# Cents Per Mile

Discussion in 'General Discussion | Credit Cards' started by andhoova, Sep 11, 2013.

1. ### andhoovaSilver Member

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I see a lot of posts were people are discussing the value of their points for a specific award. How do you calculate this?

2. ### zpheljGold Member

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The short answer is 'in the manner which makes the most sense for you'. Lots of people have 'rules' they use but in the end they are their rules.

I try and think big picture, leverage the current rules in play and not rely on one lone calculation. The game is complex; don't box yourself in.

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3. ### andhoovaSilver Member

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Yeah, but how do I figure out how much value I'm getting out of my award ticket for a certain points currency?

4. ### KathInJaxSilver Member

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The problem is that you can start coming up with too many valuations. Examples:

Cash Price - My recent coach redemption was \$3,000 if booked for the exact trip. \$3,000/60,000 = 5 cents per mile
Probable purchase price - If I was paying cash, the best price for different flights was \$1,200. = 2 cents per mile
How much I would pay for ticket - I would not pay \$1,200, the most I would pay would be \$700. I would have to go a different time of the year. = 1.16 cents per mile
What I would have paid for this specific trip - probably \$0, because without the miles, I would not take the trip. = no value

You can add in the amount of miles I lost by using points, instead of cash. This would be 11,000 miles.

\$3,000/71,000 = 4.2 cents per mile
\$1,200/71,000 = 1.69 cents per mile
\$700/71,000 = .98 cents per mile
0/71,000 = no value

You have to choose what makes sense to you.

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5. ### servoSilver Member

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All good points. KathInJax says it well, there are no definitive answers to point value. Everyone takes what makes sense to them and runs with it. Personally, I work in banking software, so I take my valuation to the extreme (think of the echo effect and slowness of that to really capture my intent).

I personally look at the variance between the cost I paid for miles in a particular program versus the redemption value. I use the first method KathInJax mentioned, using cash price to points used, but I'm a bit more descriptive than that, and I don't bother with opportunity cost and other assumptions of what I WOULD have done if I wasn't using points.

Confucius the Accountant says, "stick to the beans one can see, and count those". Therefore, my math looks like this:

((cost of cash ticket for same flight itinerary minus any award fees actually paid/realized divided by the number of points/miles redeemed) minus (cost of acquiring miles/points for that particular redemption divided by the number of points/miles redeemed) This gets you the cost per mile of the redemption, minus the cost per mile of acquisition.

To give an example, back in March I took a last minute award on US from MCO-LAS. The cost was 36k miles or \$837. I paid \$110 for the close-in booking fee and other taxes + the 36k miles. The cost for me to acquire the 36k miles was nothing, because I got the USAirways card and used the 40k miles after meeting my minimum spend, which was one purchase, which while irrelevant, was \$5. However, for the sake of the math, let's say I earned the 36k miles buying Vanilla Reloads at \$3.95 per \$500 at CVS, which is a 1x redemption - cost per mile is 0.00790. 0.00790*36000 = \$284.40

The math then: (((\$837-110)/36,000) - (284.40/36,000)) works to 0.0201 - .00790 = .0122 or 1.22 cent per point/mile benefit.

This gets really muddy when you have varying cost points to acquire, but like I said....to the extreme.

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6. ### SuperKirbyGold Member

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The cents (cost) divided by the points/miles.

On top of other posters giving you excellent examples, here is another for you:

For 50,000 points in a program, I can usually redeem for a \$500 gift card. \$500/50000 = 1.0 CPP (Cent per point).
Or for 50,000 points, I can use it to book a flight to wherever, and lets say this flight actual cost is \$1600 at the time of booking. My value would be \$1600/50,000 points = 3.2 CPP.

So my value is higher (over triple) with that flight booking. If that same flight was actually worth \$400, then my CPP would only be 0.8 CPP, very low value. So as you can see, it all depends on what you redeem for.