Image this: You are reserving a visit to Europe and see two choices — 60,000 miles for a round-trip flight or $650 in money. Which do you select? With out crunching the numbers, it is only a guess.
That is the place calculating the worth of an award redemption saves the day. With simple arithmetic, you’ll be able to decide whether or not you need to e book with money or redeem your factors and miles.
Associated: I broke a factors rule and nonetheless obtained award deal to Europe
What’s award redemption worth?
Award redemption worth tells you ways a lot your factors or miles are price for a particular reserving in comparison with paying money. At TPG, we measure this in cents per level or mile, so you’ll be able to simply measure whether or not a redemption is above or beneath common worth.
Associated: How a lot are Chase Final Rewards factors price?
Calculating award redemption worth
Calculating the worth of an award redemption requires a easy system:
Redemption worth = (money value – taxes and charges) ÷ factors or miles used × 100
This provides you the worth of every level or mile in cents.
Instance: New York to Los Angeles on Delta
Let’s put this into observe. Say you are reserving a round-trip flight from New York’s John F. Kennedy Worldwide Airport (JFK) to Los Angeles Worldwide Airport (LAX) on Delta Air Strains. The money fare is $450, or you’ll be able to redeem 32,000 SkyMiles plus $12 in taxes and charges.
Reward your inbox with the TPG Each day e-newsletter
Be part of over 700,000 readers for breaking information, in-depth guides and unique offers from TPG’s consultants
Utilizing the system: ($450 – $12) ÷ 32,000 × 100 = 1.37 cents per mile.
When to redeem rewards vs. pay money
So, you’ve got calculated your redemption worth — now comes the massive query: Must you truly use your rewards or pay money?
That is the place TPG’s month-to-month valuations are available in.
For the Delta instance above, we calculated 1.37 cents per mile. Since TPG presently values Delta SkyMiles at 1.15 cents every, this redemption is best than common — a powerful use of your miles.
This is a normal framework to information your choice:
- Increased than TPG’s valuation: Lean towards redeeming factors or miles.
- Decrease than TPG’s valuation: Take into account paying money, particularly if you wish to save factors or miles for higher makes use of later.
- Equal to TPG’s valuation: Take into account your private state of affairs — redeeming factors or miles saves money now, whereas paying money helps you earn rewards for future journey and work towards elite standing.
Associated: Why all vacationers ought to earn transferable bank card factors
Utilizing TPG’s Award Calculator
Not within the temper to do the mathematics your self? That is why we constructed the TPG Award Calculator — to make calculating redemption worth fast and straightforward.
This is easy methods to use it:
- Choose whether or not you are calculating with airline miles or resort factors.
- Select the loyalty program.
- Enter the money value, variety of factors or miles required, and any taxes or charges.
- Click on “Calculate” to see the worth.
In simply seconds, you will get an in depth breakdown of your redemption — like this outcome from our Delta SkyMiles instance above:
Based on the calculator, utilizing 32,000 SkyMiles plus $12 in charges for a $450 flight offers you an estimated worth of $368, or 1.15 cents per mile. In comparison with paying money, you’d save $70 by reserving with miles.
Whether or not you are maximizing each cent or simply desire a fast sanity verify, the TPG Award Calculator helps you get probably the most out of your hard-earned factors and miles — no math diploma vital.
Associated: Apps and web sites that make award redemptions simpler to seek out
Why taxes, charges and surcharges matter
When calculating redemption worth, it is essential to account for all charges — failing to take action could make a “whole lot” look higher than it truly is. This is how charges and surcharges can have an effect on redemption worth throughout several types of bookings:
- Accommodations: Taxes are normally primarily based on the money charge, so utilizing factors might help you keep away from these further prices. Resort charges, nonetheless, could or will not be waived on award stays relying on this system. For instance, World of Hyatt waives resort charges for award bookings, whereas Marriott Bonvoy doesn’t.
- Flights: Some airways add excessive carrier-imposed surcharges to award tickets, which might skew redemption worth. For instance, Virgin Atlantic Flying Membership awards could embrace charges that exceed a reduced money fare. At all times embrace these charges in your calculation to get an correct comparability.
- Combined points-and-cash awards: You need to use the identical method for awards that mix factors and money. Subtract the money portion from the full money value, then divide the remaining quantity by the factors used. This ensures your cents-per-point calculation displays the true worth of the factors portion.
By together with taxes, charges and surcharges in your calculation, you will keep away from overestimating the worth of a redemption and make smarter selections about when to make use of factors or miles versus paying money.
Associated: Are you able to pay taxes with a bank card?
Different issues to remember
Redemption worth is a useful benchmark, nevertheless it’s not the one issue when deciding whether or not to make use of rewards or money.
- Alternative price: Paying money can earn you factors or miles for future journeys. For instance, a $300 flight may earn 3,000 miles that you would redeem later, which you miss out on for those who use rewards now.
- Comparable choices: Not all flights or lodges are created equal. If one airline costs 25,000 miles for a route and one other affords an identical flight for $100 money, think about which possibility offers the higher general worth — even when the mathematics for the primary possibility seems “good.”
- Private worth: Typically the perfect redemption is not about maximizing cents per level. You may redeem factors for a particular expertise, like a first-class flight you would not pay money for, even when the redemption worth is decrease.
- Different perks: Utilizing money as a substitute of factors might help you qualify for elite standing, earn bonus factors or unlock loyalty program advantages that would prevent cash or enhance your journey expertise in the long term.
Associated: Why the perfect level redemptions are typically probably the most sensible
Backside line
Calculating award redemption worth helps you chop via the guesswork and make smarter selections along with your rewards. The maths is easy: Subtract charges, divide by factors and examine towards TPG’s valuations. Higher but, plug your numbers into TPG’s Award Calculator for an prompt reply.
Simply bear in mind: The “finest” redemption is not at all times about squeezing each final cent out of your factors. Typically the appropriate transfer is reserving the journey that is smart for you, aka saving cash. However by figuring out easy methods to calculate worth, you will make certain you are getting probably the most out of your hard-earned factors and miles.
Associated: How I handle bank card redemption evaluation paralysis
