Over the past few years, I’ve accumulated a ton of credit card points. I was recently reminded of how many points I’ve amassed when I went to book some flights for our international summer trip next year – we’re flying to France to catch the tail-end of the Olympics, then taking a train over to Switzerland for a few days before flying back to the US.
Even after booking three business class flights each way, I found I was still left with over 3 million points in my Chase and American Express accounts. And that doesn’t include the points and miles I still have in various other airline and hotel programs like Delta, American Airlines, Marriott, or Hilton.
Most of these points came from my regular mainstays – cards like the Chase Ink Unlimited and the American Express Business Platinum (specifically, the targeted no-lifetime language offers). But some of this came from my regular spending too – with two kids, daycare, taxes, and all sorts of other things to pay for at this point in my life, my household expenses are abnormally high right now.
3 million points is A LOT of points. But in the abstract, it’s just a random, arbitrary number – like saying I have a bajillion dollars or something.
When I do the math though, it’s pretty incredible how much my points are worth. Assuming a reasonable redemption value of 1.5 cents per point, those 3 million Chase and American Express points could be worth an astounding $45,000 in travel (and likely more if I’m more strategic with how I use them).
Using these points for travel and assigning a value to them is all theoretical. But even turning them into cash would be possible. At a bare minimum, I could cash out my 3 million points for around 1 cent per point in statement credits. That means those 3 million points are worth $30,000. That’s a lot of money to have sitting around!
Could My Credit Card Points Be Part Of My Net Worth?
I don’t obsess about my net worth too much because I don’t think it’s all that helpful, but I still like to keep track of it just so I have a general idea of where I stand financially.
Net worth has always seemed like a vanity metric to me since much of it isn’t really “real.” Yes, you have things with immediate value such as cash and easy-to-access investments. But like a lot of people, much of my net worth isn’t easily accessible – money stuck in retirement accounts or my house. Even things like this blog could technically be part of my net worth – it has value and could be sold to someone.
When I think about it, my 3 million in credit card points could easily be considered an asset and something that should be counted as part of my net worth. I usually hesitate to treat my credit card points as something of value, mainly because they’re a made-up currency that can be devalued or lost entirely based on the whims of a company (this is a story for another time, but back in early 2020, American Airlines shut down my frequent flyer account and I lost over 300,000 in American Airlines miles).
And yet, the 3 million points I have sitting in my credit card accounts undoubtedly have value. The most obvious value they’ve given me is their value for travel. Indeed, my points have made it so I haven’t had to pay for a flight or hotel in over 6 years. That’s a significant amount that I haven’t had to pay for using my “real” money.
So should my credit card points be part of my net worth? Do I have an extra $30,000 or more sitting around? I think there are good arguments to say I do.
Credit Card Points Are Tax-Free Money
One thing that I don’t think gets talked about much is the tax benefits of credit card points. Unlike other forms of income which require you to pay taxes at some point, credit card points are unique because they aren’t considered taxable income (rather, they’re considered a non-taxable rebate). The fact that credit card points aren’t taxable can actually be a big deal, especially if you’re a high-income household like my family is.
I do a lot of this sort of gaming of financial products, such as how I earn thousands of dollars each year in bank account bonuses. Bank account bonuses are nice because the money you earn from them is pure cash, but they come with the disadvantage of being taxable interest income. So even though I earn several thousand dollars each year from bank account bonuses, I inevitably lose some of it to taxes.
But credit card points don’t suffer from that disadvantage. If I earn 100,000 points that are theoretically worth $1,000, I get the full $1,000. Considering that I now have tens of thousands of dollars worth of credit card points, that’s a pretty significant savings. And it does save me money when I travel because instead of paying for my flights or hotels with taxable income, I’m able to pay for these things with untaxed points.
I Try To Earn Something Back Whenever I Spend Money
I try to optimize a lot of my life, which means when it comes to spending money, I try to never spend a dollar without getting something back in return. The way I see it, if I have to spend money, I should try to get something back for it if I can.
Interestingly enough, because of the ubiquity of credit cards and credit card rewards, the cost of everything is essentially increased to cover the fees that businesses pay to credit card companies. As explained by Vox:
With more credit cards and more rewards come more swipe fees. And merchants don’t want to pay those fees out of their own pockets — so they pass some of them on in prices that everybody pays, not just the credit card holders. People paying with cash or debit cards wind up footing the bill to pay for the rewards of people who pay with credit cards — people who tend to be more well-off.
I’m in a situation these days where I accumulate way more points than I can spend. It’s not the ideal thing to do – points have no value until they’re used – but I can’t help it. I spend a lot of money because my expenses are higher than normal these days. Since I keep spending so much money, I keep opening more and more credit cards to earn valuable signup bonuses. And I’m not really spending these points very quickly because I can’t travel as much as I’d like due to work and kids.
But even though I’m not necessarily using my points, they are still an asset. They might be a made-up asset with no inherent value, but they do have value if I use them – so long as these banks don’t massively devalue the points.
The ultimate takeaway I guess is that net worth might be made up of more than just cash, stocks, and real estate. There are a lot of other things that could be included in that number. In this case, I happened to notice all these points sitting in my credit card accounts – a lot of points. I think those should be counted somewhere, even if it is a made-up currency.