Editors’ estimated annual benefit value: Methodology

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When you’re paying an annual fee, it helps to know if you’re getting your money’s worth.

While rewards credit cards can carry a lot of potential, it’s not always easy to figure out exactly how much value they provide.

Some card perks come with an exact dollar figure attached, but not everything is so clear. Plus, even when a statement credit carries an exact value, there’s no guarantee the perk will be easy to use.

To help with that confusion, our credit card editors developed an annual benefit value metric that provides a quick snapshot of how much an average consumer might earn from a card’s recurring perks and benefits.

Let’s take a closer look at how we calculate this value, what it captures, and how you can use these figures to help choose the best credit card for you.

How our editors’ estimated annual benefit value works

Editors’ estimated annual benefit value is our attempt to capture how much an average cardholder can expect to earn from a card’s recurring perks and benefits.

It is not a full valuation of every benefit a card provides, and it does not include any value you might earn from a welcome bonus or from spending in rewards categories.

Rather, it represents an attainable, reasonable value that cardholders might earn from their benefits on an annual basis. Instead of assessing the total potential value held by each card, we sought to provide a quick look at what it brings to the table.

How to use editors’ estimated annual benefit value

The estimated annual benefit value is meant to demonstrate how a credit card provides value over the long haul. While welcome bonuses and high rewards rates can help you earn serious value, they’re either temporary offers or dependent on how much you spend. On the other hand, many recurring perks and benefits can provide ongoing value even if you change your daily spending habits.

That doesn’t mean our numbers will always match up with your experience. Because we’re looking to find a middle ground value that can be attained by many cardholders, the annual benefit value may not align with everyone’s sense of how much they’re likely to earn from each valued card. Hardcore optimizers may far exceed our estimated annual benefit value, and others might not match our numbers. It all depends on what you find useful and the amount of effort you’re willing to put in.

Ultimately, the estimated annual benefit value is only a starting point to help guide your decision, and the true value of a card can vary from person to person.

For that reason, we always recommend digging deeper into what a card offers to see what potential value it can provide to you. In some cases, we may have valued benefits that hold no value for you, or we may not have valued a benefit that you would find especially useful.

What’s included in the Editors’ estimated annual benefit value calculation

Determining the editors’ estimated annual benefit value depends on numerous factors that can vary from card to card.

Consumers look for different things out of their credit cards, so we didn’t assume that a benefit that’s useful on one card must be valued on another. To put it another way, we’re not assessing the value any credit card user would get from a benefit, but the value for an average cardholder of that specific card.

For instance, if a co-branded airline credit card offers a free checked bag on flights with that airline, then it’s an important benefit of the card. However, if a flexible travel card were to offer the same checked-bag benefit only with that airline, we couldn’t be sure that the average cardholder would use that benefit.

In practice, that means calculating an estimated annual benefit value is more art than science. Still, we ask ourselves several key questions whenever we value a card’s benefits.

Can you put a value on the benefit at all?

Some credit card benefits are useful, but their value can’t be assigned a clear value. For instance, hotel chains don’t make their elite status available for purchase, but a credit card may come with that automatic elite status.

We chose not to value these benefits, because it’s not simple to approximate their dollar value. The benefits may be meaningful and important to you — they’re just not a good fit for this metric.

Does the benefit match the reasons someone would apply for this card?

The likelihood of a cardholder using a benefit can depend on context, and what looks like a crucial benefit for one card might not be for another.

For instance, people already seeking out travel cards are more likely to be interested in airport lounge access than chances to save on purchases at an expensive department store.

That doesn’t mean a benefit that’s not central to the card’s valuable proposition won’t be part of the estimated annual benefit value, but it can be a determining factor in choosing to include or exclude it.

Is the benefit easy to use? Is the cardholder likely to use it regularly?

We believe cardholders are more likely to use benefits that don’t require them to jump through hoops. Automatic statement credits and easy-to-activate perks are more likely to be included in the estimated annual benefit value than those that make you go through an application process.

Similarly, other benefits may be easy-to-use for those with access, but not widely available even in major cities. There are also recurring benefits that are unlikely to be used on an annual basis, like statement credits for exercise equipment purchases.

We also treat complimentary airport lounge access a little differently than other benefits that might not be widely available. While we value a card’s most important full lounge membership at its stated value, we assign a flat-rate amount to all other airport lounge offers, no matter if they include full access or individual visits. Because you’re only likely to use one lounge per airport visit, fully valuing all lounge offers tends to overrate their usefulness. At the same time, we understand the flexibility offered by card with considerable lounge access and want to capture that value.

Does the benefit cover the full cost of the expense?

Some benefits offer apparent value without much work, but they will likely require you to spend more than the cost of the full credit to use them. We often include these kinds of perks if they seem like they cover common purchases, but we use our discretion. In some cases, these credits can serve as enticements to make purchases you otherwise wouldn’t consider.

Does the card have few enough benefits that each one takes on added importance?

If a credit card has only a few notable benefits, we think those features are more likely to prove valuable to cardholders even if they fail to meet some of the standards discussed above. It’s easier for consumers to assess the usefulness of two benefits than of 15 benefits, and those who decide to apply have likely determined they can get value from these features.

About the author: Eric Freeman is a writer and editor at Credit Karma, specializing in credit cards and credit scores and reports. He strives to make personal finance relatable for readers and to ground complicated issues in everyday e… Read more.