Help understanding value of points
 

I am generally good at math but some reason airline points confuse me a lot. Even after readying a bunch of guides online. Could someone explain it better to me?

If a jetblue point is worth 1.3 cents, does that mean that for every point I use, if I were to convert the points to a dollar amount, the points give me an extra .003 cents per every 1 cent I would normally pay in dollars? Would that be correct?

If we take a mint ticket that is worth $598.10 in dollars and 45300 points + 5.60 in taxes/fees how much "dollars" would I be paying if I used points? Would it be 598.1/45300 = ~1.3. So for every point I get .003 cents extra. So 45300*.003=135.9 So If I pay with points and convert to dollars I would be paying 598.10 - 135.90+ 5.6 = 467.8 Is this correct?

You can either spend points or you can spend cash. There is not a fixed value for what a point is worth but 1.3 cents seems to be a good average of late. If you want to know the point value for a specific itinerary divide out the cents to buy it by the number of points to buy the same thing. In the example you've provided a point would be worth 1.36 cents, not 1.3 cents, as it is 43,500 point for $591 in value (I removed the $5.60 from the revenue fare, too, as you pay that in cash either way).

If you believe that 1.3 cents is a good go/no-go point for making a decision then simply divide the revenue price by the number of points. If the resulting number is higher than 1.3 then you got a good deal with points. If it is lower then probably not.

And, yes, if you believe the 1.3 cents number then you are "saving" ~$25 dollars paying with points in that scenario, but also giving up the opportunity cost of earning 9 points per dollar (Mint bonus and online bonus) so ~5200 points (or more if Mosaic or using the B6 CC). That's about $65 in opportunity cost.

Think of B6 points as British pounds sterling -- or rather pence, since you need to move the decimal place two positions over. I have 41,700 points in my account, which is worth roughly $542 in flights.

The value ratio varies somewhat, but not nearly as much as it can on airlines with fixed redemption tables. That's where you can score phenomenal deals, such as last-minute travel when saver awards are available while all cash fares are sky-high. Alas TrueBlue isn't that kind of program.

Thanks for the replies. I just realized that I had wrong calculations and never submitted my edit until now. Could you please re-read the OP and let me know if you what have said so far still applies?

smb12, I had not thought about the opportunity cost. That is something for me to keep in mind.

RandomBaritone, I know the ratio varies which is why I gave the mint example since those prices are pretty standard with $598.10 being the lowest you can find recently. One thing that prompted me to make this post is I recently booked a roundtrip ticket to SDQ from JFK during a recent sale. The cost in dollars would have come out to be $366 but in points I ended up paying 8000 points + 104 in fees and I am trying to figure out if I ended up saving dollars by using my points. In this case the point value is definitely higher than 1.3

The value of a point is "flexible" and you effectively get to choose when it's "worth it." Each airline is different. Like recently...I could fly LAX-NRT for 60,000 MR, but cash fares were $550. I'd be getting <1 cent per point in value...and my "bar" for MR is 1.7cpp, so I would rather pay cash.

In your last example $366 vs 8000points+$104. Without taking opportunity cost into the picture, your 8000 points is offsetting the $262 ($366-104) you would have paid going full cash. $262/8000 = 3.3cpp. I'd say, you made a good choice...ESPECIALLY if you value those points around 1.3cpp. At 1.3cpp, 8000 points = $104. So your total was $208. You just spent $208 to get a $366 ticket. Did you do well?

You just bought that ticket at "46% off". But it's defined BY YOU. If your bar is 4cpp (unlikely)...then almost every time...you'll be "saving money" by just spending cash.

Thanks Yummy for the explanation.