Credit card rewards points

When you swipe your credit card to pay for dinner, the credit card company charges the restaurant a few percentage points – essentially a fee for the service of moving money around quickly and reliably. Additionally, when you carry a balance on your credit card (instead of paying it off), you the consumer are charged pretty substantial interest. Finally, your credit card probably comes with an annual fee.

As a benefit for all these charges, you are given “reward points” or “miles.” Here’s a quick write-up on my favorite way to spend them – international travel. The process is needlessly confusing (”Wait are these dollars? How many dollars is a mile? Why is it called a mile?”) but below I’ll show you some actual flights with actual numbers to clear the air.

The first, and most tempting tab, of your credit card’s rewards portal is “Use Points for Statement Credit.” You’ve earned those points with purchases, and the idea of wiping away your balance is an appealing one.

Crunching the numbers…

Shows for every point we get 6 tenths of a cent back. We can establish this as the baseline.

Online merchants such as Amazon will allow you to directly purchase with your credit card points. When a $32 item is in your cart, it may be appealing to just “get it for free” by using your points. You earned it, right?

But if we do the math…

We see that each point is worth $0.007, or 7 tenths of a penny.

For 108,250 British Airways “Avios” + $232.20 in fees, you can fly lie-flat business class directly from JFK to Tokyo Haneda. This is a flight about a year from now – July 30, 2024. (Author’s note: You might be able to find this route for less than 108k points, especially with short notice).

That same flight, booked directly through Japan Airlines, will run you $3,989.20.

Additionally, American Express currently (but not rarely) offers a 30% transfer bonus to British Airways. So 100 Amex Points = 130 British Airways Avios.

Let’s calculate the value of our points if we use them on a flight to Tokyo.

Meaning that a lie-flat business class seat has a redemption value of around 4.5 cents per point. A whopping 7.5x better than paying off your balance, and 6.4x better than redeeming on Amazon.