I’m going to be churning cards in the new year and wanted to really understand how point hackers evaluate the deals that are offered. I’ve looked at the Westpac Black and NAB Black Signature cards but I’m not entirely sure they’re good deals. Is there an objective way of looking at this? For example:
Bonus points / annual fee = effective points per dollar
(+ $X * spend over 3 months period)
(+ $ value of the extras like lounge passes, insurance etc.)
(- opportunity cost of holding the card)
Do you go through a process like this? What does your evaluation process look like?
If I’m keeping it simple, I just look at the signup bonus vs first year annual fee.
E.g. 100,000 Qantas points at say 1 cent per point (personal valuation) vs $200 annual fee. Equates to $1000 value in Qantas pts for $200.
100,000 Velocity points at say 1.2 cent per point (personal valuation) vs $250 annual fee. Equates to $1200 value in Velocity pts for $250.
100,000 Amex points at say 1.3 cent per point (personal valuation) vs $300 annual fee. Equates to $1300 value in Qantas pts for $300.
If you add in qualifying spend, lounge benefit, insurance, etc. It gets too complicated quite easily, in my books.
I don’t want to get paralysis by analysis. Instead I’ll just shortlist the 2/3 better deals and go for it. No point wasting time.
In short, the valuation you give to the points will matter a lot. E.g if you are short in Velocity points to get to your intended redemption, you might want to set the valuation for Velocity points higher (at least in the short term) to meet the redemption requirements. Or just ignore valuation and work towards your redemption goals directly.
Thanks @w.hiew and @ck009. This is super helpful. I’m not sure why I was valuing travel insurance because you’re right, I’m planning on closing the card as soon as I get the points.
So what I’m hearing is the value for each point type is reverse engineered from the redemption you’re working towards at any one point in time?
I.e., work backwards from what you’re redeeming and the dollar value of that, divided by the points required
Follow up question to this. Some of the bonus points structures I’ve seen entail:
X points if you spend $Y within the first 3-4 months of acceptance (usual)
X points each month if you spend $Y in every month for each of the first 4 months of acceptance (this is what I’m seeing from Velocity)
X points if you spend $Y within the first 3-4 months of acceptance, with additional Z points if you keep the card for over 12 months
I’m valuing (1) highly, with (2) very conditionally but the spend for these is quite high. For (3), it’s almost like you evaluate it on the X points for $Y spend and ignore the Z points for keeping the card. Is (3) ever worth keeping more than 12 months considering you don’t need to hit a minimum spend and can just hold? You’re still going to be paying the annual fee and it doesn’t seem worth it.
@naeiou re your comment - “So what I’m hearing is the value for each point type is reverse engineered from the redemption you’re working towards at any one point in time? I.e., work backwards from what you’re redeeming and the dollar value of that, divided by the points required” - yes, that’s how I do it but I take a few usual trips into consideration and calculate the average. But try to be reasonable with your valuation.
Re the bonus points structures
X points if you spend $Y within the first 3-4 months of acceptance (usual) - this is my preferred way (meet min spend - get bonus points - close the card)
X points each month if you spend $Y in every month for each of the first 4 months of acceptance (this is what I’m seeing from Velocity) - I tried this once but had to fight with the bank since they calculated the first month as the statement date which was like 4 days from the date I received the card - lot of stress to make sure the min spend is met every 30 days and make sure the excluded categories are not in that spend - so not a preferred option for me
X points if you spend $Y within the first 3-4 months of acceptance, with additional Z points if you keep the card for over 12 months - If I have to keep the card for 12 months, it means my overall credit limit is gone up and my borrowing capacity is gone down + the waiting period to earn the actual bonus points (say 100k) for this specific card is pushed back by an year + the annual fee (say $300) is not worth the 30k points to me
Be cautious of the feel good feeling of using the astronomical costs of Business/First class flight to divide the number of points required for your redemption. E.g. $10,000 for a 200k point flight gives you 5cpp.
I’ve been advised to put only what you are actually willing to pay for the flight instead. E.g. $3500/4000 for the 200k point flight gives you 1.75/2 cpp.
The valuation in this article is a tad high in my personal opinion, however it is a good starting point.
Everyone’s numbers are different so there is no right or wrong.
It’s interesting that the valuation is around 1.8 cents. To take an example, let’s say we look at NAB Qantas Rewards Signature Card.
The offer is 90k points (it’s actually 120k but 30k is banked if you keep it for over 12 months) when you spend $3k within the first 60 days for $295 first year annual fee. If we divide this assuming an earning rate of 1:1, then we get $295 / 93K = 3.2 cents per point.
This seems a bit high and not worth is under the current valuation. Could you share a bit about how you’re viewing this?