How do you calculate credit card rewards?

Calculating your credit card rewards is vital to ensure that your card’s annual fee is justified. This article will further discuss how to calculate your credit card rewards.

Firstly, it is important to understand that not all credit card rewards are the same. One point earned through one credit will most likely not be equivalent to a point earned through another credit card. It is therefore important to conduct calculations separately for each credit card you have. 

The actual process of calculating your credit card rewards is fairly simple. You first have to note down the rewards rate of your card (i.e. how many dollars of expenditure equate to 1 point) and then divide your total expenditure by this rate. Certain cards have specific restrictions on which categories of purchases are eligible for rewards. It is therefore important to only calculate your rewards for the categories your card has rewards on. 

It is also important to factor in other costs that may lower the true value of your rewards. Costs such as interest fees, late fees, foreign transaction fees and annual fees need to be subtracted from the value of the rewards. After this, you will have to calculate your redemption rate (i.e. what you points are worth in terms of real currency) and redeem them appropriately. 

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Conducting this process regularly is not only a good way to understand how many points you have earned, but also to gauge if your card’s rewards outweigh its costs.