Measuring signup and retention offers with an X


Its no secret that the easiest way to earn frequent flyer points & miles quickly is by signing up for a few credit cards.  Many cards standardly offer 40,000 to 50,000 point bonuses.  In almost all cases, though, there is a catch.  You must spend a certain amount of money in a certain amount of time (typically 3 months) to get the full bonus.  A 50,000 point offer that requires $1K spend is much better than a 50,000 point offer that requires $5K spend.  But, what about a 75K offer that requires $5K spend?  How does that compare?

Let’s set aside for a moment the fact that the value of points vary tremendously from one program to another.  For example, Starwood points are worth waaaaay more than Hilton points.  We’ll come back to that.

Signup Offers

When I look at new sign-up offers, I find it helpful to calculate the “X”.  What I mean is that I calculate how many points per dollar I would get from fulfilling the spend requirements to get the full signup bonus.  Let’s take an example…

One of my favorite cards is the Chase Sapphire Preferred.  For the past year or so, it has had a standard signup bonus of 40,000 points after $3K spend.  If we assume, conservatively, that all $3K spend will be for things that earn 1 point per dollar then we can calculate that we will have 43,000 points after spending $3K.  That comes to 14.3 points per dollar, or 14.3X.  If, instead, we spend all $3K in 2X categories (travel and dining), then we would end up with 46,000 points, which comes to 15.3 points per dollar.  So, the “X” for this offer ranges from 14.3X to 15.3X.

Looking at a few other current signup offers, we have:

  • Chase Ink Bold / Ink Plus. 50K after $5K spend = 11X to 15X
  • Chase British Airways. 50K after $1K spend = 51.25X to 52.5X
  • Chase Southwest. 50K after $2K spend = 26X to 27X
  • Amex Business Gold.  50K after $5K spend = 11X to 13X
  • Amex Gold Delta.  45K after $5K spend = 10X to 11X
  • Amex Gold Delta (2).  30K after $500 spend = 61X to 62X
  • Amex SPG. 10K after first purchase (= 10,000X for a $1 purchase), then 15K after $5K spend = 4X to 5X
  • Citi AAdvantage.  40K after $3K spend = 14.3X to 15.3X
  • Barclay Arrival. 40K after $1K spend = 42X
  • Barclay Lufthansa Premier. 50K after $5K spend = 11X to 12X


Why is this interesting?

What I find interesting about this way of looking at things is that while several of the offers are off the charts at over 50X, most are in the 10X to 15X range.  This is still better than earning 5X everywhere, but not by orders of magnitude.  In other words, if you’re not into churning credit cards (or you’ve already signed up for all of the good cards), you can still do very well just by using the right card for the right job.  See, for example, these posts:


Retention offers

Often, when you call to cancel a credit card, the credit card company will offer you points or cash to keep the card.  Often, though, those offers come with spend requirements.  For example, a reader recently told me that when he tried to cancel his American Airlines card, he was offered a retention package of 10,000 miles contingent upon $5K of spend.  Since this card automatically earns 1X for most spend, this means that he would earn a total of 15K after spending $5K on that card.  In other words, his card has temporarily become a 3X earning card.  While that’s nice, it’s certainly not amazing.

The value of points

There’s no doubt that the value of points vary tremendously from one program to another.  Unfortunately, it’s impossible to say exactly how much each point is worth (see “Impossible point valuations and the joy of free“).  You can, though, estimate the usual price at which people “buy” points through credit card spend.  See “Fair Trading Prices.”  While these fair trading prices will not tell you how much value you’ll get from your points, I’d argue that they are a fair way of estimating the rebate value you get from spend.  Take, for example, the fair trading price of Ultimate Rewards points, which is 1.31 cents per point.  You could plug that number into the calculated “X” above for the Sapphire Preferred card and come up with a rebate % like this:

Sapphire Preferred = 14.3X.  14.3 * 1.31 = 18.7%.

So, you could estimate that the rate of return on your Sapphire Preferred’s $3K spend is 18.7%.  Personally, I don’t bother going that far with the calculations.  If a signup offer or retention offer will give me 10X or more on my spend and will result in highly valued points, I’ll consider going for it (to me, highly valued points include Ultimate Rewards, Membership Rewards, SPG, Hyatt, or just about any airline miles).  With some lesser value points (Hilton, IHG, Marriott, Club Carlson) I’ll look for 20X or more.


I’m not trying to argue here that measuring the “X” is the best way to evaluate signup and retention offers.  I’m simply presenting a way of looking at offers like these that’s a bit different.  It’s a tool to use to help evaluate the quality of an offer, but it is by no means enough, in itself, to say whether an offer is right for you.

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