I’m sure we have all thought, “Are these points really worth anything?”… I know I certainly did! Until I started down the rabbit hole that was the points game, I had no idea how valuable credit card points could actually be, or what I could use them for. Getting started on this crazy journey is often the hardest part and once you get into a rhythm it becomes quite easy. In this post I will focus on “What are points?”, “How do I earn points?”, “What are my points worth?”, and finally “How do I get started?”.
What Are Points?
Points, whether it be Membership Reward points from American Express, Ultimate Rewards points from Chase, Delta SkyMiles, Marriott Bonvoy points, or Hilton Honors points, are essentially “currency” that can be used in a variety of ways to cover the cost of goods that you would normally pay cash for. These points are then used in exchange for monetary value to book things such as Airline tickets, hotel rooms, or even used on popular websites such as Amazon. They key to the “points game” is finding the right mix that maximizes your value of points in exchange for actually paying your cold hard cash.
How Do I Earn Points?
Now that we know what points are, let’s dive into how you actually start earning points. I am sure you have seen advertisements for “100K point sign up bonus”, but that is only the start of the journey to accumulating points. Points are earned by everyday spend on places such as gas stations, grocery stores, restaurants, etc., every time you swipe your card. The key to earning points is finding the right card to maximize your earning potential.
For me, my “keeper card” is the American Express Gold Card, which earns me 4 points for every $1 I spend at grocery stores and restaurants. For example the average US household spends approximately $6000 a year at grocery stores, which would equate to 24K Membership Reward points from American Express. When we combine that with the average spend of $3000 a year at restaurants, you are looking at a combined 36K points just from normal day to day spend.
What Are My Points Worth?
As discussed above, every point has a monetary value, however they vary widely in terms of what they are worth. Most Points experts agree that the gold standard is American Express Membership Rewards points and Chase Ultimate Rewards points, valuing them both at around 2 cents per point(cpp). The value of a point is typically calculated by comparing how much it would cost to pay cash for a room or flight vs how many points it would cost for the identical room or flight.
For example, I was looking for a flight for my wife and me to Hawaii for next month from MCO(Orlando) to HNL(Honolulu). Hawaiian Airlines website has a nonstop flight with lie-flat, first class seats for $8,332 or 520,000 points + $22.50. Not sure about you but I have a hard time spending over $8,000 for a flight but I am a lot more willing to spend $22.50 + points. In order to calculate the cpp, I took $8,332 X 100 and divided that by 520,000 which gave me 1.6cpp. Hawaiian Airlines points are typically worth .9cpp so this was a great value!
How Do I Get Started?
Just like any new project or hobby, the hardest part is getting started… that’s where I am here to help! The first thing to do when looking to start the points game is choosing a credit card and understanding the benefits and if any annual fees are associated. For individuals looking for a good keeper card, I would recommend the American Express Gold card. Although there is a $250 annual fee, there are plenty of benefits that make up that fee, including $120 in Uber or Uber Eats credits, $120 dining credits, plus an INSANE 60,000 MR point intro bonus(after you spend $4,000 on the card in the first six months). This card earns 4x points on all groceries(up to $25,000 per year) and restaurants, 3X points on flights, and 1 point on all other spend.
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The Points Authority: Mastering The Points Game 