Calculate your rewards card's value: 8-point checklist


Make sure your rewards card pays for itself Yagi Studio/DigitalVision/Getty Images


Make sure your rewards card pays for itself Yagi Studio/DigitalVision/Getty Images

If you’re forking over a hefty annual fee to your credit card issuer each year, make sure your card is paying for itself. 

Assessing your annual fee cards starts with, but doesn't end with, doing the math. The value you derive relies heavily on your spending patterns, how you redeem your rewards, and the value you assign to hard-to-quantify perks such as airport lounge access. For some, a modest $50 annual fee card might not be worth the cost. For others, a card with a $450 fee may pay for iteslf many times over.

How do you tell? Each year, before your annual fee hits your statement, do a checkup on your credit cards to make sure you’re getting your money’s worth. This eight-step checklist will help you assess the value you get from your annual fee cards.

1. Look at your payment history. 
First, make sure you’ve paid your credit card bill on time every time. If you’ve paid any interest charges, that’s a sign you should nix the card. 

With rewards cards, the interest rate tends to be higher (15.30 percent) than with other types of cards (11.98 percent for low interest cards), according to’s weekly Credit Card Rate Report. If you carry a balance on a rewards card, that can easily wipe out the value of your rewards.

Way too many people get caught up in the rewards game and end up deep diving into debt.

— Stephen Alred,
Founder of Ignite Financial

“Way too many people get caught up in the rewards game and end up deep diving into debt,” says Stephen Alred, founder of Ignite Financial, an Atlanta fee-only financial planning firm.

However, if you have the cash flow to easily pay your bill in full each month, move on to analyzing the value you get from the card.

2. Tally up total rewards earned.
Add up the total number of points or miles you’ve earned from your spending on the card in the past year. 

To get this figure, log into online banking or open your file cabinet and look at the past 12 months of statements for the card.

If you snagged a sign-up bonus, don’t include those points in your total, says Shawn Coomer, managing editor of Miles to Memories. “A sign-up bonus is a one-time thing,” he says.

3. Calculate the dollar value of your points.
Now figure out how much those points are worth to you in dollars. 

As a very general guideline, a point is worth about a penny, says Linda Sherry, director of national priorities for Consumer Action, a consumer advocacy group. At that value, 50,000 points equals $500.

But the value can vary widely based on how you redeem the points, with travel generally offering the best redemption value. Buying merchandise with points almost always offers the worst value, Sherry says.

To get a better idea of how much your points will be worth, check The Points Guy, which offers a monthly point and mile value.

When in doubt, use the lowest possible value so you don’t overvalue your points, Coomer says. Multiply the value per point by the total points you earned in the past year to get the dollar value of your points.

4. Assess the worth of your card perks.
“Look at the fringe benefits and perks too,” Coomer says, pointing out that those are big selling points for many cards.

To find the dollar value of your perks, look at the card benefits you’ve used in the past year that have actually saved you money.

For example, maybe you have a card with primary car rental insurance, which saved you from paying a daily rate for insurance when you rented a car on vacation. Maybe your card offers free checked bags, saving you $25 a pop each time you fly.

Add up the amount your perks have saved you in the past year.

5. Crunch the numbers.
Now, do the math. “You have to get out your calculator,” Sherry says.

First, add the dollar value of your rewards to the dollar value of your perks to get the total yearly dollar value you’re getting from the card. Look at how that number stacks up against your annual fee.

If the monetary value you get is lower than the fee, the card is a bad deal. If the amount you get is equal to or higher than the annual fee – ideally much higher, of course – your card is earning its keep.

6. Account for any perks you can’t put a price on.
Know that the monetary value may not represent why you continue to hold that card.

Many cardholders like that their credit cards offer peace of mind through extended warranty coverage and travel insurance, even if they never file a claim. Other cardholders savor the little luxuries, such as airport lounge access.

It’s hard to put a price on these perks. Coomer says, ask yourself, “If you lost the benefit, would it be a big deal to you?” 

An annual fee is paid for the upcoming year, so calculate the benefit as you see it in the future.

— Shawn Coomer,
Managing editor of Miles to Memories

7. Look to the future.
The value you get from your card is closely tied to your spending, so think about whether your spending habits are likely to remain the same in the coming year.

That card that was well worth the annual fee last year when you spent big bucks remodeling your house and traveling the globe, may not pay for itself next year if you plan to stick around at home and sock away most of your extra cash in savings.

“An annual fee is paid for the upcoming year, so calculate the benefit as you see it in the future,” Coomer says. 

8. Shop around for other cards.
Now that you’ve done the math on your spending, rewards earnings and perks, peruse the other rewards card offerings.

Check to see if you can find a no annual fee credit card that offers you a better value, says Sherry, who recommends consumers not pay annual fees. Some of these cards offer sign-up bonuses and healthy rewards.

Cash back cards are the best bets,” Sherry says, adding that you can save time and hassle by not having to wrangle points or miles. Most people can get a 2 percent cash-back card without an annual fee, Coomer adds. 

If you do decide your reward credit card isn’t paying for itself, or that you could get a better deal with another card, make sure you won’t lose your accrued points if you cancel, Coomer says.

“Every bank is a little different, so be proactive in protecting your points if you cancel,” he says.

See related: 5 questions to ask before getting a credit card with an annual fee, When to close an annual fee card, Rewards card switch: from fee to no fee

Published: October 11, 2016

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Updated: 10-25-2016

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