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How we think about first year value of credit cards

When we publish a first year value, we are giving you a number that represents the cash value you will get from a credit card in the first year, less annual fees.

It’s that simple.

But there is a lot of thought behind what we do or don’t include in that number. Read on for more.

We take a conservative approach

We focus on cash rewards and only the credit card value that is likely to be realized by the vast majority of credit card users. This often means that our first year value numbers are lower than you will see elsewhere.

Why do we do this? Everyone has different budgets and spending patterns, so it’s folly to make too many assumptions about how you will use your credit card, so we don’t. And most people will redeem their credit card rewards for cash or cash equivalents, so that’s what we choose to focus on.

The good news for you is that, if you use the benefits of your credit cards and put spending on cards that aligns with category bonuses, you are likely to get much more value out of your credit cards in the first year than our published first year values. (And our credit card overviews are a great way to see how to get more value out of your cards!)

Ultimately, we think that taking a conservative approach to credit card first year values inspires trust.

What is included in “first year value”

In our first year value number, we include the value of cash-equivalent rewards that you will get by signing up for the credit card and spending the amount required to earn the welcome bonus. We also subtract the annual fee that you will pay in the first year.

Cash value of the welcome bonus

If a credit card offers a $200 welcome bonus after spending $1,000 within three months, we assume that you will spend $1,000 on the card and earn the welcome bonus.

When a card earns points that can be redeemed in multiple ways, we include the value of the most logical way that most holders of the card could use their points. The Capital One Venture X card earns points that can be redeemed for cash back at 0.5 cents per point or used to offset travel purchases charged to the card at 1 cent per point. Since this card is targeted toward people who travel often, we assume that most users of this card will redeem their points to offset travel purchases, making the 75,000 points earned from this card’s welcome bonus worth $750.

We do not assume that you hold other cards. Things get a little bit more complicated when a credit card earns points that can be transferred to other cards. For example, the Chase Sapphire Preferred card earns points that can be redeemed for cash back awards at one cent each or used to book travel through Chase Ultimate Rewards at 1.25 cents each. But if you transfer these points to a Chase Sapphire Reserve card, the points can be used to book travel at 1.5 cents each. We don’t assume that you hold the Chase Sapphire Reserve card, so we value the 80,000 point Chase Sapphire Welcome bonus at $1,200 (1.25 cents per point.)

Statement credits

Some credit cards offer statement credits to offset purchases at certain merchants or certain categories of purchases. We include a limited number of statement credits in. Generally our rule is that we include statement credits that we think the vast majority of credit card holders will reasonably use.

For example, we include the $300 travel statement credit on the Chase Sapphire Reserve card in that card’s first year value calculation. The card is targeted toward people who travel and the credit is automatically applied toward a wide variety of travel expenses. Likewise we include the Capital One Venture X $300 travel credit in that card’s first year value calculation because, even though it applies only to travel booked through Capital One. Most airfares, hotels and rental cars are bookable through the Capital One Travel portal at prices similar to what you would find on any online travel agency. And those who hold a travel credit card will almost certainly be able to spend $300 or more on flights, hotels or rental cars through the Capital One travel portal.

The one case in which we will include a merchant-specific statement credit in our first year value calculation is when the merchant is a sponsor of the card. For example, if you applied for a Delta SkyMiles credit card that offered a $100 statement credit after your first Delta purchase, we would include that in our first year value calculation.

Annual fee

Finally, we subtract the annual fee that you pay in the first year of card membership. If you get a $500 welcome bonus on a credit card but have to pay a $250 annual fee, you are actually getting $250 of value in your first year. Our first year values take this into account.

What is not included in our first year value

There are a lot of things that we choose to not include in our first year value. It’s not that these perks aren’t valuable, it’s that they won’t be used by everyone who gets the card. You can (and should) take advantage of these additional perks to get additional value from your card. We just don’t include them in our headline number.

Free night certificates or other intangible premiums

The problem with free night certificates or other intangible benefits is that they are notoriously hard to value and often expire. For example, one of the many Marriott credit cards recently offered five 50,000 point free night certificates. Many bloggers touted this as the most valuable credit card welcome bonus, ever. But there is no way to know if you will use these certificate to stay at a $100/night Courtyard by Marriott or a $1,500 a night JW Marriott property.

We will definitely tell you about these and these can be a great way to get a huge amount of value out of your credit card, but we won’t assume how you will use them.

Category spending and bonus offers

Some people who read this site barely spend anything on credit cards, some people put tens of thousands of dollars (or more) of expenses on cards each month. We don’t make assumptions about how much money you will spend on the card. So, we make no assumptions about how much you will spend on your credit cards.

This means that you will often get more value out of cards than our first year value states if you apply for and use cards that offer bonuses that align with your spending patterns.

For example, the Chase Freedom Flex and the Chase Freedom Unlimited both currently offer a 5% cash back offer on grocery store purchases within the first year, on up to $12,000 spent. If you maximize this offer, that could mean another $600 of cash back in your first year. But we say that the first year value of these cards is $200 because we do not assume that you will spend on groceries in the first year.

Statement credits that are restrictive

Many premium credit cards offer statement credits to offset purchases in certain categories or merchants. We are very selective in the statement credits we include in our first year value calculation; most statement credits are not included.

Probably the best example of this is the American Express Platinum card, which offers “over $1,500 in value” in statement credits. But are you really going to spend $189 on a CLEAR membership, $25 monthly toward an Equinox Membership, $50 every six months at Saks Fifth Avenue, $12.95 monthly for a Walmart+ membership, etc.? Likely not.

Also, many credit cards offer credits for travel incidentals like checked bag or seat upgrade fees. While many people with frequent flyer status will get value out of these fees, we don’t think that they are used often enough to be included in our first year value.

Value of aspirational awards

Some of the highest value ways to use points, especially transferable points like Citi ThankYou Points, Chase Ultimate Rewards, American Express Membership Rewards and Capital One Miles are to transfer them to travel partners and redeem them for luxury hotels or international business and first class flights. Most of these point redemptions often require intimate knowledge of airline mileage programs, many hours of research and ultimately quite a bit of luck. We don’t assume that you use miles and points in this way and we certainly aren’t going to assume that you would otherwise pay $10,000 for that business class ticket to Europe.

Bottom line

We value the trust you place in our site to give you accurate and to cut through the hype. When you see our first year value number, you can be assured that the number represents an accurate cash value that you will receive from your credit card in during your first year of holding the card.

About the author

  • Aaron Hurd

    Aaron Hurd is a credit card, travel rewards, and loyalty program expert. Over the past 15 years, he has authored over a thousand expert contributions published by leading outlets including WSJ, TIME, Newsweek, Forbes, NerdWallet, The Points Guy, Bankrate, CNET, and many others. He has also served in consulting roles for many of these same outlets, designing content strategy, hiring teams of teams of editors and contributors, developing thought-leadership pieces, and ghost-editing for senior editors. Aaron is well-known in the miles and points community and regularly presents about travel rewards at conferences like the Chicago Seminars and Minnebar. Aaron has enjoyed the game of optimizing credit card rewards since getting his first credit card shortly after he turned 18. He started learning about credit cards and travel rewards from the (now defunct) FatWallet Finance forums and FlyerTalk. He holds more than 40 open credit cards and has first-hand experience with almost every major credit card product.

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