16d ago in General discussion
The Value of Points
One of the things about travel credit cards most people find intimidating is the value of points calculations. It is much simpler to understand 1% cash back but points can be so much more powerful than cash back. Let me explain: with cash back you get a fixed value but with points the value of your points depends on how you redeem them. The points valuation calculation is as follows: (cash price -unavoidable taxes and fees)/points needed to purchase= value per point. Let’s use a specific example to see how awesome some of these points redemptions can be. Take this flight from Washington DC to Madrid, Spain on Iberia for example. The cash price of a business class lie-flat seat of $4,109 is completely out of reach for 95% of people. However while booking with points it is 68,000 points roundtrip plus $272.61 in taxes and fees. The points calculation for this redemption would be as follows: ($4,109-272.61)/68,000 = 5.64 cents per point. This is amazing value compared to a 1% cash back or 1 cent per point. This deal gets even more ridiculously good when you factor in the current Chase transfer bonus to Iberia of 30%. This means that you only need 53,000 Chase points to transfer to Iberia to book the flight. If we change the denominator of the equation to 53,000 the value goes even higher to 7.42 cents per point. All this just goes to demonstrate the incredible power of points. With the current welcome offer of 60,000 points from Chase you would still have 7,000 points left over and a $300 travel credit. INSANE!!! If you have any questions or want to know more let me know in the comments below ⬇️
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The Value of Points
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