topic Points vs Percents in Credit Cards

Points vs Percents

socalchef00 — Sat, 02 Apr 2022 17:20:38 GMT

Is it me or doesn't it seem better to use cards with x amount of points per dollar spent vs a certain % cash back ?

Example :

PayPal Extras MC gives 3x points for every dollar at Gas and Resturants

Discover IT gives 1% unlimited cash back, and during the quarters 5%, in this case, its 5% at Target and Gas.

But if I spent $100 on gas w/ PayPal, I'd get 300 points vs $5 with Discover

I guess it depends on the conversion rate of points to cash back ?

Re: Points vs Percents

DJRobbieD — Sat, 02 Apr 2022 17:44:52 GMT

Exactly, it's all about the conversion rate for points. If you can get 1 cent per point (cpp), you're earning the same rate as cash back.

Many banks/CUs let you redeem points for cash back at 1ccp, but some cards are lower than that (e.g. Amex Gold at 0.6cpp, X1 at 0.7cpp ) while others maybe be higher (e.g. Amex Schwab Platinum at 1.1ccp).

Re: Points vs Percents

SoCalGardener — Sat, 02 Apr 2022 17:44:53 GMT

@socalchef00 wrote:
Is it me or doesn't it seem better to use cards with x amount of points per dollar spent vs a certain % cash back ?

Example :

PayPal Extras MC gives 3x points for every dollar at Gas and Resturants
Discover IT gives 1% unlimited cash back, and during the quarters 5%, in this case, its 5% at Target and Gas.

But if I spent $100 on gas w/ PayPal, I'd get 300 points vs $5 with Discover

I guess it depends on the conversion rate of points to cash back ?

Yes, definitely. Saying "3x points per dollar" or whatever SOUNDS great, but what does it actually MEAN? We need to compare apples and apples, not apples and oranges. If points equal cents, then 100 points equals $1.00, and you can compare that to a percentage card one-to-one to see which is better. If its point value isn't that cut and dry, then you just need to do the math to figure out what you're actually getting.

Personally, I gave up on points cards. I mean I'm not getting any cards now that are not cash back. For me, the straightforwardness of knowing that when I spend $100 I'm getting $6 CB is just cleaner and less of a hassle than working out points.

Re: Points vs Percents

socalchef00 — Sat, 02 Apr 2022 17:50:12 GMT

@SoCalGardener wrote:
@socalchef00 wrote:
Is it me or doesn't it seem better to use cards with x amount of points per dollar spent vs a certain % cash back ?

Example :

PayPal Extras MC gives 3x points for every dollar at Gas and Resturants
Discover IT gives 1% unlimited cash back, and during the quarters 5%, in this case, its 5% at Target and Gas.

But if I spent $100 on gas w/ PayPal, I'd get 300 points vs $5 with Discover

I guess it depends on the conversion rate of points to cash back ?

Yes, definitely. Saying "3x points per dollar" or whatever SOUNDS great, but what does it actually MEAN? We need to compare apples and apples, not apples and oranges. If points equal cents, then 100 points equals $1.00, and you can compare that to a percentage card one-to-one to see which is better. If its point value isn't that cut and dry, then you just need to do the math to figure out what you're actually getting.

Personally, I gave up on points cards. I mean I'm not getting any cards now that are not cash back. For me, the straightforwardness of knowing that when I spend $100 I'm getting $6 CB is just cleaner and less of a hassle than working out points.

Awesome thanks. Most of my cards are points , believe i only have 2 cash back cards.

I'll do some research on my cards with points and find out which ones are better than the others.

Thanks!

Re: Points vs Percents

Anonymous — Sat, 02 Apr 2022 19:26:18 GMT

I think there is a card that is/was semi-popular here that gives FOUR points per $, but it turns out each point is worth very little and the earning is worse than many cards.

The major issue with points is that they are easy to devalue. The example I am most familiar with (unfortunately) is with Penfed's Platinum Rewards points. They silently devalued the points some time back. All that happened is that when you went to redeem, something that used to take say 50,000 points, now took 59,900. Card still earned the same way (5/3/1) so no annoucements were needed, it was just suddenly quite a bit less valuable.

Non-cashback points also can devalue in other ways, normally not through the issuer. So an airline can determine that a trip that used to take 120,000 miles now costs 200,000. Chase UR, Amex MR, Citi TYP still work the same from the card point of view, but they are less valuable for this redemption (but may still be OK for others).

Pure cashback cards devalue as well, but generally it is much more explicit, the issuer says it is going from 3% to 2% (USAlliance for example).

Re: Points vs Percents

Aim_High — Sat, 02 Apr 2022 21:08:22 GMT

+1 ^ Good explanation from @Anonymous.

And this is why with points systems, you never know what they were worth until after you've redeemed them.

And points-based systems are more subject to devaluation that cash back. Point devaluation can be insidious and easy to miss if a consumer is not paying close attention.

Also, if there is an annual fee on the card, doing the math to see what your actual earnings rate will be is crucial. Many premium cards that are rewards points-based have annual fees. Sometimes, much or all of that AF can be reduced by "credits" against it, so annual fees in-and-of themselves are not always a bad thing. However, if a consumer can't or doesn't use the credits, they become a further drag on earnings rates. Doing your own calculations to see what value you're getting out of points-based cards is always suggested.

Re: Points vs Percents

Credit-hoarder — Sun, 03 Apr 2022 03:48:43 GMT

I can tell you from experience the Pay Pal Extras MC points are only worth about .8cpp---not a full 1cpp.

Another Points vs cash back question

socalchef00 — Sat, 09 Apr 2022 18:07:45 GMT

About a week or so I posted regarding points vs cash back and most responses were for cash back percent being better than the typical 2x, 3x, 5x etc on points.

I want to double check I'm calculating this correct as I'm looking to reorganize my cards to the ones that will give me most benefits.

Currently my everyday use card is Fidelity Signature Rewards as I get 2% cash back.

I do have the Paypal Extra's MC that gives 3x points on Gas and Resturants.

I checked the conversion rate at Paypal, and it is 6,000 points = $50

Fidelity is $2500 spent = $50 cash back

To me, If I spend $2,500 with Fidelity thats $50, but if I spend $2,000 in Gas/Resturants, thats 6,000 points and I get $50 back

Seems like I should use Paypal MC for only Gas and Resturants and Fidelity for everything else?

Now of course, not all cards have the same conversion ratio, so it may vary card to card and I just want to make sure I'm not missing anything.

Re: Another Points vs cash back question

Anonymous — Sat, 09 Apr 2022 19:30:17 GMT

@socalchef00 wrote:
About a week or so I posted regarding points vs cash back and most responses were for cash back percent being better than the typical 2x, 3x, 5x etc on points.

I want to double check I'm calculating this correct as I'm looking to reorganize my cards to the ones that will give me most benefits.

Currently my everyday use card is Fidelity Signature Rewards as I get 2% cash back.
I do have the Paypal Extra's MC that gives 3x points on Gas and Resturants.

I checked the conversion rate at Paypal, and it is 6,000 points = $50
Fidelity is $2500 spent = $50 cash back

To me, If I spend $2,500 with Fidelity thats $50, but if I spend $2,000 in Gas/Resturants, thats 6,000 points and I get $50 back
Seems like I should use Paypal MC for only Gas and Resturants and Fidelity for everything else?

Now of course, not all cards have the same conversion ratio, so it may vary card to card and I just want to make sure I'm not missing anything.

Yes. The math really isn't very hard! The factors are simply:

1) What does the card earn, in points or %. This will vary from card to card, and within a card from category to category.

2) If points, how much are they worth when redeemed. Again, this varies from card to card, and within a card, how they are redeemed.

So, for a given purchase, does (points earned on card 1 * redemption rate for those points) exceed (points earned on card 2 * redemption rate for those points)

In your example, if 6000 Paypal Extra points are worth $50, a point is worth $50/6000, or approx 0.83c. A Fidelity point (redeemed into a fidelity account for example) is worth 1c

On gas and restaurants, Paypal Extra earns 3 points, which, from above is worth 3*.83 or about 2.5c. The fidelity card earns 2, each worth 1c, so that is worth 2c. SInce 2.5 > 2, yes, use paypal extra on those categories, and Fidelity for the rest, if those are the only cards.

Re: Another Points vs cash back question

socalchef00 — Sat, 09 Apr 2022 19:32:14 GMT

@Anonymous wrote:
@socalchef00 wrote:
About a week or so I posted regarding points vs cash back and most responses were for cash back percent being better than the typical 2x, 3x, 5x etc on points.

I want to double check I'm calculating this correct as I'm looking to reorganize my cards to the ones that will give me most benefits.

Currently my everyday use card is Fidelity Signature Rewards as I get 2% cash back.
I do have the Paypal Extra's MC that gives 3x points on Gas and Resturants.

I checked the conversion rate at Paypal, and it is 6,000 points = $50
Fidelity is $2500 spent = $50 cash back

To me, If I spend $2,500 with Fidelity thats $50, but if I spend $2,000 in Gas/Resturants, thats 6,000 points and I get $50 back
Seems like I should use Paypal MC for only Gas and Resturants and Fidelity for everything else?

Now of course, not all cards have the same conversion ratio, so it may vary card to card and I just want to make sure I'm not missing anything.
Yes. The math really isn't very hard! The factors are simply:

1) What does the card earn, in points or %. This will vary from card to card, and within a card from category to category.
2) If points, how much are they worth when redeemed. Again, this varies from card to card, and within a card, how they are redeemed.

So, for a given purchase, does (points earned on card 1 * redemption rate for those points) exceed (points earned on card 2 * redemption rate for those points)

In your example, if 6000 Paypal Extra points are worth $50, a point is worth $50/6000, or approx 0.83c. A Fidelity point (redeemed into a fidelity account for example) is worth 1c

On gas and restaurants, Paypal Extra earns 3 points, which, from above is worth 3*.83 or about 2.5c. The fidelity card earns 2, each worth 1c, so that is worth 2c. SInce 2.5 > 2, yes, use paypal extra on those categories, and Fidelity for the rest, if those are the only cards.

Thank you!

Re: Points vs Percents

SDMarik — Sat, 09 Apr 2022 21:03:53 GMT

It really depends on how you plan on using them, if cash back is your ultimate goal then a cash back card will pretty much always yeild you a higher net result than getting points and converting them. Most issuers will convert their points to cash at under 1 cent per point (usually around .005), which is well below the 1-2% cash back you can find.

Those 300 points are likely worth less than $3.

However, if you are planning on using the points for things like travel, they can be worth WAY more than the 1-2% cash back. Esepcially if you get the hang of trasnfering the points to partner airlines/hotels.

Re: Points vs Percents

coldfusion — Sat, 09 Apr 2022 21:27:26 GMT

@Anonymous wrote:
I think there is a card that is/was semi-popular here that gives FOUR points per $, but it turns out each point is worth very little and the earning is worse than many cards.

That would be the PNC Points card, which is the card that many BBVA Clearpoints cardholders ended up with as part of the BBVA assimilation by PNC. The standard payout is 4 points per dollar, but the value of 1 point = 0.25% i.e. by default it's a 1% cashback card. There are however ways to earn bonus points based upon type and value of PNC accounts and/or amount of monthly direct deposits made that in theory could make the card as much as a 1.75% cashback card, not that I see that as much of a wow factor.

Re: Points vs Percents

TSlop — Mon, 11 Apr 2022 14:01:18 GMT

@coldfusion wrote:
@Anonymous wrote:
I think there is a card that is/was semi-popular here that gives FOUR points per $, but it turns out each point is worth very little and the earning is worse than many cards.

That would be the PNC Points card, which is the card that many BBVA Clearpoints cardholders ended up with as part of the BBVA assimilation by PNC. The standard payout is 4 points per dollar, but the value of 1 point = 0.25% i.e. by default it's a 1% cashback card. There are however ways to earn bonus points based upon type and value of PNC accounts and/or amount of monthly direct deposits made that in theory could make the card as much as a 1.75% cashback card, not that I see that as much of a wow factor.

That was my first ever credit card, around 2006 or something. Back then, I thought the 4x points was awesome. I'd cash them in for Best Buy gift cards. But over the years, I noticed the amount of points for the gift cards was ever increasing. It wasn't until 2018 when I actually decided to start learning about credit card points/cashback. I did some math, and I realized the PNC cashback card would likely net me a greater return. PNC wouldn't PC it, so I ended up with Chase's Freedom card, thus beginning my journey to maximize rewards.

Overall, I prefer cashback to points. In PNC's case, they kept increasing the point cost for items, which effectively devalues the points. A point would need to be worth at least 1 cent to match cashback. That being said, I do like URs, since I can get more than 1 cent worth out of them.

Re: Points vs Percents

lovebackwards — Mon, 11 Apr 2022 21:00:06 GMT

I have a couple of travel cards in my siggy as my goal card. One of them is points based, but as much as I research, I can't wrap my mind around using a points system.

I'm really new to using credit cards and I love seeing the cash back that I get on my purchases. However, I do want a travel card because I want to travel more. I'm worried that I won't get the full benefit of the cards because I haven't really grasped points vs. cashback and all of the conversions, partners, etc.