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

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

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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

Updated April 10th, 2020
Name Product Bonus Points Rewards program Rewards Points per $ spent Purchase rate (p.a.) Annual fee
Qantas American Express Ultimate Card
100,000 bonus points
Qantas Frequent Flyer
Amex
1.25
20.74% p.a.
$450 p.a.
Get 100,000 bonus Qantas Points, a $450 Qantas Travel Credit and 2 yearly complimentary Qantas Club lounge invitations. Ends 14 Apr 2020.
Qantas Premier Platinum
100,000 bonus points
Qantas Frequent Flyer
Visa/MC
1
19.99% p.a.
$299 p.a.
Get up to 100,000 bonus Qantas Points, a 0% p.a. balance transfer rate for the first 18 months and complimentary lounge passes.
Coles No Annual Fee Mastercard
flybuys
Visa/MC
0.5
19.99% p.a.
$0 p.a.
Earn flybuys points for your spending and save with an ongoing $0 annual fee and 0% p.a. on balance transfers for 18 months.
Qantas Premier Everyday
25,000 bonus points
Qantas Frequent Flyer
Visa/MC
0.75
19.99% p.a.
$29 p.a. annual fee for the first year ($49 p.a. thereafter)
Get up to 25,000 bonus Qantas points, a discounted first year annual fee and complimentary insurance covers.
Coles Rewards Mastercard
flybuys
Visa/MC
2
19.99% p.a.
$99 p.a.
Earn 2 flybuys points / $1 spent and save with a 0% balance transfer offer.
Qantas American Express Discovery Card
Qantas Frequent Flyer
Amex
0.75
20.74% p.a.
$0 p.a.
Earn uncapped Qantas Points on your purchases and pay $0 annual fee for life.
American Express Velocity Escape Card
Velocity Frequent Flyer
Amex
0.75
20.74% p.a.
$0 p.a.
Earn uncapped Velocity Points on purchases and save with a $0 annual fee for life.
American Express Qantas Business Rewards Card
140,000 bonus points
Qantas Business Rewards
Amex
1.25
N/A
$450 p.a.
ABN holders w/ $75,000 revenue. Get up to 140,000 bonus points, 3x points on eligible Qantas flights & 2 lounge passes per year.
Coles Low Rate Mastercard
flybuys
Visa/MC
0.5
12.99% p.a.
$58 p.a.
Save with a low purchase interest rate, earn flybuys points as you spend and get up to 55 days interest-free.
American Express Velocity Platinum Card
50,000 bonus points
Velocity Frequent Flyer
Amex
1.25
20.74% p.a.
$375 p.a.
Get 50,000 bonus Velocity Points when you spend $3,000 for the first 3 months. Plus, 100 Status Credits and luxury travel perks.
American Express Platinum Business Card
150,000 bonus points
Membership Rewards
Amex
2.25
N/A
$1,750 p.a.
ABN holders w/ $75,000 revenue. Get 150,000 bonus points and up to 2.25 points/ $1 spent on eligible business purchases. Ends 22 Apr 2020.
David Jones American Express Platinum Card
30,000 bonus points
Qantas Frequent Flyer
Membership Rewards
Amex
1
20.74% p.a.
$295 p.a.
DJ's shoppers and Qantas travellers earn 30,000 bonus Membership Rewards Points or 15,000 Qantas Points on eligible spend.
American Express Explorer Credit Card
50,000 bonus points
Membership Rewards
Amex
2
20.74% p.a.
$395 p.a.
Get 50,000 bonus points when you spend $3,000 in the first 3 months, a yearly $400 Travel Credit and 2 entries per year to the Amex Lounge.
American Express Business Explorer Credit Card - Online Offer
100,000 bonus points
Membership Rewards Gateway
Amex
2
16.99% p.a.
$0 p.a. annual fee for the first year ($395 p.a. thereafter)
ABN holders w/ $75,000 revenue. Get 100,000 bonus points and a $0 first year annual fee. Plus, 2 airport lounge passes. Ends 22 Apr 2020.
American Express Platinum Edge Credit Card
Membership Rewards Ascent
Amex
1
20.74% p.a.
$195 p.a.
Receive a yearly $200 Travel Credit and complimentary domestic and international travel insurance, plus earn up to 3 Membership Rewards Points per $1 spent.
Qantas American Express Premium Card
30,000 bonus points
Qantas Frequent Flyer
Amex
1
20.74% p.a.
$249 p.a.
Enjoy 30,000 bonus Qantas Points, 2 complimentary Qantas Club lounge invitations per year and the protection of complimentary insurance covers.
David Jones American Express Card
15,000 bonus points
Qantas Frequent Flyer
Membership Rewards
Amex
1
20.74% p.a.
$99 p.a.
Not just for David Jones shoppers, receive 15,000 bonus Membership Rewards Points or 7,500 Qantas Points on eligible spend.
American Express Platinum Card
80,000 bonus points
Membership Rewards Ascent Premium
Amex
2.25
N/A
$1,450 p.a.
Receive 80,000 bonus Membership Rewards Points, a $450 annual Platinum Travel Credit, dedicated personal service and luxury travel perks.
American Express Gold Business Card
Membership Rewards Ascent
Amex
1.5
N/A
$169 p.a.
ABN holders w/ $75,000 revenue. A business card with no pre-set spending limit, data feeds to MYOB and up to 51 days to pay for purchases.
American Express Velocity Business Card
Velocity Frequent Flyer
Amex
1
N/A
$249 p.a.
ABN holders w/ $75,000 revenue. A business charge card offering Velocity Points per $1 spent and up to 51 days interest-free on purchases.
American Express Business Card
Membership Rewards Ascent
Amex
1.5
N/A
$109 p.a.
ABN holders w/ $75,000 revenue. Up to 1.5 points/ $1 spent and extended cashflow with up to 51 days interest-free on business purchases.
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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:

  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.
  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.
  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.
  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:

  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.
  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
Miles439
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

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2 Responses

  1. Default Gravatar
    MiteshNovember 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

    • Avatarfinder Customer Care
      JacobNovember 14, 2012Staff

      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

Updated April 10th, 2020
Name Product Purchase rate (p.a.) Balance transfer rate Annual fee
Coles No Annual Fee Mastercard
19.99% p.a.
0% p.a. for 18 months with 1.5% balance transfer fee
$0 p.a.
Earn flybuys points for your spending and save with an ongoing $0 annual fee and 0% p.a. on balance transfers for 18 months.
Qantas American Express Ultimate Card
20.74% p.a.
$450 p.a.
Get 100,000 bonus Qantas Points, a $450 Qantas Travel Credit and 2 yearly complimentary Qantas Club lounge invitations. Ends 14 Apr 2020.
HSBC Platinum Credit Card - Balance Transfer Offer
19.99% p.a.
0% p.a. for 22 months
$129 p.a.
Enjoy a balance transfer offer, yearly annual fee refund, airport lounge passes and complimentary insurance covers.
Bendigo Bank Low Rate Mastercard
11.99% p.a.
0% p.a. for 18 months with 2% balance transfer fee
$45 p.a.
A no-frills credit card with a competitive annual fee and 0% p.a. interest rate on balance transfers for the first 18 months.
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* The credit card offers compared on this page are chosen from a range of credit cards finder.com.au 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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