Let's get this out of the way first: there are many categories of points and miles, and this won't cover every single one. I will cover the ones I'm familiar with, though, and try to provide guidelines and context that can be applied to the rest. Buckle in, because this is deep in the weeds.
There are flexible points, and there are branded points and miles. Flexible points include American Express Membership Rewards (MR) points, Chase Ultimate Rewards (UR) points, Capital One Venture Miles (VM), and Citi ThankYou (TY) points, which can all be used at many different travel brands. There are also some newcomers like Bilt Rewards points. Branded points are just about everything else, from Delta Skymiles, to Hilton Honors points. Marriott Bonvoy points is sort of both: they are the points of the Bonvoy loyalty program for Marriott, but they can also be transferred to other brands.
These are all critically different from cash back, in that the currency is points, not dollars. Each point can have a value in dollars, but cash back is a simpler operation of "spend 1 dollar, earn 1 cent" type of math. For the most part, points and miles values aren't fixed. So "spend 1 dollar, earn 1 point" could be worse than cash back, or MUCH better.
There are two main values associated with points: an actual value for a specific redemption, and a benchmark value that you might use when figuring out how much a signup bonus is worth, or just to check if your redemption is worth it.
Calculating a specific value is simple enough
[Value of point] = ([cash value for equivalent] - [cash fees for redemption]) / ([points needed for redemption])For example, if a plane ticket retails for $320, but you could redeem 25,000 airline miles for it, plus $11 in taxes and fees, the value is ($320-$11)/(25,000) = 309/25,000 = 0.0124 $/point, or 1.24 cents per point. This is the specific and accurate way to determine points value. But what if you don't know what you'll use points for yet, or have multiple different redemptions planned? Or you just want to know how much value you have in your rewards account? You'll want a benchmark for points value!
Benchmark values primarily come from experience, including others' experiences, with redeeming points and miles. Flexible points (again, Amex MR, Chase UR, Citi ThankYou, etc), broadly, I like to benchmark at 2 cents each. This is primarily due to the fact that they can be transferred to partners to pick and choose the best possible redemption. Each flexible currency has at least 10 transfer partners, to whom you can transfer your flexible points in exchange for branded points. For example, Amex MR points can be transferred to KLM/AirFrance Flying Blue points, even if you've never flown with KLM or AirFrance before.
There are tons of redemption options for more than 2 cents, but you start to get into questionable cash values at very high end redemptions. Would you ever really pay $20,000 for a first class Etihad ticket? I find that 2 cents is pretty memorable, and it's a good bar to aim for when considering points vs cash. Have a Singapore Airlines flight with the Singapore Krisflyer program you're looking at for 3.1 cents per point? Sounds great, transfer those points and book the ticket! Looking at a domestic Delta flight like the example above (1.2 cents per point)? Maybe just pay cash for it, and keep saving your MR points for something more valuable.
The table below is a summary of the points currencies I have experience with, and how much I expect them to be worth based on that experience, plus the experience of others like TPG. Keep in mind, this is a list of average/typical/benchmark values, and there are particular redemptions that could be worth far more! It's just not fair to assign a value to the whole currency based on a couple fantastic redemptions.
Program | Benchmark Value (cents per point) |
AAdvantage | 1.5 |
British Airways Avios | 1.5 |
Delta Skymiles | 1.2 |
Emirates Skywards miles | 1.4 |
Hilton Honors | 0.5 |
IHG One Rewards | 0.5 |
KLM/AirFrance Flying Blue | 1.2 |
Marriott Bonvoy | 0.75 |
Singapore Krisflyer miles | 1.3 |
Southwest Rapid Rewards | 1.4 |
United Miles | 1.2 |
Virgin Atlantic Flying Club miles | 1.5 |
World of Hyatt points | 2.0 |
The research phase: how I decide whether to pay cash or points.
The way I typically use these benchmark valuations is in deciding whether to pay cash or use points. I used to think that points just meant free travel, but that's really no longer what it's all about. Now, I view points as a way to elevate travel experiences and stretch a certain travel budget much further. If you have a travel budget of $0, that makes it very hard to do anything with points. On the flip side, if your travel budget doesn't really exist and you can spend six figures annually on travel without harming your financial future, then good for you! It's probably a waste of time for you to read this blog, though, because you could just spend more to do the things you want to do. Having a reasonable budget for travel also means you can be flexible and use points for the a couple really valuable redemptions per year, while paying cash for other trips or parts of trips that don't present as good of value.
At this point in life, I would never really pay cash for a transoceanic business class plane ticket at $3,000-$8,000 one way, so I would just only consider using points for those. But for domestic flights or any hotels stays, I will check the points redemption options and the cash options. In many cases, it makes more sense to pay cash and continue earning points because the value is just not high enough. There are some exceptions, however, like if we are looking at traveling to a city when there is an event going on there. Events usually inflate hotel cash prices without really affecting points prices. The same Marriott hotel might be $150 on August 1st, but be $300 on August 8th because there is a music festival in town, even though it costs the same 25,000 points both nights. On August 1st, that's a lackluster 0.6 cents per point, but a solid 1.2 cents per point on August 8th. Per the table above, I value Marriott Bonvoy points at 0.75 cents per point. So, if it were me, I would pay cash if I were staying on the 1st, but I would use points for staying on the 8th. If you can't afford to pay the $150 cash for August 1st, but you don't have any flexibility on the date, my advice would be to reconsider whether the trip is really necessary, or just pay the points but acknowledge that you could be using those points for something more valuable.
Reframing how you think:
Another way of thinking of this is framing it as "my 100,000 [insert points type] points should be worth at least $XXXX." Thinking this way means you can have a general valuation for your points balances to get excited when you see them growing, and it gives you something to cross-check to make sure you're getting at least the value you should be. "My 180,000 Amex MR points should be worth at least $3,600." When I'm researching future travel for Kristyn and I, and considering spending some of this large stockpile of points, there's no way I'm going to waste them on the travel portal at 1 cent each for $1,800! I'm going to transfer them somewhere they'll be at least worth 2 cents, and ideally even more.
But at the end of the day, what makes a good value is being able to use your hard-earned rewards to unlock unique, exciting, and possibly otherwise unattainable experiences on this earth. As a math nerd, I love feeling like I'm really getting a great value for these points, but that doesn't mean you need to sweat about only getting 1.8 cents when redeeming your Amex MR points, or booking a trip through the Chase travel portal at 1.5 cents per point. Get out there and do something insanely fun, and try to find a way to use points to pay for at least a part of it.
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