How to Calculate the Value of Your Points for Gift Cards

How to Calculate the Value of Your Points for Gift Cards

Last Updated: 27 Aug 2017

Calculating the Value of Points for Gift Cards

The value of Points in relation to Gift Cards is easy to measure. This is because Gift Cards are:

  • Easy to understand
  • Generally not subject to availability (unlike seats on a plane) and therefore require much less planning
  • Not subject to additional taxes of any sort
  • Effectively cash - provided you redeem a Gift Card for a merchant where you are likely to shop anyway (e.g. Prepaid EFTPOS/Visa/Mastercard, Coles, Woolworths).
  • Do not fluctuate in value unless there are drastic changes to the program/redemption costs, i.e. a $100 Coles Gift Card will always cost you 13,500 American Express Membership Rewards points - and that $100 Coles Gift Card is always worth $100
 Gift Card Redemption Rate comparison between the popular loyalty programs

Gift Card Redemption Rate comparison between the popular loyalty programs

I have taken four of the most popular Rewards Programs in Australia and calculated the value above.

On a per-point basis, American Express Membership Rewards offers the best redemption rate offering you a "rate of return" (right column) of 0.74%. This means for every $100 spent on an American Express card earning 1pt/$, you are earning $0.74 in "cashback". Another common measure of points is "How much is one point worth?". Continuing with the example, each American Express Membership Rewards point is worth 0.74 cents.

At a basic level, if you are able to get a greater return on your cashback than 0.74% through flights, it is probably worth using on flights.

I'll be explaining how to value points for flights in next week's post.

Going back to the Gift Cards example above, keep in mind I have kept it simple. The rate can fluctuate based on the type of Gift Card you redeem and the denomination.

As an example, Virgin Velocity "sell" their BP Gift Cards at a cheaper rate than Coles Gift Cards (4500 points for $25 as opposed to 4500 points for $20 for the Coles Gift Card). In some cases, redeeming the higher denomination also results in a cheaper unit cost (i.e. they encourage you to purchase the larger value gift card).

Another example is American Express Membership Rewards charge 10,000 points for $100 to be spent with Webjet (as opposed to 13,500 points for a $100 Coles Myer Gift Card).

Step-by-step calculation

  1. Find the denomination (value) of the Gift Card (e.g. $25, 50, $100)
  2. Divide that by the number of points required to purchase
  3. Multiply this value by 100
  4. This becomes your "rate of return" per dollar - assuming a points earn of 1pt/$1
  5. If your card earns you points at a different rate, multiply this amount by the per dollar points earn rate of your card

Example

WISH eGift Cards are offered by Qantas in the Qantas Store.

  • $25 for 4750 points
  • $50 for 9500 points
  • $100 for 19000 points
  • $250 for 47500 points

The goal here is to figure out how much a point is worth in each of the examples above:

  • $25 / 4750 = 0.00526 * 100 = 0.526%
  • $50 / 9500 = 0.00526 * 100 = 0.526%
  • $100 / 19000 = 0.00526 * 100 = 0.526%
  • $250 / 47500 = 0.00526 * 100 = 0.526%

Note in this example, there is no incentive to purchase the larger value Gift Card as the unit cost is the same. That is, you still get 0.526 cents value per point regardless of what value WISH eGift card you purchase with your points.


In a future post, I'll talk about the best Credit Cards for pure cashback.

I hope this post helps you understand how to calculate the value of your points!

How to Calculate the Value of Your Points for Flights

How to Calculate the Value of Your Points for Flights

Frequent Flyer Points - Flights or Gift Cards/Cashback?

Frequent Flyer Points - Flights or Gift Cards/Cashback?