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TPG reader Mahon112 tweeted me to ask:
“What do you consider a valuable point redemption for airline and hotel (cents per point)?”
So just how much are airline miles and hotel points worth? There’s no easy answer to that question and there’s no set value, which is at the heart of what I talk about every day on ThePointsGuy.com.
Everyone gets a different value out of their redemptions, and people argue all the time about whether they’re getting the full value of the face value of a ticket or hotel room from the miles or points they redeem for it. A lot of people say that they’d never pay for a super expensive business or first class ticket, so you’re not actually getting that value from that kind of award. But at the end of the day, the fair market value of the ticket is probably the easiest indicator to determine the value of your award. Because whether you want to pay for it or ever would, the airline still sells those tickets for those prices.
However, depending on whether you are basing your redemption off the market value of a ticket or hotel night, or based on the price you would pay for it, your value will vary.
Now for Mahon’s question. When it comes to credit card spending, you get 2.2% back on the Barclaycard Arrival when you redeem the miles you earn with it for travel purchases. Arrival miles are fixed-value points since you always get the same value from them for travel redemptions, and I would use them as a benchmark for what kind of value you get from the points or miles you generate from spending on your other credit cards.
That’s actually why I suggest the Barclaycard Arrival as one of the top travel credit cards out there, because you earn 2X miles per $1 on all purchases and you can redeem them for travel – pretty much any travel that you can’t normally redeem airline miles or hotel points for, such as rail tickets, car rentals, even the fees and taxes on award tickets – at a fixed rate of 1 cent per mile plus a 5% mileage refund, and know you’re getting a very decent fixed value or 2.2% back on your spending.
To contrast, let’s say you’re using a Delta Amex and you’re getting 1 mile per $1 on all purchases except Delta ones (2X per $1), and you redeem those miles at a rate of 1 cent per mile with Delta’s Pay With Miles feature, you have to think, “Why would I do that when I could be getting more than double in value from those Arrival miles?”
In fact, you could purchase that Delta ticket using your Arrival card (which has roughly the same annual fee as the Amex Delta SkyMiles Gold card), redeem your Arrival miles for the purchase and still earn Delta award and elite-qualifying miles on your flight!
The Delta card does give you some perks that the Arrival would not, like free checked bags, priority boarding, and things like that. But you should definitely be getting more than 1 cent per mile with your airline miles, because otherwise you could just be using a fixed-value card like the Arrival or another like the Capital One Venture Rewards card – or even a card like the Ink Bold or Sapphire Preferred, which let you redeem your Ultimate Rewards points for travel at 1.25 cents apiece if you don’t want to transfer them to the program’s travel partners. Delta miles are at the low end of the spectrum, but other miles, like American or United (at least until next month’s devaluation) can be worth a lot more than that, especially on premium awards.
This whole equation is thrown off by big sign-up bonuses as well, because generally cash back and fixed-value points cards don’t have big sign-up bonuses of 50,000 or 60,000 points, but are closer to the 10,000-20,000 mark. However, the Arrival is the exception here as well since it offers a sign-up bonus of 40,000 miles when you spend $3,000 in first 90 days – the equivalent of $440 worth of travel.
Additionally, elite status also provides some equation-skewing factors like bonus flown miles and other perks – so as you can see, there are a lot of variables to take into consideration!
However, if you’re looking for a rule of thumb, I’d say that in general, you should be getting more than 1 cent per mile in value from your airline miles.
With hotel points – the value range can be huge. For instance, with Hilton HHonors points, where you could be using 40,000 points to pay for a $239 hotel room like in the example below, you’re only getting a value of about 0.6 cents per point.
While I’d put Starwood points at a much higher value, like anywhere from 2-4 cents like in this similar example below.
Here are my “rough” valuations of various miles and points below – and please feel free to comment with your own valuations. Because when you get down to it, the value really depends on how you like to travel, where you want to go, and what matters most – convenience or price. Sometimes the best redemptions aren’t for the most expensive tickets or rooms, but being able to redeem for the travel you want or need. However, do be smart about it and make sure that you are getting some value from your points or miles, because that’s what they’re for!
My Miles and Points Valuations – I’ll be reevaluating soon once various devaluations take place including Delta, United, Hyatt and others.
Aeroplan Miles: 1.7-2 cents each
Alaska Airlines Miles: 1.9 cents each
American Airlines Miles: 1.8 cents each
Amex Membership Rewards Points: 1.9 cents per point
Barclaycard Arrival Miles: 2.2 cents per dollar return in value
British Airways Avios: 1.5 cents each
Capital One Miles: 2 cents per dollar return in value with Venture card
Chase Ultimate Rewards: 2 cents per point
Citi ThankYou Points: 1.25 cents per point
Club Carlson: 0.7 cents per point
Delta SkyMiles: 1.5 cents each
Marriott: 0.5-0.7 cents each
Hilton HHonors Points: 0.6 cents each
Hyatt Gold Passport Points: 2 cents per point
Southwest Rapid Rewards: 1.8 cents per mile
Starwood Preferred Guest Points: 2 cents each
United Miles: 2 cents per mile, 1.5 cents post-devaluation
US Airways miles: 1.8 cents per mile
US Bank Flexperks Points: 1.33-2 cents each
Barclaycard Arrival™ World MasterCard®
|Intro APR||Regular APR||Annual Fee||Balance Transfer||Credit Rating|
|N/A||16.24%, 20.24% or 24.24%* Variable||$0||See Terms||Excellent/Good|