What are points worth? Reasonable Redemption Values Explained | Coffee Break Ep97 | 3-17-26

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Welcome to Freka Miler's Coffee Break, where we focus on a single topic related to miles

and points.

And each coffee break is limited to 20 minutes or less, or your money back.

Today's coffee break.

What are points worth?

All redemption values explained.

There's no single right answer to what points are worth.

With most points, the value depends on how the points are used.

It's often possible to get very great value from your points or terrible value.

For example, you might take, let's say, a hundred thousand airline miles and use it for

an incredible international business class, life, flat seat experience, or you might use

it for a domestic trip in the economy.

In the first case, you're probably compared to the cash rates getting unbelievable value

in the second case.

You're probably getting somewhere around.

You're often getting less than one cent per point value, depending on the airline

mile you use and the situation.

Even worse, sometimes you're encouraged to use your points for things like to spend

at Amazon.

In those cases, you get really awful value from your points.

So overall, the answer to what our points worth is it depends.

But there's times we really do need to know we have to have some answer, right?

Yeah, absolutely.

Because how would you evaluate the value of a credit card welcome bonus?

How would you decide between signing up for a hotel credit card with Hilton that offers

100,000 points versus a hotel credit card with Hyatt that offers 60,000 points?

I mean, you and I know that Hyatt points are usually worth more than Hilton points, but

are they worth enough to make the 60,000 point Hyatt offer better than a 100,000 point

Hilton offer?

You need to be able to compare somehow.

And similarly, if you're making a big purchase and you're deciding, well, should I earn

three Hilton points or two Hyatt points on this particular big purchase or two Marriott

points, maybe three Hilton points versus two Marriott points, how do you decide?

Which one do you go for and why?

And so we need some sort of a metric to compare the value of different points.

Yeah, totally.

So that's what we came up with with reasonable redemption values or our RVs, for short.

What our RVs are estimates of how much value you can reasonably expect to get with your

points.

So it's not a guarantee.

Not necessarily to get that much, but if you try a little bit to get good value, you should

reasonably be able to get that much value or more, and sometimes a lot more.

And it really depends on the points program, whether you could get a little bit more or

a lot more, and it depends on the situation, but it's a point value that where we aim to

sort of get a midpoint of what the points are worth, so that you have some metric to go

on.

Those that Nick brought up a second ago.

Yeah, and I mean, obviously it depends somewhat on what you value, too, because like Greg

mentioned before, getting an amazing business class redemption.

But if you don't value flying in business class or you don't travel internationally, those

things might not matter as much to you as that domestic trip during a school break or

whatever the case may be for you.

So we want to find something in the middle, so we have to figure out how to do that.

And then we use that value to determine things like how much is a welcome bonus worth?

It gives us an estimated value.

How much is this 100,000 point welcome bonus worth?

And how much is the return on spend?

So if you're getting 3x on dining, what's that worth compared against a cashback card?

A percentage, maybe you can get a credit card that offers 4% back on dining or a card that

offers three hotel points or transferable points, which is better, which card should

you be using?

And so we use that for our card displays.

So when we have a page, for instance, that shows the best cards to use for dining purchases,

it actually calculates that and figures out, okay, well, the reasonable redemption value

of this type of point is worth this much.

And so the return on spend is roughly equivalent to this percentage back.

And so our RVs calculate quite a bit.

They drive the first year value you see behind different cards because it is what determines

the value of a welcome offer.

And of course, they, again, they help us calculate what the return on spend is for various

category bonuses.

Yeah.

So where do these RVs come from?

We'll be right back with that information and more after this.

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And we're back.

Let's talk about where our RVs come from.

Where do we get these numbers?

Luckily, we have some partners that we work with that get a lot of data that we use to

calculate these numbers.

So first, for airline miles, we have points path, which is a tool that integrates with

Google flights.

And what it does is it shows the user for each flight where Google flights is showing you

the cash rate.

Points path shows you the points rate.

How much it costs in airline miles to book that same flight.

And they preserve all that data from millions of searches that end users are doing.

And they give us access to that data.

So what we generally do is just look for the midpoint for American Airlines miles.

What are those miles usually worth?

What's that median value that it's worth?

And we take that.

In some rare cases, the median and mean, which are two different ways of calculating averages,

are very different.

So sometimes it will take sort of a midpoint between those two.

But usually they're close enough that we'll just grab the median and be done with that.

So that's for airline miles.

For hotel points, another partner, a gondola.

What gondola is, it's a hotel search website, which is designed to, you know, you pick

a city where you're looking for a hotel and give it your dates and it will show you all

the hotels available along with the cash rates.

But also it will show you the point rates.

And so again, gondola has all that information.

This is a little different though.

What gondola is providing for us to calculate our RVs.

It's not from end user search data.

It's from them scanning all the hotels in each of the like major loyalty programs, like

all the hotels across the world for all dates within the next year or so.

And then they let us view the median values and that's what we use for our RVs.

So you know, the median value for Marriott hotels, for example, across all their thousands

of hotels when using points to book that hotel might be around 0.7 or 0.8 of a cent.

And that's what our RV will then be for Marriott points.

Where things are not as easy as that is with transferable points.

So transferable points like from Chase, MX, Capital One and others.

We love transferable points because what they let you do is acquire those points that

are sort of held by the bank.

But when you're ready to, when you find a hotel or a flight that's a good value to book

with, with points or miles, you can transfer to any one of their transfer partners in order

to then book that high value award.

So it gives you the opportunity to book all kinds of things that you might not ever have

thought you would be able to do just for one like really simple example.

You might not have any Air France flying blue miles, but you might see using points

path that a short delta flight only cost 5,000 Air France miles versus, you know, $400

in cash or 20,000 Delta Sky miles.

So you can then go to your transferable points program at transfer those 5,000 points to

Air France and then book that flight.

So okay, so given all that, where do, how do we come up with the value of transferable

points?

And the basic answer is it's more of an educated estimate than a data collection.

So in this case, what we do is we had long ago pegged Chase Ultimate Awards at 1.5 cents

per point as a reasonable value at which to redeem those points.

And so we use that as the baseline metric and then we look at each transferable points

program and say, is this better than Chase's program?

Like maybe they have more valuable transfer partners than Chase does.

If so, we bump that up a little bit to 1.55 or 1.6.

And similarly, some programs don't have as good of transfer partners as Chase.

So we lower it down a little bit, 1.45, 1.4.

For example, and so that's where the value of our transferable points comes from.

The RRV for transferable points.

Yeah, and RRV again is reasonable redemption value, which is meant to be the value you

can reasonably expect to get without putting in a ton of effort, like just a medium amount

of effort to not pick a bad redemption.

And obviously, or maybe it's not obvious, but importantly, if you're willing to put

in effort, you can oftentimes do much better than the RRV in terms of value.

And in fact, if you were to look up any of our posts about the what our choice privileges

points worth or what our high at points worth, et cetera, you're going to see the RRV that

we've chosen, which is around that median point, but you'll also get an idea of what's

the 80th percentile and the 90th percentile to get an idea of what outsize retemptions

look like as well.

So you'll find that with the various hotel points, for sure.

And then with your transferable currencies, you also have some ability to get outsize

value, but this creates a bit of an RRV paradox, because sometimes there are individual

airline or hotel reasonable redemption values that are higher numbers than our transferable

currency reasonable redemption values.

Even when you can transfer to that that partner, and so to give an easy example, our reasonable

redemption value for chase ultimate rewards points is 1.5 cents per point, our reasonable

redemption value for high at points is 1.8 cents per point.

These are both every time of recording by the way, at the time of recording, good point.

Good point.

But yes, and important to mention that, that's at the time of recording.

But whenever you listen to this, the concept here is going to be applicable, even if these

specific numbers are right.

So in that case, sometimes readers will get that and say, well, you can transfer your

chase ultimate rewards points to high at.

So if you can get 1.8 cents per point in value with high at, shouldn't the floor value

of chase ultimate rewards points be 1.8?

That's like your minimum redemption, right?

And for us, it's, it's not.

It doesn't determine the minimum redemption, because you have to keep in mind again.

These are expected to be the value you can reasonably expect to get in general without

making undue effort at maximization.

And Hyatt's footprint isn't always going to work for everyone.

You know, if you have a high at redemption in mind, there's a good chance you're going

to get better than reasonable redemption value for chase points.

And that is one of the things that makes chase points as desirable and valuable as they

are.

It's the fact that you can transfer to high at when high at yields good value.

But if you're traveling somewhere without any high at hotels, then the reasonable redemption

value of high at won't be relevant for you.

So instead, we look at the overall portfolio of transfer partners and say, okay, well,

with all of these different partners, whatever it is that fits your needs, whether it's one

of their airline partners or a hotel partner like Hyatt, you can reasonably expect to get

one and a half cents or better.

And keep in mind that or better part because folks who really get into this hobby, people

like Greg and I rarely redeem our points at just reasonable redemption value.

They're usually aiming for much higher.

We want to get better than average value.

We aim for above average in lots of different ways.

And so Hyatt is a go-to transfer partner for me because I do want to get better than reasonable

redemption value out of my points when I go to redeem them.

But you can also get better than reasonable redemption value with various airline partners.

And so there's always going to be situations where you can do that.

And that'll be the case with each of the transferable currencies.

And of course, each of the different hotel points and airline miles.

There are outsized redemption capabilities.

But even calculating those in some cases can be difficult when it comes to airlines.

As I said a moment ago, how much is that fancy business class flight worth to you?

For some people, it'll have a really high value because they really value the luxury of

the experience, the extra space, the chance to lay down and sleep on the flight.

For other people, that doesn't provide high value.

They don't care as much about that.

And so even figuring out what that point is worth when you're redeeming for a fancy flight

is going to be something that varies from person to person.

But again, our reasonable redemption values are meant to be sort of a conservative valuation

of what you can reasonably expect to get.

And that is a tool to help you compare different offers.

And you can certainly adjust and should certainly adjust, offer down based on your own travel

patterns and your own expected redemption is to what you think you're going to get out

of those points.

Absolutely.

And if you want to see a full list of our reasonable redemption values, go to FrequentMilor.com

forward slash RRV.

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