ValuePenguin.com (hereafter referred to as "Us", "We", or "Our") receives compensation for some of the card, insurance and deposit product offers that appear on the site. This in no way influences the opinions and reviews expressed by our writers and analysts. We maintain strict editorial integrity and our content is, and will remain, transparent and unbiased.
Our mission is to help our users make the most well informed decisions – this philosophy is what drives how we approach creating articles on our site. To that end, we strive to present readers with the actual value of the financial products we discuss on our site – explicitly showing, where possible, the math and data behind our conclusions.
In the interest of openness and transparency, here is a full list of current credit card and banking advertising partners:
- American Express
- Capital One
- Goldman Sachs
- JPMorgan Chase
- US Bank
- Wells Fargo
Credit Card Methodology Disclosure
Section 1: How We Determine The Value Of Rewards & Benefits
We do our best to estimate the value of each card on the site. To help consumers, we discuss the value of points, miles and cash back rewards of the card.
Card issuers may revise any of the terms discussed on our site without notice. Not all benefits are available to residents outside of the 50 United States and the District of Columbia. Complete program details should be checked through the card issuers' websites. Readers are encouraged to always read through a card's terms and conditions before submitting an application. The materials discussed on our site reflect the benefits of each card offer at the time of writing and should not be taken as a guarantee. The analysis on our website reflects the research and opinion of our analysts, which may differ from your experience with the card offers discussed on the site.
The values we use are always based on extensive research by our analysts and are displayed as a benchmark. It should be noted that such references, though rigorous, are not always exact. Cash rewards, points and miles have no cash value until such time as you may request and receive redemption (check, statement credit or gift card, or other methods) for your eligible rewards.
1.2 How We Determine The Value of Miles and Hotel Points
In determining the value of frequent flyer miles, our analysts perform an in-depth study into the redemption options for each airline. While miles can be redeemed in multiple ways, we default to using miles to book flights. The presumption here is that readers who are already interested in frequent flyer miles will use them to book more travel.
In the event that the value of redemptions is not fixed, our analysts will average no less than ten (10) itineraries – all of which will be subject to different dates, points of origin, and destinations – to calculate our value.
Example Calculation: A flight with airline X on a particular date from New York City's JFK to Los Angeles' LAX airport costs $500 or 50,000 points miles. For that itinerary, we would say the value of one mile is represented in the following equation:
$500 / 50,000 points = $0.01/point
In order to arrive at an average value for these miles, at least nine more itineraries would be collected – both domestic and international.
The same methodology is applied towards hotel reward points.
1.3 How We Determine The Value Of Credit Card Points
Some credit cards have reward programs that are not co-branded with a particular airline or hotel chain (e.g. Chase Ultimate Rewards, American Express Membership Rewards and Citi ThankYou). Such points usually have a number of different redemption options: cash back, statement credit, travel, transfers, etc. Our analysts look at all the values of such redemptions.
Example Calculation: An individual has some amount of points collected with credit card X. These points can be redeemed in the following ways:
- 5,000 points for a $50 Gift Card
- Transfer points to airline X at a ratio of 1:2
- 10,000 points to receive $50 cash back
- 5,000 points towards $50 in travel statement credit
Here is how the point value of each redemption method would be calculated:
- Gift Card: $50 / 5,000 points = $0.01 per point
- First, the value of airline X miles must be determined following the methodology outlined above. In our previous example, the value of a single airline X mile was $0.01. Therefore, since the user can get two airline X miles for a single point, this redemption results in a value per point of 2 x $0.01 = $0.02.
- Cash back: $50 / 10,000 points = $0.005 per point
- Travel statement credit: $50 / 5,000 points = $0.01 per point
With all the redemption values now known, we can say that the average value of a point on credit card X is ($0.01 + $0.02 + $0.005 + $0.01) / 4 = $0.01125.
1.4 List of Point & Mile Valuations
The following is a list of our point valuation studies. There, consumers can gain greater insight into how we approximate the worth of each particular mile or point:
- Chase Ultimate Rewards (http://www.valuepenguin.com/chase-ultimate-rewards)
- American Express Membership Rewards (http://www.valuepenguin.com/american-express-membership-rewards-comprehensive-guide)
- Citi ThankYou Points (http://www.valuepenguin.com/citi-thankyou-points)
- JetBlue TrueBlue (http://www.valuepenguin.com/jetblue-trueblue)
- United MileagePlus (http://www.valuepenguin.com/united-mileageplus)
- American Airlines AAdvantage (http://www.valuepenguin.com/aadvantage-frequent-flyer-rewards-program)
- Delta Skymiles (http://www.valuepenguin.com/delta-skymiles-program)
- Best Western Rewards (http://www.valuepenguin.com/best-western-rewards)
- Hilton HHonors (http://www.valuepenguin.com/hilton-hhonors-rewards-program)
- IHG Rewards Cub (http://www.valuepenguin.com/ihg-rewards-program)
- Wyndham Rewards Program (http://www.valuepenguin.com/wyndham-rewards-program)
- Marriott Rewards (http://www.valuepenguin.com/marriott-rewards-program)
- Starwood Preferred Guest Rewards (http://www.valuepenguin.com/starwood-preferred-guest-rewards)
- Plenti Program (http://www.valuepenguin.com/2015/03/plenti-rewards-new-cross-brand-loyalty-program-american-express)
- Hyatt Gold Passport (http://www.valuepenguin.com/hyatt-gold-passport)
While we do our best to keep the value of points up to date and current, users should never make a decision based solely on the material printed on our website. Always check with the issuer, airline or hotel chain before applying for a particular product, and consider how you will be earning or redeeming the points.
1.5 Point & Mile Bonuses
The above values are used in determining the value of credit card bonuses. Any time we explicitly call out the "value" or "worth" of a credit card bonus, it is obtained by multiplying the bonus amount by the corresponding point/mile value. Unless otherwise specified, we typically use the average redemption value.
Example Calculation: Card X has a welcome bonus of 10,000 points. Because we calculated the value of each point to be $0.01125, we say the value of the bonus is $112.50. This is represented in the following equation:
$0.01125 x 10,00 points = $112.50
1.6 Non-point-based Bonuses
Some credit cards will offer bonuses that aren't expressed in points or miles. For example, a card may offer a free hotel stay or an airline companion ticket. In such a case, the value we assign to the bonus is based on the average monetary value of the bonus. In the case of airline coupons and hotel stays, analysts use no less than ten itineraries to arrive at the value.
1.7 How Point Values Are Represented In Reviews, Studies and 'Best Credit Card' Articles
The value of points and miles is used to calculate the rewards rate of a credit card. This rate allows us to create for users a baseline comparison between cards by standardizing points and bringing greater transparency to the review process.
Important Note: The rewards rate is an approximation our analysts use to compare credit cards against one another. It is not a definitive representation of what a user can expect from using a card. Readers should be aware that points and their values are subject to sudden change based on what the card issuer chooses to do. Readers should never take a rewards rate to mean that it is the exact value they can expect to get by using a particular credit card. Instead, the rewards rate should be used to estimate and compare the relative differences between offers.
1.8 How We Calculate the Rewards Rate
The rewards rate for each credit card is created to help establish a baseline for comparing the rewards of different credit cards – whether they be based on a points, miles or cash back system. The rewards rate represents the return on every dollar a user charges to their reward credit card.
Example Calculation: If a user were to charge $1,000 to credit card A and in return receive $10, we would say that that card's rewards rate is 1%. This figure is obtained by dividing $10 by $1,000.
For cash back credit cards, the rewards rate is simply equal to its cash back rate. If a card has more than one redemption option, such as cash back or gift cards, we will take one – or the average redemption value – to arrive at a rewards rate, and note how it was derived.
For point and mile based rewards programs, the rewards rate is based on a point/mile redemption value obtained in a separate study – as is explained in Section 1.1. In the case of points, we consider the monetary value one can obtain from redeeming their points and apply that to the point-earning rate of a card.
Example calculation: Card X earns two points per $1 on gas and one point per $1 on all other spending. The value of points on card X has been determined to be 0.01125 cents. For every dollar you spend on gas, you receive the equivalent of 2.25 cents back (2 points x 0.01125 cents/point), while on all other spending you receive 1.125 cents back for every dollar you spend. The rewards rate of card A would be 2.25% when it is used on gas purchases and 1.125% on everything else.
In the case of credit cards that award miles, our analysts will sample dozens of itineraries and record the price for those in both USD and miles. Each is then divided to come up with an average value for a particular mile.
1.9 Net Rewards Rate
In certain instances on the site, we may refer to the Net Rewards Rate as an annualized variation on the above calculation that takes into account the annual fee of a card.
Example Calculation: In one year, a user with card X earned 100,000 points after spending $100,000. The user also paid a $50 annual fee on the card. To calculate the Net Rewards Rate, we take the value of points earned (100,000 points x $0.01125), subtract the annual fee ($50) and divide by the total money spent ($100,000). We then multiply the result by 100 to express it as a percent. The result in this case becomes (($1,125 - $50) / $100,000) x 100 = 1.075%.
Section 2: How We Determine the "Best Credit Cards"
2.1 How Cards Are Selected for Consideration
Credit cards appearing in the "Best Credit Cards" type pages (e.g. What Are The Best Rewards Credit Cards of 2018?, What Are The Best Business Credit Cards? and What Are The Best Travel Credit Cards?) have been selected from among the credit card offers in our database. While this does not encompass all possible credit card offers available to consumers, our editors do their best to be as exhaustive as possible in their search for cards.
Cards do not receive preferential treatment or placement based on advertising relationships. In our search for the best credit cards, we consider offers from both affiliate and non-affiliates and weigh them equally. Affiliate offers on our site are part of a paid advertising network.
2.2 What Qualifies in Each Category
A card can be included on a list of "Best Credit Cards for [Category]" as long as it satisfies at least one (1) of the following:
- The card earns rewards for that particular category. E.g. The Wells Fargo Propel American Express® card earns users points on travel shopping, qualifying it for the "Best Travel Credit Cards" page.
- The card's rewards can be redeemed for use in the particular category. E.g. The Chase Sapphire Preferred® Card earns points that can be transferred to airline partner miles, qualifying it for the "Best Airline Miles Credit Cards" page.
- The card includes perks, bonuses or features that would be useful to consumers seeking a card for the category. E.g. The Alaska Airlines Visa Signature® credit card includes a companion fare certificate which can help alleviate some of the expenses that come with traveling, qualifying it for the page "Best Travel Credit Cards."
- The card possesses a particular quality or feature that makes it part of the category. E.g. A card in our database with no annual fee will be considered for the "Best Credit Cards With No Annual Fee" page.
2.3 How We Decide To Feature Offers On "Best Credit Card" Pages
The cards we feature on the "Best Credit Card" pages are handpicked by our editors based on a number of quantitative and qualitative factors. Because some qualitative factors are unquantifiable, the "Best Credit Card" pages are, to a degree, a subjective list based on our editors' assessments and opinions of the qualitative and quantitative aspects of the offers. They are not a list of the absolute best credit card offers available, since that will depend on consumers' individual spending habits.
The following are some of the quantifiable factors our editors consider in their determination of Best/Top/Favorite Credit Cards:
- Rewards rate
- Signup bonuses
- Length of promotional APR offers
- Number and diversity of point/mile redemption options
- Special perks with assigned value (airport lounge access, free checked baggage on airlines, etc.)
- Severity of fees (interest, annual fees, etc.)
The following are some of the unquantifiable factors that are considered as part of the evaluation:
- Concierge service benefits
- Travel insurance benefits
- Priority boarding, in the case of some airline credit cards
- Breadth of point/mile/cash back earning opportunities
In addition, our editors consider several different consumer profiles: light spenders (less than $12,000 in annual credit card spending), medium spenders (between $12,000 and $24,000 in annual credit spending) and high spenders ($24,000 or more in annual credit card spending). These brackets were determined based on common credit card breaking points – where the annual fee becomes worth the awards users earn from spending. These numbers do not reflect, in any way, actual demographic or spending data.
2.4 The Order In Which Cards Appear
Credit card tools that appear on the "Best Credit Card" type pages display credit cards in order from the highest estimated net rewards to the lowest based on the default spending inputs. These are based on the latest average consumer expenditures data released by the Bureau of Labor Statistics (hereafter referred to as "The Bureau").
The Bureau lists the following annual expenses of Americans by category:
- Food at home: $3,971
- Food away from home: $2,787
- Owned dwellings: $6,149
Rented dwellings: $3,631
Apparel and services: $1,786
Gasoline and motor oil: $2,468
Vehicle Insurance: $1,112
- Health insurance: $2,868
- Entertainment: $2,728
- Cash contributions: $1,788
- Personal insurance and pensions: $5,726
- All other expenditures: $3,548
Our credit card comparison tool allows users to input estimated monthly spending by category to calculate estimated rewards for each card. Available categories are: general, gas, groceries, airlines, hotel, dining, office, utilities and computing.
The categories that could be charged to a credit card were then fit to one of our site's inputs. The Bureau's reported annual expenditures were divided by 12 to obtain monthly estimates, the results of which can be seen below:
- General (All other expenditures, entertainment, apparel and services): $670
- Groceries (food at home): $330
- Gas (gasoline and motor oil): $200
- Dining (food away from home): $230
Readers are expected to input their own spending in order to obtain personalized net rewards estimates for each card.
The way in which these tools calculate value is discussed in the section below.
Section 3: Methodology for Credit Card Calculator
Our calculators and tools exist to help users through the calculations we outlined above. By entering their monthly spending once, the calculation is carried out automatically for all cards displayed in that category.
Example Calculation: The Chase Sapphire Preferred® Card:
1. Users enter their estimated monthly spending: $400 per month on dining, $100 per month on airline purchases made directly with the airline and $1,000 on all other purchases.
2. We first calculate net rewards and points earned in their first year. Since the Chase Sapphire Preferred® Card earns users two points per $1 spent on travel and dining, the total points earned each year are 24,000. Assuming the card offers a 50,000-point bonus for spending $4,000 in three months (Note — the offer can vary. Visit Chase's website to see the current sign-up bonus), the user will also qualify for the card's bonus. Therefore, the first year, a user earns 74,000 points (24,000 + 50,000). We estimate each point is worth $0.0125. Therefore, we calculate that a user earns $925 (74,000 x $0.0125) in value in the first year of holding the card.
3. Next, we calculate net rewards and points earned in their second year: They earn 24,000 x $0.0125 = $300. During the second year, the annual fee also kicks in, making the net rewards $300 - $95 = $205 for year two.
4. We calculate the Net Rewards Rate: This tool on the comparison pages is the average rewards rate over two years. The Net Rewards Rate for each year is the value of rewards earned minus annual fee divided by the amount spent. For year one, after having accumulated 74,000 points and earned $925 in rewards, our rewards rate was $925 / $18,000 = 5.14%. For year two, the net rewards rate was $205 / $18,000 = 1.14%. Therefore, the card displays a Rewards Rate of 3.14% (Year one Rewards Rate: 5.14% + Year two Rewards Rate: 1.14%) / 2 = 3.14%
Section 4: Deposit Account Methodology Disclosure
To help our readers understand the comparative value of different deposit account options, we evaluate deposit products from a qualitative and quantitative standpoint. Factors we examine include, but aren't limited to: interest rate, account fees, deposit minimums and opening requirements; ATM networks, branch availability, mobile app features and website technology; and customer service ratings and satisfaction surveys. The factors we consider may differ based on the type of deposit products we evaluate.
Section 5: Editorial Grade
The numbered score on each card review is an editorially-chosen grade, on a scale from 0 to 5. The number is assigned at the discretion of the reviewers, and is an evaluation of the product's features. Generally, a score between 4 and 5 means the product is one of the best on our site. A score of 3 to 4 corresponds to "good." A score of 2 to 3 is "average." Between 0 to 2 is "poor."
The credit cards are scored based the following:
Rewards card: The reviewers take into account the card's net rewards rate and rewards value, across several different spending profiles. Points are taken off for characteristics such as difficulty of reward redemption or high annual fees. Additional features (or lack thereof) impact the score as well. This includes foreign transaction fees, baggage waivers or flexibility of rewards programs.
Low APR/Balance transfer cards: These are scored based on their ability to drive down costs for consumers, as well as how they perform in the long term. Just like rewards cards, points are deducted for high fees, difficulty of use or any constraints that make the user experience less than ideal.