How to use points currency to calculate the value of rewards points

Information verified correct on October 28th, 2016

Not sure how many dollars you have to spend to get that coveted reward? Here’s a look at how point currency really works

It’s easy to get excited about a credit card that pays you back for spending, until you start trying to figure out the details. A rewards credit card can get you some great stuff just for using it, but first you need to figure out how. With points ratios and tiers to further complicate matters, it’s no wonder some users end up not using them at all.

Before you start comparing rewards credit cards to find the most suitable deal, you will need to know the basics of reward point currency. This is where you figure out how many dollars you need to spend to get points, and how many points you have to earn to get your reward. Once you have that down, you’re just a simple math equation away from determining how much the rewards will cost you.

Rewards credit cards comparison

Rates last updated October 28th, 2016.

Citi Qantas Signature Credit Card

Bonus points offer has been changed from 70,000 to 50,000 points. Offer ends 30 April 2017.

September 30th, 2016

American Express Qantas Discovery Card

The spend criteria for the bonus points has been changed from $300 to $750.

October 4th, 2016

Westpac Altitude Black - Exclusive Offer

New exclusive offer of 100,000 bonus Altitude or Qantas Points which is valid until 5 January 2017

October 18th, 2016

View latest updates

Jonathan Choi Jonathan
Rewards Points per $ spent (AMEX) Rewards Points per $ spent (VISA/MC) Bonus Points Annual fee
American Express Explorer Credit Card
Receive 100,000 Membership Rewards Bonus Points on eligible spend within the first 2 months of Card Membership. Also enjoy a $400 travel voucher and two complimentary airline passes per year.
2 100,000 bonus points $395 p.a. Go to site More info
HSBC Platinum Credit Card
Enjoy an annual fee refund every year if you meet the spend requirement with a balance transfer offer, high credit limits and prestige services including a personal concierge service and VISA Platinum rewards program.
0 1 $149 p.a. Go to site More info
American Express Essential Credit Card
Receive a $50 credit on eligible spend and get Smartphone screen insurance combined with a no annual fee for life card. Also enjoy a 0% p.a. balance transfer rate for 12 months.
1 $0 p.a. Go to site More info
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
Earn bonus Velocity Points in the first 3 months plus a low balance transfer offer of 0% p.a. for 18 months
0 0.66 $64 p.a. annual fee for the first year ($129 p.a. thereafter) Go to site More info
HSBC Platinum Qantas Credit Card
Receive 60,000 bonus Qantas Points on eligible spend within 3 months. Enjoy access to premium benefits and complimentary insurance.
0 1 60,000 bonus points $199 p.a. Go to site More info
American Express Platinum Edge Credit Card
Receive 10,000 Membership Rewards bonus points when you meet the minimum spend requirement and a complimentary Virgin Australia flight each year. Enjoy a low balance transfer offer of 0% p.a. for 12 months.

1 0 10,000 bonus points $195 p.a. Go to site More info
Virgin Australia Velocity Flyer Card - 0% Interest Offer
Earn Velocity Points plus enjoy an introductory interest-free offer of 0% p.a. on purchases for 12 months, and 0% p.a. for 6 months on balance transfers.
0 0.66 $129 p.a. Go to site More info
American Express Velocity Platinum Card
Enjoy up to 50,000 bonus Velocity Points when you meet the minimum required spend and earn up to 3 rewards points per dollar spent. Also receive a complimentary return flight every year.
1 0 50,000 bonus points $349 p.a. Go to site More info
ANZ Rewards Travel Adventures card
Pay no overseas transaction fee on purchases and receive complimentary domestic return flight and lounge passes each year you hold the card when you spend $500 on eligible purchases within the first three months.
2 1 $225 p.a. Go to site More info
Westpac Altitude Black - Exclusive Offer
Earn 100,000 bonus points when you spend $5,000 on eligible purchases, choose between two reward programs offering Altitude or Qantas Rewards and receive premium cardholder benefits.
3 1.25 100,000 bonus points $395 p.a. Go to site More info

How to calculate the value of rewards points

Since each rewards program is different, you’re going to have to do the calculations for each one you are considering. To make it as comparable as possible, at least try and narrow your search down to the type of rewards program you want first. For example, if you love shopping rewards, choose a few of this type to make it a fair comparison. Then follow these steps to see how much value you are getting for your points:

  • Step 1 – Calculate. The easiest way to determine point currency is to calculate the points you will need to buy $1 worth of rewards. To do this you will need to divide the number of points needed to redeem a reward by the retail price of that reward.
  • Step 2 – Compare. Let’s say you used a $50 gift card as your reward to compare and it costs 7,500 points, you would need 150 points for every dollar the reward is worth – 7,500 (point cost) / 50 (retail value of reward) = 150.
  • Step 3 – Result. After doing the same equation on comparable rewards with different credit cards you can pick out those with the greatest value by looking for the ones with the lowest result. The lower the number of points, the better value to the consumer.
  • Step 4 – Earn rate. Now you will want to look at the earn rate. Using the same example, if the card has a one to one ratio on point to dollar, then you need to spend $150 in order to get $1 of rewards value. With a better earn rate ratio, such as two to one, you would only be spending $75 in order to earn $1 back.

In order to make sure that your calculations are as accurate as possible for comparisons, do everything you can to find rewards that are the same with the various cards. Gift cards and vouchers are the easiest, as their retail value is the same as their face value.

You can compare reward programs here at Credit Card Finder. There are usually two categories of credit cards; standard vs gold and platinum cards.

How to calculate the value of frequent flyer rewards

Using miles as the point of reference is the easiest way to calculate the value of a frequent flyer rewards card or you can also use the actual ticket price to do the comparison:

  • Step 1 – Price Calculation. Divide the value of the reward in dollars by the points needed to earn it. The value of the reward would be the actual dollar cost of the flight. This will give you the ticket value in relation to your frequent flyer points.
  • Step 2 – Mile calculation. If you prefer to compare rewards points for miles, you would simply divide the number of miles between two of your favourite destinations by the number of rewards needed for that flight. This will give you an idea of the point value for mile, helping you to make your comparisons amongst different credit cards.

See the below table to how you can use your points currency to calculate the value of your rewards.

Figuring cost per mileSydney to Melbourne
Cost for flight$289
Rewards points needed for flight8,000
Rewards points are worth0.04 cents each

What other factors should I consider?

When trying to figure out the value of a credit card rewards program, there is more to think about than the points and how much they are worth. Other factors should weigh in as well, and some will add to the value while others can significantly decrease it:

  • Annual fee

Fees and interest will put a big dent in the value of your rewards card if you don’t choose wisely. Interest rates and fees can be high with these types of credit cards, and is something you should definitely be concerned with when making comparisons.

For example, you have earned 14,000 frequent flyer points and plan to use them to fly from Sydney to Melbourne. For the purpose of this explanation, let’s say that normally that flight costs $230. Now you are thinking “what a great deal!” until you factor in an annual fee of $100. That just about halves the value, which will be reduced even further once you factor in the interest.

The higher the annual fee, the lower the value of the rewards program. This is why it is recommended that you only apply for one of these cards if you spend a lot of money through credit annually.

Reward credit cards with no annual fee

  • Bonus features

Certain rewards credit cards come with added features that just may make those fees and interest worth it. Travel insurance, concierge service, and rental car discounts are just a few of the perks you may find with a rewards credit card. These services and features add value to the rewards card.

For example, if you were to travel to Thailand yearly, traveller’s insurance would be approximately $80. If your card allows you to avoid that fee, then you can now offset any annual fee with the one you normally pay for traveller’s insurance.

You have to weigh all of these costs and discounts if you want a true estimate of what each rewards program will be worth to you.

How can I make the most of my points?

Treat your points like you would cash when it comes time to redeem them. If you are rewarded with vouchers or gift cards, shop for items that are on sale. With frequent flyer miles, go for the flights that are more expensive and generally never marked down.

For example, a domestic flight from Melbourne to Sydney may be as low as $85, while one going to London could cost $1630. If the domestic flight costs 7000 points with the rewards program and the international 62,500 then the value of flying to London using your rewards is higher since each point is roughly 2.6 cents while with the other they would be 1.2 cents.

Again though, you have to factor in other costs, such as the higher taxes that are added on to an international flight. These usually cannot be paid for with your points, and will reduce their value.

How to compare reward programs

When it comes to comparing the programs that accompany rewards credit cards, there is certainly a lot to think about:

  • Points currency. How much of a savings benefit you are getting with a rewards card lies in the real value of the rewards offered compared with the value of the points and any fees. Taking the time to make the calculations will ensure that every dollar you spend is being stretched to its limit.
  • Fees. Remember, the lower the fees and interest the more value you get from the rewards. Few rewards cards have no fees, but you can avoid those that are exorbitant.
  • Perks. You also have the little extras that can go a long way in increasing a rewards program’s value. Look for things like complimentary insurance and hotel discounts if you want to maximise your rewards potential.
  • Features. Some rewards cards also come with features that may be valuable to you outside of the rewards program. Balance transfer offers, for example, could save you thousands of dollars if the interest rate is significantly lower than what you are paying now.

See the full range of rewards cards

The few minutes of work involved in calculating points currency will be well worth it once you start earning your points. Just like with a bank account for real currency, you want a rewards program that costs the bare minimum to gain from.

Frequently asked questions

Are there any rewards cards that don’t have an annual fee?

Fees are used to help offset the cost for the bank making finding a card without any difficult.

Is there a limit on the number of points I can have?

Some cards do have a point cap, which could decrease its value for you depending on how much you spend a year using a credit card.

Can anyone apply for a rewards credit card?

There is going to be eligibility requirements for any credit card, including those that are a part of a rewards program. Your age and residency for example could determine if you are able to be approved for a rewards credit card.

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2 Responses to How to use points currency to calculate the value of rewards points

  1. Default Gravatar
    Mitesh | November 13, 2012

    I have 500,000 altitude points – what is this in frequent flyer points and how do I check where I can fly to with those points

    • Staff
      Jacob | November 14, 2012

      Hi Mitesh.
      49,920 Altitude points* = 312 Air New Zealand Airpoints
      50,000 Altitude points* = 25,000 Asia Miles
      50,000 Altitude points* = 25,000 Singapore Airlines KrisFlyer Miles
      50,000 Altitude points* = 25,000 Malaysia Airlines Enrich points
      50,000 Altitude points* = 25,000 Qantas Frequent Flyer Points
      50,000 Altitude points* = 25,000 Velocity Frequent Flyer Points

      Thanks for your question.

Credit Cards Comparison

Rates last updated October 28th, 2016
Purchase rate (p.a.) Balance transfer rate (p.a.) Annual fee
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
Enjoy a 0% p.a. balance transfer offer for 18 months and also earn 2 bonus Velocity Points in the first 3 months on everyday spend.
20.74% p.a. 0% p.a. for 18 months $64 p.a. annual fee for the first year ($129 p.a. thereafter) Go to site More info
ME Bank frank Credit Card
Enjoy a low and consistent interest rate on purchases and cash advances, combined with no annual fee.
11.99% p.a. $0 p.a. Go to site More info
HSBC Platinum Credit Card
Receive a full annual fee refund and save $149 if you meet the $6,000 spend requirement. Enjoy a balance transfer offer and platinum card benefits such as complimentary insurances and concierge services.
19.99% p.a. 0% p.a. for 15 months $149 p.a. Go to site More info
NAB Low Rate Credit Card
The NAB Low Rate Card offers 0% p.a. on purchases and balance transfers for 15 months. This card also comes with a low annual fee.
0% p.a. for 15 months (reverts to 13.99% p.a.) 0% p.a. for 15 months with a one off 3% balance transfer fee $59 p.a. Go to site More info

* The credit card offers compared on this page are chosen from a range of credit cards has access to track details from and is not representative of all the products available in the market. Products are displayed in no particular order or ranking. The use of terms 'Best' and 'Top' are not product ratings and are subject to our disclaimer. You should consider seeking independent financial advice and consider your own personal financial circumstances when comparing cards.

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