How to calculate when it is worthwhile to pay a surcharge?

Credit Cards & Credit Card Programs
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Hi All,

Thank you in advance for your help. I have looked at the articles on the site and read some previous posts, but I wonder if the community could help? I normally have no issues whatsoever with maths, however valuing my points has me stumped. If I could give an example below I would be very grateful for your feedback. I think reading all the articles I have just confused myself.

I currently have two rewards credit cards, ANZ Travel Rewards which earns me 1.5 points per $ for the first $1500/month and the American Express Explorer card earning 2 points per $. My husband and I like to visit Queenstown NZ, flying from Sydney. We have been using my Etihad miles up until now as I have gold status and fly with them back to the UK to see family. We redeem these miles with Virgin Australia.

I would expect to pay an average of $600 return SYD-ZQN-SYD. In economy this would be 13,800 Etihad Guest miles + $65 in charges. From what I have read this values 13,800 Etihad Guest miles at $535, or, 3.9c each (redemption value).

I am struggling to calculate my earn value, or, how much of a surcharge I should be happy to pay on the Amex. I receive two point per $, worth 1.5 Etihad Guest miles. Can you help with this last bit?

Thank you! Joe.

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Hi joezk,

Your 3.9cpp sound right. This is ignoring the potential miles earned if paying for the fare but let’s not complicate thing further.

Since, you are earning 1.5 Etihad miles per dollar. Using your redemption value above (3.9cpp), you would be happy to pay 5.85 cents per $ (5.85%). However, you are not gaining any value if you do so because your earn cost equals your redemption cost/value.

If you pay a surcharge of say 3%, you paid 3cent per dollar for 1.5 Etihad miles. Your earn cost would be 2cpp, which is less than 3.9cpp (this is good).

If you pay a surcharge of say 2%, you paid 2cent per dollar for 1.5 Etihad miles. Your earn cost would be 1.33cpp, which is less than 3.9cpp (this is good).

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