Valuing Frequent Flyer PointsNot all frequent flyer points were created equal. The value you receive depends on how they are spent. We all try to maximise the value we get when redeeming frequent flyer points… so how do you know if you’re getting a good deal?

The “Cents Per Point” Method

One way to calculate the value of your frequent flyer points is to use the “cents per point” method. To do this, you would need to work out a monetary value for the reward you’re redeeming. You would then divide this value by the number of points being redeemed for that reward.

For example, a Qantas Business class flight from Melbourne to Sydney normally costs $868.

Qantas website screenshot
Qantas website screenshot

Alternatively, you could redeem 16,000 Qantas points and $36 in taxes & charges for a Business Classic Reward on the same flight.

Qantas website screenshot
Qantas website screenshot

This effectively means that the 16,000 Qantas points you’re spending are worth $832 – the cost of the airfare minus the taxes & charges you’re paying. If we divide 832 by 16,000, we find that we’re getting $0.052 or 5.2 cents of value from each Qantas point.

Admittedly, the “cents per point” method doesn’t take into account the 1,850 Qantas points and 40 status credits you would have earned by paying $868 for the full-price Business class ticket.

Toaster for sale at the Qantas store
Toaster for sale at the Qantas store

The “cents per point” method can also be used to determine the value of frequent flyer points spent on non-flight rewards. For example, this toaster from the Qantas Store costs 34,260 Qantas points. A quick Google search reveals that the same toaster retails for around $139. If we divide $139 by 34,260 points, we discover that we’re getting just 0.41 cents per Qantas point worth of value.

The “Personal Valuation” Method

You might be thinking… “but I would never pay $868 for a flight from Melbourne to Sydney”. Perhaps you only personally value a Business class flight at $500. If that is the case, you may wish to use the “personal valuation” method. Instead of dividing the cash fare by the points required, you could divide the amount at which you value the reward by the number of points.

What are the best ways to spend frequent flyer points?

Using the “cents per point” valuation method, we can easily estimate the value of a range of different Qantas Frequent Flyer redemptions:

Estimated value of 1 Qantas point by redemption type
Estimated value of 1 Qantas point by redemption type

There’s a clear trend here. Non-flight redemptions offer poor value, while redemptions for upgrades and flights in premium cabins see frequent flyer points valued highly. While these results are for Qantas Frequent Flyer redemptions, it’s a very similar story with most frequent flyer programs worldwide.

Does it ever make sense to redeem points on the ground?

You’ll usually get better value for your frequent flyer points by spending them in the air. But depending on your personal circumstances, it could sometimes make sense to redeem points on the ground – for things like gift cards, hotels, hire cars, electrical appliances or even Qantas Club membership.

If you’re able to earn more points than you can realistically use for premium travel, then it may not hurt to redeem some points on the ground – even if the return is not as great.

Some scoff at people using points for gift cards, holiday packages or hotels – I’ve become a little that way and thinking, why would you do that! But after speaking to my wife recently about starting to plan a trip to the US next year, I’ve started to think a little different about point redemption’s and it definitely is not a ‘one way fits all’.

After deciding on possible routes and classes for our planned trip, we knew that we would still have a healthy QFF balance afterwards. My wife suggested we just use the remaining point balance towards booking some hotels, I scoffed, why would we do that as it provides such a bad return. She said, well that might be the case but when do you plan on using the remaining points on a premium flight?

Another AFF member writes…

…I worked out that even after flights I would have enough QFF points for around 30 hotel nights. I know I could get better value out of the points for flights, but do I want to spend $5000 on hotel nights out of my own pocket or use existing points? Simple choice for me, keeping my $5000.

It can also make sense to redeem points on the ground if you don’t fly much, or find it difficult to use the points for flights and upgrades. (That said, if you’re having trouble redeeming your points for flights, the Award Flight Assist service is available to help!)

I recently also did the cardinal sin… used QFF points in the QFF Store to purchase Bose QC25 headphones during a sale – 38,740 points and you can buy the headphones for $249 at the moment at Harvey Norman – I had a pretty large points balance (for me) at the time and nil success with getting upgrades on recent trips so is a good use of points for me, and the headphones are amazing, so much better than what you get provided by the airlines in J…. so I am happy.

You may not always get the absolute maximum value for your frequent flyer points (which probably cost you nothing in the first place). But even redeeming for a toaster is better than letting your frequent flyer points expire!

Join the discussion on the Australian Frequent Flyer forum: To knowingly commit a cardinal redemption sin

 

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Matt Graham
The editor of Australian Frequent Flyer, Matt's passion for travel has taken him to over 60 countries… with the help of frequent flyer points, of course!
Matt's favourite destinations (so far) are Germany, Brazil, New Zealand & Kazakhstan. His interests include economics, aviation & foreign languages, and he has a soft spot for good food and red wine.

You can contact Matt at [email protected]