Points Basics: What’s 1 Point Per Dollar Worth?
Tl;dr: For each extra bonus point, you’ll typically earn $100-$130 or so for every $10,000 spent.
Well, this will be a short post–the question and answer are already up there. I’m a big fan of having a diversified portfolio of cards to maximize my points, like the Amex Gold for 4x Membership Rewards points when dining out, IHG Premier for 5x IHG points on gas and travel, and the Capital One Venture X for 2x points on all purchases and 10x points on hotels and car rentals booked through Capital One. But is optimizing your earning rate on every dollar spent all that lucrative?
How much more can you earn with more points?
But sometimes improving your earning rates offers little or no value in the grand scheme of things. That’s because each extra point on $10,000 of spending earns between $100-150 in rewards for most bank (e.g. Amex, Chase) points or airline miles, depending on which points and how you use them. Hotels are a little more complicated, with Hyatt points being worth more and Marriott, IHG, and Hilton points being worth less. If a point is worth 1.25¢ to you (e.g. a Bilt point, which can be redeemed for travel at that rate), getting an extra one from a bonus category will earn $125 for every $10,000 in spending.
If you’re spending $10,000 per year eating out, upgrading from debit card to an Amex Gold card will net you $500+ in points each year. On the other hand, if you’re only spending $3,000 per year on gas, adding a Citi Custom Cash with 5% cash back at the pump would only net you about $120 beyond what you could get with the Amex Gold. That’s solid, but it might not be worth the opportunity cost of passing on cards that could net you over a thousand dollars in travel.
Don’t forget about annual fees
Even if a card can earn you an extra $100 or so in rewards, it might not be a better option if you needs those rewards just to break even on an annual fee. There are tons of no-fee cards and cards that have little to no net fee, so paying an annual fee just to earn more points rarely makes sense except in niche circumstances (e.g. if you spend 100+ nights/year in Hilton hotels, it might make sense to pay a net fee for the Hilton Aspire card).
It’s okay to be lazy
Finally, the more you micromanage your bonus categories the more thinking you’ll have to do. For most people, a few key cards like a “dining” card, a “travel” card, and an “everyday” card, will do the trick. Squeezing a few extra points out by using the perfect card all the time can be fun, but once you have the essentials down the marginal value might not be worth the effort.
Conclusion
We’re big fans of optimizing your bonus points, but at a certain point micromanaging the categories might be more work than it's worth, or you could risk losing sight of the forest (giant bonus offers good for expensive international travel) for the trees (a hundred bucks or so in extra points or cash back). Knowing the returns you can expect will help you invest in new cards more strategically.