How to calculate what your credit card reward points are worth

Are your credit card reward points giving you back as much as you’re spending to get them?

There are so many credit card rewards programs on the market. How are consumers meant to keep up with all those different rewards programs? Once again, we’re here to help.

Net Reward Return

It can be a nightmare for the typical spender to try and work out whether their credit card rewards program is good value or not. And if they’ve been putting money towards a certain rewards program for a considerable period of time, they may be hesitant to find out that said program isn’t actually giving them great value for money. But that being said, given all the points that you earn, we think that it’s important to know what you’re actually getting back in return for your spending.

So here’s a simple way to cut through the confusion of rewards. We call it the Net Reward Return and it calculates:

  • The dollar value of credit card reward points earned each year, MINUS
  • The cost of the card and its reward program each year

This tells you whether paying the annual fee for the card is worth the credit card reward points you’re earning, or whether it’s time to find a new card.

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How Net Reward Return works

Net Reward Return works like this:

rewards formula

So as an example:

rewards formula 2

In the above example, given that it costs 150 points to get just $1 of usable rewards, earning 24,000 points will equate to a yearly reward of $160.

Once you know the dollar value of your reward points each year, you can subtract the cost of the reward program to determine your Net Reward Return each year. So you have to know what the annual fee is in order to know whether the credit card rewards program is worth it.

In the example we’ve used, if the annual fee is less than $160/year, you have come out on top. For example, a $60/year annual fee still leaves you with a Net Reward Return of $100/year. It’s up to you whether you want to look for an even more profitable rewards program, but you’re already doing well.

If the annual fee is more than $160/year, this rewards program is not working for you at all. It’s time to ditch that sucker and find a rewards credit card that actually rewards you for holding the card.

Figure out whether you’re getting bang for your buck

credit card users not paying off their bill

Finally, you have to calculate this based on how much you actually spend on your card each year. Be realistic, and don’t use one big month to calculate your year. If you’re not spending enough to earn the credit card reward points to make the card worthwhile ($24,000/year in the example above), you may be better off with a different card.

That’s not to mention that many rewards programs limit the number of points you can earn per year or per month with points capping.

Not every rewards program is created equal. So if you’re unsure about whether or not your rewards program is working for you or against you, give our algorithm a shot!

If you’re interested in joining a credit card rewards program or switching to a better rewards program than you already have, use Canstar’s credit card rewards comparison tool to start your search.

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