Video SRQ: Is It Worth it to Pay a 7% Credit Card Fee to Earn Capital One Rewards Points?

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TPG reader Katie is doing some home improvements and wants to use her Capital One Venture Rewards Credit Card to pay for them, but that might not be the best idea:

“We have to have $2,900 worth of work done on the house. Our handyman accepts credit cards, but he’ll have to charge a 7% sales tax. Would the points earned on a Capital One Venture Rewards card be worth the extra $200 it would cost us to put this purchase on the card? I’m not sure how to figure that out.”

Of course I try to put any and every expense possible on my credit cards in order to earn points, so I’m glad to hear you’re thinking that way as well. In this type of situation, however, it is absolutely not worth paying an extra 7% just to use your Capital One Venture Rewards card.

Capital One miles are valued at about 1 cent per point when you go to redeem them, so if you were to pay this charge, you’d basically be paying 7 cents to get one cent back. Personally, I wouldn’t pay 7 cents for any point – it’s sort of like spending 7 cents to buy a penny.

Some vendors only charge 2 or 3% for using a credit card and when paying your taxes it will cost you 1.89-3% depending , which I have done before. I justified paying the extra fee because not only can the value of a point be more than 2 cents, but the benefits you get from the points can be worth much more than that. For example, with the Delta Reserve card you’ll earn 15,000 MQM’s for spending $30,000 in a calendar year, which will help you maintain your elite status. Also companion passes like the British Airways Travel Together ticket, which you earn after spending $30,000 in a calendar year on your British Airways Visa Signature Card, can be worth thousands of dollars depending on how you use and value them.

In general, I try not to pay more than 2 cents per point, especially when I can get them through lucrative credit card sign up offers. I recently did an app-o-rama in March and signed up for 5 new credit cards that earned me 315,000 points once I hit the spend thresholds on each card. Being able to go about my spending as normal and earn hundreds of thousands of points is a much better option to me than paying extra for them in a situation like this.

As always, it really depends on your personal situation – do you pay full price for first class and will using miles actually save you that much money? There’s no one right way to value your miles, but you should always evaluate how much you’re going to pay to get those points or miles and what value you’ll get for them in the end. If you’re not going to redeem them for more than what you paid, it’s not worth it and you should pay with cash even though it pains me to tell you that.

Since I’m frequently asked how much certain points and miles are worth, here are my personal valuations of different currencies:

Aeroplan Miles: 1.7-2 cents each
American Airlines Miles: 1.8 cents each
Amex Membership Rewards Points: 2 cents per point
Barclaycard Arrival Miles: 2.2 cents each
British Airways Avios: 1.5 cents each
Capital One Miles: 1 cent each
Chase Ultimate Rewards: 2 cents per point
Citi ThankYou Points: 1.33 cents per point
Delta SkyMiles: 1.5 cents each
Marriott: 0.5-0.7 cents each
Hilton HHonors Points: 0.5 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
US Airways miles: 1.8 cents per mile
US Bank Flexperks Points: 1.33-2 cents each

The Platinum Card® from American Express

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More Things to Know
  • Earn 60,000 Membership Rewards® points after you use your new Card to make $5,000 in purchases in your first 3 months.
  • Enjoy Uber VIP status and free rides in the U.S. up to $15 each month, plus a bonus $20 in December. That can be up to $200 in annual Uber savings.
  • 5X Membership Rewards® points on flights booked directly with airlines or with American Express Travel.
  • 5X Membership Rewards points on prepaid hotels booked on amextravel.com.
  • Enjoy access to the Global Lounge Collection, the only credit card airport lounge access program that includes proprietary lounge locations around the world.
  • Receive complimentary benefits with an average total value of $550 with Fine Hotels & Resorts. Learn More.
  • $200 Airline Fee Credit, up to $200 per calendar year in baggage fees and more at one qualifying airline.
  • Get up to $100 in statement credits annually for purchases at Saks Fifth Avenue on your Platinum Card®. Enrollment required.
  • $550 annual fee.
  • Terms Apply.
  • See Rates & Fees
Intro APR on Purchases
N/A
Regular APR
N/A
Annual Fee
$550
Balance Transfer Fee
See Terms
Recommended Credit
Excellent/Good
Terms and restrictions apply. See rates & fees.

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.