Credit card signup bonus estimation details

In order to rank credit card offers from best to worst, we estimated the first year value of each credit card’s signup bonus.  This methodology does not take into account benefits one would get from each card through daily spend or from perks available to credit card holders other than those explicitly offered as part of the signup bonus.  One exception: annual statement credits (often offered for airline fee reimbursements) are counted as part of the credit card’s first year value.

For each credit card on our Best Offers page, we’ve estimated the card’s first year value as follows:

(Estimated value of bonus points + Estimated value of other bonuses)


(Estimated cost of minimum spend requirement + first year annual fee)

Estimated value of bonus points

Here we used the latest Reasonable Redemption Values (RRVs) to estimate the value of each point and then multiplied by the number of bonus points offered.  RRVs are the value at which it is considered reasonable to get this much value or more per point.  See this post for more information about RRVs: Airline Miles are worth 1.4 cents each. A simplified approach to Reasonable Redemption Values.


  • Current Reasonable Redemption Value (RRV) for IHG points = 0.57 cents per point.
  • The Chase IHG card often offers a 80,000 point signup bonus
  • Estimated value of bonus points = 80,000 X 0.57 = 45,600 cents = $456.

Estimated value of other bonuses

We count three types of credit card bonuses and perks in addition to bonus points:

  • Free nights (or other free things) given as part of a signup bonus
  • Statement credits given as part of a signup bonus
  • Statement credits available each year (in which case, I count only the first year credits)

Estimating the value of free nights:

We estimate hotel free nights as follows:

  • Hyatt 2 free nights at any Hyatt property: $500
  • Ritz Carlton 2 free nights at any category 1 through 4 Ritz property: $500
  • Hilton 2 free weekend nights at most Hilton properties worldwide: $500
  • Fairmont 2 free nights at any Fairmont hotel: $500

An explanation for the $500 2-night valuation can be found here: Unbiased credit card rankings: a work in progress.

Statement credits:

We discount the value of statement credits if they are difficult to obtain.  In general, we follow these rules:

  • Assign full value to any statement credit that requires credit card spend less than or equal to the credit card’s signup bonus minimum spend requirement.
  • Assign 90% value to airline fee reimbursements that are available to use for a full year or that are easily obtained by buying a gift card online.
  • Assign 25% value to fee reimbursements that are limited to 3 or 4 months and require spend directly with the credit card co-brand, and there are no known easy ways to get the reimbursement without travel.
  • Assign no value to fee reimbursements that seem especially difficult to obtain.

Estimated cost of minimum spend requirement

The cost of the spend requirement is estimated by assuming that the cardholder would have put the same amount of spend on a 3% cash back card if they hadn’t signed up for this card.

The cost of the minimum spend requirement is calculated as follows:

Value earned from spend (Points earned per dollar X Minimum Spend Requirement X RRV)


Opportunity cost of spend (3% of Minimum Spend Requirement)

Let’s flesh out the IHG example:

Value earned from spend: 1 point per dollar X $2,000 min spend X 0.57 RRV = 1,140 cents = $11.40


Opportunity cost of spend: 3% of $2,000 = $60

= –$48.60

A complete example

Remember that the overall calculation for each card’s first year value is:

(Estimated value of bonus points + Estimated value of other bonuses)


(Estimated cost of minimum spend requirement + first year annual fee)

Let’s now look at the best IHG credit card offer at the time of this writing (the IHG Premier Card): Up to 85K points: 80K after $2K spend in 3 months + 5K for adding authorized user.  $89 annual fee not waived first year..

Next, let’s calculate each of the components of the above equation:

  • Estimated value of bonus points: $484.50 (85000 bonus points X 0.57 / 100)
  • Estimated value of other bonuses: None (this is where we would account for a $50 statement credit for example)
  • Estimated cost of minimum spend requirement: $48.60 (1 x $2,000 x 0.57 – $2000 x .03)
  • First year annual fee: $89

Now, let’s put it all together:

$484.50 + 0 – $48.60 – $89 = $346.90

Notify of

This site uses Akismet to reduce spam. Learn how your comment data is processed.

newest most voted
Inline Feedbacks
View all comments