One metric to always keep in mind is value per point, or in some cases value per mile. A point can be worth several cents (for example, a $90 hotel room for 3,000 points) with a card like the Starwood Amex. I took my family to Atlanta for a week and we got three cents per point out of our Hyatt points while staying in a couple of suites, although those points were transferred in from our Chase Ultimate Rewards accounts.
At theother end of the spectrum, points can be worth barely a quarter cent, as is the case with the deliberately confusing rewards programs from PNC Bank and Key Bank.
All of which is to say, if a card is offering 40,000 points as a sign-up bonus, that may be a great bonus–or it may be a weak one. Know the rewards program before you decide the value of a bonus.
Another thing to keep in mind is that some credit card issuers throw around the term “miles” loosely. For example, the Capital One VentureOne Rewards card advertises 1.25 “miles” per dollar on every purchase. But in this case a “mile” is not a frequent flyer mile, it’s essentially one penny that you can redeem for travel costs (planes, hotels, etc). So in this case 1.25 miles per dollar actually means you get back 1.25 cents per dollar, but those cents have to be used on travel purchases.
So is that a good deal?
In this case, not particularly, for two reasons: first, some cash rewards cards pay more than 1.25 cents per dollar, and you don’t have to redeem your rewards on travel–you can just deposit them into your savings account. Second, some travel rewards cards offer more than 1.25 cents per dollar anyway.
For now, you just need to be aware that some points are more valuable than others. If you want to maximize your credit card rewards, it helps to have financial and/or travel goals in mind, and to understand the nuances of programs you might be interested in.
Cash vs points vs miles vs “miles”
Not all rewards are created equally. Sometimes a point is worth a cent, and sometimes it’s worth less. Sometimes it’s worth more. It all depends on who’s issuing the points, what they can be redeemed for, and what you actually redeem them for.
For example, a Citi ThankYou point can be worth less than a cent with a bad gift card redemption, or it can be worth a cent with a student loan or mortgage redemption, or it can be worth more than a point with a travel redemption. So how much is that Citi 5% TYP bonus worth? Well, how will you use those points?
One card marketing issue to be aware of is distinguishing between miles and “miles”. Miles are actual frequent flyer miles from actual frequent flyer programs. They are often (though not always–it depends on what kinds of flights you book) worth more than a cent. “Miles”, with the quotation marks around them, are a marketing gimmick used by credit card companies that, for their own reasons, don’t deal with actual miles. A “mile” is usually just one cent of credit card rewards–except this penny, since it’s a “mile”, can only be used for travel rewards and cannot be paid to you as cash.
Sometimes miles will be better for you, and sometimes “miles” (with the quotations marks) will be better–it depends on your situation. If you want to travel around Christmas, then “miles” might be worth looking into since frequent flyer programs often have limited availability then. If you’re looking to travel across the ocean during the offseason, or to travel first class, then miles are probably the way to go since it’s not too hard to get more than a cent of value per mile out of travel to foreign countries on a lot of routes.