of your reward points for each redemption, you need to establish a base value for one point. You would do this by comparing hundreds of flights and hotels in destinations all around the world at various times. With all of this data compiled, you’ll get an average value. That’s the base value you’ll use to compare all redemptions moving forward.

Obviously, no person in their right mind is going to do that. Who has that kind of time? Guess what? I do. As a travel writer, I’ve literally searched thousands of flights and have done detailed comparisons with many different loyalty programs. 

Generally speaking, you should use the following base values when comparing redemptions:

You only really need to worry about the base value of your Aeroplan and Marriott Bonvoy points since the value of your redemptions will change depending on what you’re booking. The rest of the programs have a fixed value per point (although a few of the programs have additional redemption options), so it doesn’t matter much. 

Basically, when redeeming Aeroplan points, you want them to be worth around 2 cents each. For Marriott Bonvoy, aim for a value of .9 cents each. If the value falls well below that, then save your points and pay cash. 

How to calculate the value of your points

For many people, calculating the value of your reward points is difficult. They don’t understand the math behind it and get confused when taxes or additional fees are factored in. 

Regardless of what loyalty program you’re part of, you need to figure out the value of one point or mile. Once you know that value, you can quickly compare it to the base value that’s been established above. Fortunately, the formula to calculate the value per point is the same for each loyalty program.

Cash value of redemption X 100 / number of points required = Cost per point

Keep in mind that you would need to subtract any taxes or fees that you need to pay out of pocket from the cash value before you make your calculations. For example, let’s say you want to book a round-trip ticket from Ottawa to Vancouver. The cash price is $600. However, if you book via Aeroplan, it’ll cost you 24,000 Aeroplan points + $75 in taxes. That means the cash value of the redemption is $525, so your formula would be as follows:

$525 X 100 / 24,000 = 2.19 cents per point.

Since the value of this redemption is worth more than the established base value of 2 cents per point for Aeroplan, it’s worth redeeming your points.

Now let’s look at another example. I recently searched for a stay at the Sheraton Wall Centre in Vancouver. The cash rate was $296 per night after taxes and fees. At the time of my initial search, they had peak pricing, so it would cost me 40,000 Marriott Bonvoy points for a free night. 

$296 X 100 / 40,000 = .74 cents per point

Since I have a base value of Marriott Bonvoy points at .9 cents each, this redemption represents an 18% devaluation. In my opinion, it wasn’t worth using my points, so I decided to pay cash. 

Oddly enough, a few days before my stay, I searched the hotel again and I noticed that they had changed the redemption price to standard rates. Getting a free night would now only cost me 35,000 points. I quickly did the math to see if this was worth it.

$296 X 100 / 35,000 = .85 cents per point

While this value still fell below my target value of .9 cents per point, it was only a slight devaluation of 6%. I considered this a good enough deal and rebooked on points.

As you can see, once you know the formula to calculate the value of one point and have an established base value, it’s easy to figure out if a redemption is worth it or not.

Travel Hacking for Lazy People

Calculating the Value of Your Reward Points

About Barry Choi

Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances. His blog Money We Have is one of Canada’s most trusted sources when it comes to money and travel. You can find him on Twitter:@barrychoi

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