Sunday, January 13, 2013

Bank of America Master Card Points Reward Program Dollar and Points Ratio

Introduction and Background Information
This isn't really a problem, just something I thought was kind of amusing and I wanted to share with anyone who might be wondering about it or hell maybe you didn't even realize it. I have a Bank of America (BOA) Master Card (MC) with what is formerly known as the World Rewards Point Program which has recently been re-branded as the BOA Rewards Point Program. I also own a Visa with a Cash Rewards Program which I absolutely love because I get money back for buying stuff I have to buy anyhow which averages out to about $25 every 3 months. That's not bad. I haven't done the ratio on that yet (follow up article?), because I don't really care what the ratio is since like I aforementioned I would have had to purchase those items with or without the rewards program.

Stuff such as Gasoline which you get 3% back on, then 2% on food and 1% on anything that isn't the other two things. Well for those things that only qualify for 1% I use my MC instead because I like to separate out my purchases. So the Visa is for food and gasoline (odd pairing huh) and my MC is for anything that isn't food and/or gasoline. Helps me identify where my money is going pretty easily. I am more forgiving of the purchases on my Visa since I automatically know what they are rather than my MC which is for what can be considered non-essential items. Well I started racking up a bunch of points on my MC and I wanted to see what the payout was if I converted my points to cash which is actually an option or I could get stuff or gift cards which are kind of like cash. I noticed that the ratio of Points to Dollar (or Dollar to Points) were drastically different depending on how many points you have and what you are trying to obtain. In my case I am focusing only on cash or an Amazon Gift Card because I feel that Amazon is a pretty good place to spend money especially if you have Prime.

The Chart
Item Value Points Ratio ($/p) Ratio (p/$)
Cash $12.50 2,500 0.005 200
Cash $25.00 5,000 0.005 200
Cash $37.50 7,500 0.005 200
Amazon Gift Card $25.00 3,500 0.0071 140
Amazon Gift Card $50.00 6,500 0.0077 130
Cash $80.00 10,000 0.008 125
Cash $120.00 15,000 0.008 125
Cash $160.00 20,000 0.008 125
Amazon Gift Card $100.00 12,000 0.0083 120
Cash $250.00 25,000 0.01 100
Cash $350.00 35,000 0.01 100
Cash $500.00 50,000 0.01 100

This chart is sorted by the Dollars to Points Ratio (4th Column). I mixed in Cash and Amazon Gift Cards because those are the two most intriguing things to me. Amazon doesn't beat out cash, it is only worth it if you are going to cash in 12,000 points. Otherwise it is better to wait it out to until 25,000 points where you benefit the most and you get the highest dollar per point value of 0.01 dollars per point.

Conclusion
No I don't actually have a lot of time on my hands, I just thought this was pretty amusing and I wanted to point it out. So basically the idea here is the more points you have the better your conversion is from points to dollars because you hit a constant, a ceiling factor if you will, where it doesn't matter anymore. It is better to go for a point to cash conversion when you hit 25,000 points because your ratio doesn't get any better.

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