**Updated, 11/06.**

Why, oh, why, do some rewards programs pay in points? How do I know what the points are worth? How do I know how the points rebates compare to the percentage rebates?

Rebate programs that use points do so for a couple of reasons. First off, they LIKE that they’re confusing. They COUNT ON you not knowing what you’re really earning when you shop. Your ignorance is their bliss!

When you do the math and calculate what a point’s really worth, it becomes obvious really fast that point rebate programs in general just can’t compete with cash rebate programs. In my 2006 Shopping Rebate Comparison Chart analysis, I found that the four lowest paying rebate sites of the 17 I compared were POINTS sites, not percentage rebate sites! Could they get away with it if it was more obvious that they’re paying so much less? Heck, no! People would go elsewhere!

Another reason some sites pay in points is that it gives THEM the control over what YOU are really earning. You think: “Hey! I almost have the 1000 points it costs to get a $10 Walmart gift card!” They think: “Hey, business isn’t that great…why don’t we increase the cost of that $10 Walmart gift card to 1200 points, make ‘em earn us some more money before we pay them?!” BOOM! They just made your points (that’s your rebate!) worth less. Cash rebate sites can’t do that.

One other reason some sites pay in points is that they can give out free, non-spending points to members for things like reading their emails or visiting links on their site. The member thinks they’re getting something for nothing — free points without spending a dime! But they may not realize the true value of those points (anywhere between 1/2 and 1/20th of a cent).

Finding out the real dollar value of a point can be useful in many ways.

**The Usefulness of Knowing Point Value**

Let’s say you want to figure out what’s the better deal, for example, 3% at Ebates or 20 Greenpoints per dollar. Or, you want to figure out how a 250 point Milesource signup bonus translates into dollars. Or maybe you’re curious, is 10 points per dollar at one program the same as 10 points per dollar at another site?

To do these kinds of comparisons, you have to know how much ONE point is worth at each site. That way, you can figure out how much 20 points per dollar is, THEN you can convert that to percent. (Just multiply the value of one point by 20…and move the decimal over two places.) You can figure out how much that 250 point signup bonus is. (Multiply the value of one point by 250.) And you can figure out how much 10 points per dollar is worth. (Multiply the value of one point by 10…and if you want to convert it to percent, move the decimal over two places.)

Once you know the dollar value of a point, the math isn’t very hard. But you need a strategy for how to go about calculating the value — and that can get complicated. Here’s why.

**Deciding How to Calculate Point Value**

The difficulty in calculating the dollar value of a point comes from the fact that rewards programs aren’t consistent with their own dollar value. If a $25 GC costs 1500 points, you’d think a $50 GC would cost twice that or 3000 points, right? Not necessarily… it might cost 2850. And a $25 department store GC may cost fewer points than a $25 Webcertificate. There could potentially be a different point value for every single redemption on a rewards program’s website! So how do you come up with a quick estimate for comparison’s sake?

The way I do it is, I calculate the dollar value based on a $25 GC when it is available, or the next closest denomination if $25 isn’t available (maybe they offer $20 GCs instead). This is just to be consistent across the board, so all programs are “judged” by the same dollar value redemption.

*The calculation itself is simple: Take the best $25 redemption (the one that costs the fewest points). Divide 25 by the number of points it costs. Voila! You’ve got the dollar value of a point at that program.*

There’s nothing magical about using the $25 redemption; I just use it for consistency. I didn’t want to use the cheapest redemption (at most sites, $5 or $10) because there is usually a cost savings in points for holding out for a higher value redemption… but I didn’t want to choose an unrealistically high value redemption, because most of us probably won’t wait until we have $100 in our accounts to cash out. If you want to re-work the numbers on your own at the $10 level or the $100 level, be my guest, just be sure to be consistent and use the same dollar value redemption for each program you compare.

As you read through each rewards program’s review on CompareRewards, you’ll see the dollar value of a point that I’ve calculated for that program. Remember that it is based on the best-value $25 redemption. If you traditionally cash out at a lower level, your points may be worth less…and if you usually cash out at a higher level, your points could be worth more. And remember, the calculation was valid as of the last date I reviewed the site… if the best $25 redemption’s point cost changed since then, the calculation won’t be accurate.

**Stop the Insanity!:**

“Site X pays 20 points per dollar for shopping at Target. Site Y pays 30 points per dollar. Site Y is the best!” NO! Well, maybe! How do you figure out if that’s true? Calculate the value of a point at Site X, multiply by 20, move the decimal over two places. Calculate the value of a point at Site Y, multiply by 30, move the decimal over two places. Compare. Site Y could be better…but comparing the number of points between the sites tells you absolutely nothing; you won’t know until you do the math!

**And Don’t Go HERE, Either:**

“Hey, a point is worth more at Program X than at Program Y. Program X must be better then, right?” NO! There are two sides to the point analysis: one is backing out the value of a point from the cost of the best $25 redemption. The other is taking that value forward to calculate what the site pays for its offers, including shopping. Program X may only charge 25 points for a $25 GC…that would make each point there worth $1. Sounds great, huh? More than what a point is worth at Program Y, for sure! But what if Program X only pays 1/1000th of a point per dollar for shopping? It’s an extreme example, but it’s meant to illustrate that the dollar value of a point is only one calculation that allows you to figure out what a points program pays. It’s not THE calculation that tells you if a program is good or not.

**I’m So Confused!:**

Don’t worry, you have a friend with an MBA and too much time on her hands. Just send me an email and I’ll be more than happy to do the math for you, or to explain it in a different way that might make more sense to you.

Congratulations! You’ve just completed the last section of Rewards Program Basics! You have MORE than enough information to make the most of rewards programs!

But I want to leave you with this, my most basic yet most important point: join a rebate/rewards program and start your shopping by clicking through their link to the online store where you want to shop…and you will save money every time. All the rest — determining point value, using shopbots, finding coupon codes — is just extra. Once you’re comfortable with the very simple act of clicking through the rebate portal to shop, to earn a rebate every time, then you can come back and re-read to grasp the finer nuances of taking full advantage of your options!

I was a newbie once, too, and I had questions and no one to answer them. Let me be that person for you. My email address is comparerewards@yahoo.com and I’m more than happy to help.

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*Updated, 11/06.*

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