I hadn’t heard of Return on Expense either. So I am taking credit for coining the phrase. If you know otherwise, please let me know!
How do we best determine the value of our rewards? Sometimes it is easy, a card offers a straight 2% cash back. Your return on any expense made with that card is… you guessed it 2%.
First take the points per dollar that you earn with your card (PPD). My Delta Reserve makes 1 PPD, unless it’s a dollar spent with Delta which earns 2 PPD. The majority of my spend is not with Delta, so I will be using 1 PPD.
Next, figure out your value per point (VPP). You can use a source like The Points Guy, which values it at 1.2 cents. According to my point spend for the year, I am earning 2 cents per point.
Lastly, multiple your PPD by your VPP to determine your ROE.
1 PPD x .02 VPP = 2% ROE
So my Delta Reserve is earning 2% on the average.
If we take a look at the Hilton Aspire card.
47.9 PPD for my hotel stays x .006 VPP = 28.7% ROE
(These numbers are based on my 2019 experience)
If I plug in the default earning for non-Hilton purchases, we get:
7 PPD x .006 VPP = 4.2% which is over twice the return of my Delta Reserve card.
So why is the Hilton my secondary if I can get a higher Return on Expense than with my Delta Reserve? It all goes back to how I want to be rewarded. The Delta Reserve helps get me Platinum when I wouldn’t earn it otherwise.