How to Calculate Your Credit Card Points

How much are points and rewards really worth?

Rewards credit cards are a great way to get extra perks from using a credit card. You want to make sure your points are worth having the credit card, especially if the credit card carries an annual fee. Calculating your points also helps you compare credit cards so you can tell whether you’re getting the best deal and to see the value of the rewards you’ve accumulated.

No matter how your credit card pays out rewards, whether it’s a flat-rate rewards structure or a tiered system, the value of your rewards is based on the specific credit card and how you earn and redeem rewards. A point on one credit card might not be worth the same as a point on another credit card.

How Many Points Will You Earn on a Purchase?

Calculating the number of credit card points you’ll earn on a purchase is fairly simple, as long as you know your rewards program and the type of business you’re shopping in. You can divide the dollar amount of your purchase by the number points you’ll earn for that transaction. For example, if your card pays two points for every dollar you spend on travel purchases, you’ll earn 600 points for a \$300 airplane ticket.

Rewards are categorized based on the type of business you’re purchasing from, not necessarily the type of purchases you make. Food purchased from a cafe inside a grocery store, for example, may be considered groceries rather than dining, because you’re buying from a grocery store. That is important to keep in mind when you’re making credit card purchases with a card that rewards additional points for different types of purchases (dining out and entertainment, for example).

Calculating the Value of Credit Card Points

The simplest way to calculate the value of your credit card points is to divide the dollar value of the reward by the number of points required to redeem it. For example, if it takes 50,000 points to get a \$650 airplane ticket, your points are worth about 1.3 cents each.

Yes, There’s Math

The math is simple: Multiply the dollar value of the reward by 100 and divide that by the number of points. Our example looks like this: (650 x 100)/50,000 = 1.3.

And if you earned two points for every dollar you spent, then you had to spend \$25,000 to earn enough points for the airplane ticket.

Calculating the true value of your rewards requires a few more steps. You’ll have to take into account the cost of earning those rewards and any extra perks you receive from the credit card.

Calculate the fees and interest you’ve paid. Any extra costs you pay lower the value of your rewards; that includes interest, late fees, foreign transaction fees, and any annual fee charged on your credit card. Your credit card statement will include the total amount of interest you’ve paid so far this year.﻿﻿ However, you may have to review each monthly billing statement individually to calculate the fees you’ve paid over the year.

Remember, you can always pay your account balance in full to avoid paying interest on your credit card. This step instantly boosts the value of your rewards.

Add up the total rewards you’ve earned. Make sure you’re comparing rewards and fees over the same time period. If you’re using the past 12 months of credit card fees and interest, then you should consider only the rewards you’ve earned over the past 12 months. Check your credit card statement to see how many rewards you’ve earned.

If you’re calculating your rewards for a period of less than one year, divide your annual fee by the number of months you’re using to calculate your rewards.

Calculate the redemption rate for your rewards. The next step is to figure out what rewards are worth. You’ll need to calculate the rewards value by dividing the amount of rewards by the redemption value. You can usually get this information from your credit card issuer’s rewards portal. If a \$500 airline ticket is 50,000 points, then your rewards are worth a penny each.

Redemption rates often vary for different kinds of rewards. Airline miles might have one redemption value, while merchandise purchased via your credit card’s online portal may have another. Before purchasing with points, do the math. You might be better off saving your points for a purchase with a better redemption value later.

Multiply the total number of rewards you have right now by the value of your credit card rewards. If you have 25,000 points that are worth a penny each, then you have \$250 in rewards saved up.

You can optionally include the value of any additional credit card perks, as long as you can give a monetary value to those perks. Just add it to the total amount of rewards you’ve accumulated. If you receive a \$200 travel statement credit each year, you can add that to the \$250 you have in rewards for a total rewards value of \$450.

Make the Most of Your Rewards

To get the maximum value from your credit card rewards, you should earn more rewards than you pay in fees—including a late fee or transaction-based fee like a balance transfer or cash-advance fee. That’s much easier to do once you’ve totaled the value of your rewards and perks. Simply compare the value of your rewards to the total interest and fees you pay on your card.

How do your rewards stack up? If you’re not earning enough rewards to cover the cost of your credit card, it may be a sign to switch to a different rewards credit card.

Want a new rewards card? Start by reviewing our favorite offers. See our list of the best rewards credit cards.

Is it worth using credit cards for reward points?

When considering a credit card that offers reward points, the first thing to ask yourself is whether you can pay off the entire balance on that card every month. Credit card purchases can help you earn rewards such as points toward trips and cash back. However, if you cannot pay off the balance each month or if you miss payments altogether, the value of your rewards may be outweighed by fees and interest charges.

How do I redeem credit card points?

The way to redeem points depends on what kind of rewards your credit card racks up. For example, if you earn points for hotel stays, you will need to go to that card's reward portal to redeem free visits, statement credits, or other reward-point features. On the other hand, if your card partners with a particular airline, and you want to see about booking a flight or upgrading a ticket, you'll need to do it through that airline's portal. If your credit card spending earns you cash back, you'll need to log into your card's bank and select how you want to receive those rewards.

Article Sources

1. JP Morgan & Chase. "Chase Sapphire Reserve® with Ultimate Rewards® Program Agreement." Pages 1-2. Accessed Aug. 30, 2020.

2. Consumer Financial Protection Bureau. "Truth in Lending Act § 1026.7 Periodic Statement." Accessed Aug. 30, 2020.