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Quality beats Quantity in Credit Card Rewards Programs

Quality beats Quantity in Credit Card Rewards Programs

*Editorial Note: This content is not provided or commissioned by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through a credit card issuer partnership.

This article was last updated Sep 24, 2015, but some terms and conditions may have changed or are no longer available. For the most accurate and up to date information please consult the terms and conditions found on the issuer website.

When I was a child, I remember thinking that I was especially clever when I offered to trade two pennies to a friend in exchange for one dollar. The logic seemed simple enough since two is greater than one, and I hoped my friend will think he is getting a better deal and I would walk away 98 cents richer! But as you can imagine, this childhood hustler never made it big with this ingenious ploy because even first graders understand, even at the most rudimentary level, that quantity is not always better than quality.

This same basic principle holds true in the vast world of credit card rewards; however, consumers often fall victim to enticing credit card offers just because they see a sign up bonus with a lot of zeros attached. When evaluating credit card rewards programs, it’s important to consider the actual value of your points or miles and what they translate to in terms of the dollar amount.

Credit Card Rewards are a Form of Currency

While they may not be publicly traded on any world market, make no mistake that the points and miles sitting in your loyalty account(s) are a form of currency. Having this mindset when you compare and contrast credit card offers will help you make more educated decisions. In the same way 1 US dollar holds a different value than 1 Mexican peso, 1 Starpoint (Startwood Hotels’ loyalty currency) has a very different value than 1 Hilton HHonors point. Whether its credit card points, airline miles, or hotel points, award currencies should never be compared simply on a basis of numbers without considering what those points are worth.

An Example: 25,000 > 85,000

To put this reality into perspective, let’s look at the current offers for two popular hotel credit cards; the Club Carlson Premier Rewards Visa Signature and the Starwood Preferred Guest® Credit Card from American Express. The former offers a sign up bonus of 85,000 Gold Points after you spend $2,500 in the first 3 months, and the latter gives 25,000 bonus Starpoints® after you use your new Card to make $3,000 in purchases within the first 3 months.. *This offer and/or promotion has since changed, expired, or is no longer available.

At first glance, an uninformed consumer might look at these two cards and think, “Wow! 85,000 points is way more! What a great deal!” However, when you dive into the redemption rates of each hotels’ reward program, it turns out that the sign up bonus on the Starwood Preferred Guest® Credit Card from American Express will get you a much better value, even though you receive less than a third of the points.

Overall, Starwood hotels are much more expensive than Club Carlson, and yet, they require far fewer points to book an award night. Also, Starwood has a larger footprint worldwide, and in most cases, their hotels are in more desirable locations. As an illustration, here’s an example of what it costs to book a hotel with each chain in downtown Paris with points and with dollars.

carlson redemption2

Starwood redemption

In this example, 1 Club Carlson Gold Point is worth about .4¢ and 1 Starpoint is worth about 3.16¢. If you use these values to calculate what each card’s sign up bonus is actually worth, it would look like this:

Club Carlson Premier Rewards Visa Signature: 85,000 Gold Points x .4¢ = $340

Starwood Preferred Guest® Credit Card from American Express: 25,000 Starpoints x 3.16¢ = $790

Of course, different hotels will have different rates for how many points are required for a free night, but overall you can conservatively expect to get at least 5x the value for Starpoints as opposed to Carlson Gold Points.

The point of this example is to communicate one thing; don’t let the numbers fool you! When it comes to picking a credit card or a loyalty program, its worth putting in time to perform your research and fully understand the terms of an award redemption. Never take a credit card offer at face value!

Credit Cards With High Value Rewards

Navigating the intricacies of credit card reward programs can be tough. But lucky for you, our credit experts at CompareCards.com have already done the work for you! Here are a few of our favorite rewards credit cards that will get you a good value on the points you earn:

Chase Sapphire Preferred® Card: New cardholders can earn 50,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. For ongoing rewards, you can earn 2X points on travel and dining at restaurants worldwide & 1 point per dollar spent on all other purchases. The reason Chase Ultimate Rewards® are so valuable is because you can transfer them to a number of airline frequent flyer accounts and hotel loyalty programs. Having multiple ways you can redeem your points will help ensure you get a great value for them. Transfer partners include Southwest Airlines, Marriott Hotels, United Airlines, and many more.

Capital One® Venture® Rewards Credit Card: This card also comes with a one-time bonus of 50,000 miles once you spend $3,000 on purchases within 3 months from account opening, equal to $500 in travel. But with the Capital One® Venture® Rewards Credit Card, you can redeem your miles on any airline or hotel with no blackout dates for a value of 1¢ per mile. For ongoing rewards, cardholders earn a consistent 2 miles per dollar on every purchase, every day, which is a generous rewards rate. There is an annual fee – $0 intro for first year; $95 after that.

Hyatt Credit CardThe Hyatt Credit Card: This credit card doesn’t actually give a set number of points for a sign up bonus. Instead, it offers cardholders two free nights at any Hyatt hotel, worldwide, after they spend just $1,000 in the first 3 months. That means this sign up bonus could be worth well over $2,000 in value if you used the two free nights at a luxurious resort property like the Park Hyatt Maldives. But it’s important to note that the free night certificates expire one year after the date they are issued, so I would only apply for this credit card if you have a specific redemption in mind within the next 12 months. *The information related to the Hyatt Credit Card has been collected by CompareCards.com and has not been reviewed or provided by the issuer of this card.

* Editorial Note: This content is not provided or commissioned by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through the credit card issuer Affiliate Program.

*The content in this article is accurate at the publishing date, and may be subject to changes per the card issuer.

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