Christie Matherne, Credit Card Writer
You can calculate reward point values by dividing the dollar value of what you redeem points for by the number of points required to get that product or service. This will leave you with the value of a single reward point. For example, if a $500 plane ticket costs 40,000 points, that means each point is worth 1.25 cents when redeemed for airfare.
Cost of Item in Dollars / Cost in Points = Value of 1 Reward Point
In many credit card rewards structures, point redemption values change depending on what you redeem them for. Some credit cards give more value point-for-point on travel redemptions than cash back, for example. The average credit card reward point value is 1 cent, for reference.
Elijah Nash, WalletHub Analyst
How many reward points you earn are also calculated by a credit card company when they’re doling them out for purchases. And that depends on what kind of rewards credit card you have. If you have a tiered or bonus category credit card, how many points you earn will generally depend on what kind of purchase you make. Some cards might give 3 points per $1 spent at gas stations, for example, but 1 point per $1 at restaurants. Flat-rate rewards credit cards will give you the same number of points for every dollar you spend, no matter what type of purchase it is. If you’re not sure how many rewards points your card gives, look them up in your card’s terms.
Robert Sambrick, WalletHub Analyst
Credit card companies calculate how many rewards points they can offer by looking at interchange rates and revenue from annual fees and interest charges. The interchange rate is the amount they charge merchants for accepting purchases. That, plus annual fees and finance charges, can give a card issuer enough of a profit margin to offer more bonus points.
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