Guides · The basics

Points vs. cash back: how to value a credit card point

2 min read

“3x points” and “3% cash back” sound alike, but they're only equal if each point is worth exactly one cent. Often it isn't.

Cents per point

The simplest way to compare is to convert everything to cents per point. Take the cash value of a redemption and divide it by the points it costs. If 25,000 points gets you a $250 statement credit, each point is worth 1 cent. If the same points book a flight that would cost $400, they're worth 1.6 cents each.

What changes a point's value

How you redeem. Cash and statement credits usually give a fixed, modest value. Gift cards and merchandise are often lower. Travel and transfer partners can be higher.
Which program. Some points can move to airline and hotel programs; others can only be redeemed through the issuer.
Your own habits. A high-value redemption only counts if you'd actually take that trip.

Comparing a points card with a cash-back card

Multiply the earn rate by your value per point. A card earning 3 points per dollar, with points you'd redeem at 1.25 cents, effectively pays 3.75%. A card paying 2% cash back pays 2%. If you'd only ever cash points out at 1 cent, the same points card pays 3%.

Rule of thumb: value your points at what you'd realistically get for them, not the best case you've read about. If you're unsure, use the cash-out value.

Don't forget the downsides

Points can lose value when a program changes its redemption rates, and some expire if your account is inactive or closed. Cash back is simpler and doesn't depend on future program rules. Points can be worth more, but only if you use them well.