How to Value Your Miles and Points With the CPP Formula

Valuing the points or miles you earn on credit cards is challenging. The values vary from one rewards program to the next. They also vary based on how you redeem them. In this guide, we provide a methodology to help you determine the value of miles or points you’ve earned.

A common question I see when discussing rewards cards from various issuers is how to compare the different rewards redemptions available. For example, which is more valuable: 50,000 Chase Ultimate Rewards points, or 50,000 Starwood Preferred Guest points?

The answer in many cases is, unfortunately, “it depends”. Let’s walk through some quick back-of-the-napkin calculations that you can do to determine the value of your points or the value of your redemptions.

Defining the CPP Metric

The easiest way to value points redemptions is to look at the cash value, or “cents per point” metric. If you’re able to purchase a $50 gift card for 5,000 points, that gives you a CPP of $0.01 or 1¢ per point. It’s a very simple calculation: simply take the dollar value of your redemption, turn it into cents (shift the decimal), and divide by the number of points you used for redemption. Some examples:

$250 night hotel stay for 12,500 points: 2 CPP ($250 / 12,500 * 100)

$450 flight for 15,000 points: 3 CPP ($450 / 15,00 *100)

$100 Bluetooth speaker for 10,000 points: 1 CPP ($100 /10,000 * 100)

Naturally, you want to be looking at rewards that maximize your CPP, so we’ll examine some below. First, though, a note on “points” vs. “miles”: Many airline cards use “miles” as their metric instead of points. Treat them as equals; they use the word “miles” because it has marketing value for them and can be immediately and subconsciously associated with flying, but miles and points are one and the same.

The Bad Redemptions

You can go ahead and scratch off certain categories or redemptions as an effective usage of your points. Redeeming for cash back, gift cards, or merchandise are all generally a terrible usage of points. In most of these scenarios, you will be redeeming points at 1 CPP at the most.

If you’re in desperate need of one particular item, or have a rare need for a gift card or statement credit, by all means use your points. But if you’re finding yourself doing that regularly, you’d be better served switching to a cash back credit card instead of a rewards card.

Travel Redemptions

In general, redeeming your points and miles for travel rewards will provide you the best return. For example, an American Airlines round-trip flight from Richmond, VA to New York City would cost around $500. Using AA miles, it comes out to 15,000 points with $86.20 in fees. It’s important to factor in those fees when counting CPP, so here’s how:

(Travel value – reward fees) / points

It’s very similar to the original formula, but discounts the associated fees to reflect the pure value of the points you’re using. In our American Airlines example, we’re still coming out at 2.75 CPP, which is a pretty reasonable return for your miles.

Your points can actually become more valuable when looking at business or first-class redemptions. A round-trip first-class flight from NYC to London could cost you over $9,000. Using American Airlines miles again, you’d be looking at around a $1,100 outlay in fees and 170,000 miles. That works out to around 4.6 CPP, nearly doubling what you’d get from an economy redemption.

The First Class Trade-off

Redeeming for more luxurious flights can be really enjoyable, especially for longer trips. I know I wish I’d flown first-class when I traveled a couple of years ago from DC to Seoul, South Korea. You should consider, however, the trade-off in quantity. For the price of a first-class flight, you could usually redeem at least 2 (and usually 3!) economy or saver flights. While the economy flights may not be as great of a value for your points, you’ll stretch your miles further and be able to travel more by going economy.

Taking it Further

In future articles, I’ll explore the value of cash back cards, and compare rewards points from different issuers. The rewards landscape is competitive, but some types of points, for example Starwood Preferred Guest points, are widely considered to be more valuable than others. We’ll take a closer look at which points are best to accrue and how to redeem them for maximum value. Stay tuned!