Points Back vs. Discount: Which Is the Better Deal? Effective Discount Formula and Conversion Chart

Short answer: at the same number, the discount wins

If the discount and the points-back rate are the same number, the discount that lowers the price on the spot is the better deal. 20% off turns a 1,000 item into 800. 20% back in points means you pay 1,000 and receive 200 points. Even if each point is worth 1 unit of currency and you use every one of them, you paid 1,000 for 1,200 worth of value, so as a discount rate that's 200 ÷ 1,200 ≒ 16.7%.

“Value received” in the table is the item itself (its list price) plus the points you receive. The effective discount is calculated as “1 − (amount paid ÷ value received).” This is the same calculation as the “Compare deals” tab of the Discount Calculator.

The formula for converting points back into a discount rate

You can't compare a points-back rate directly with a discount rate because the denominators differ. A discount is a percentage of the list price, but the value you get from points back expands to “list price + points.” Put them on the same denominator and you get this formula.

1. 1

   Write the points rate as a decimal

   20% back is 0.2, and 5% back is 0.05.

2. 2

   Divide it by itself plus 1

   0.2 ÷ 1.2 = 0.1666… For 5%, 0.05 ÷ 1.05 = 0.0476…

3. 3

   Multiply by 100 to get a percentage

   0.1666… → about 16.7%. That's the discount rate that would save you the same as the points offer.

Why put “+ points” in the denominator? Compare how much you can buy with the same 1,000. At a store offering 20% off, 1,000 buys items with a list price of 1,250 (1,250 × 0.8 = 1,000). At a store offering 20% back, 1,000 gets you 1,000 worth of items plus 200 points, or 1,200 in total. The same money buys 50 more with the discount.

Going the other way, the points rate needed to match a given discount is “discount rate ÷ (1 − discount rate).” To match 20% off with points, you need 0.2 ÷ 0.8 = 25% back.

Conversion chart: points rate vs. discount rate

Here are common points rates converted into effective discount rates. The right-hand column goes the other way: the points rate you'd need to match that discount.

For small rates of around 1–5%, the gap with the discount rate is 0.3 percentage points or less, so you can treat them as roughly the same. The difference starts to matter above 10%. A big campaign like “up to 50% back” never reaches the value of a half-price sale even if you use every point: it's effectively one third off (about 33.3%).

• “10x points” means 10% back if the base rate is 1%. The effective discount is about 9.1%.
• However it's worded (“+9x,” “up to 10x”), convert it to a final points rate (%) before using the chart.
• “1 point per 200 spent” is 0.5% back, and “1 point per 100 spent” is 1% back.

How to compare a discount combined with points back

When a discount and points overlap, as in “10% off, plus 10% back,” don't add them up to “20%.” Points are usually awarded on the amount you actually paid after the discount.

1. 1

   Work out the price after the discount

   10% off a list price of 10,000 means you pay 9,000.

2. 2

   Multiply the amount paid by the points rate

   9,000 × 10% = 900 points. Many stores round fractions of a point down.

3. 3

   Divide by the value received

   The value received is 10,000 + 900 = 10,900. The effective discount is 1 − 9,000 ÷ 10,900 ≒ 17.4%.

Even when the total adds up to the same 20%, the larger the discount share, the higher the effective discount. Put the other way, campaigns with a small discount and a big points bonus aren't as generous as the headline total suggests.

Stacking discounts on their own (20% off and then another 10% off works out to 28% off, for example) is explained in detail in How to calculate discounts.

Points earned on the pre-tax price give you a lower real rate

Whether points are awarded on the tax-inclusive amount you pay or on the pre-tax price depends on the store or service. When they're based on the pre-tax price, “10% back” earns you fewer points than 10% of what you actually paid.

With a 10% sales tax or VAT, points based on the pre-tax price come to about one tenth less than points based on the tax-inclusive amount. The lower the tax rate, the smaller the gap. Don't take the advertised rate at face value; check whether the terms say points are based on the price “before tax” or “including tax.”

Caps, expiry dates and redemption rates shrink points back

The effective discount from points back is the maximum you get when every point is worth 1 and you use them all. In practice, it often shrinks for these three reasons.

• Earning cap: with “20% back (up to 1,000 points),” you only get the full 20% on purchases up to 5,000. Anything above that earns no extra points. Divide the cap by the points rate to find the largest purchase that earns the full rate.
• Limited-time points: points from campaigns are often limited-time points that expire in one or two months. Any you don't use are as good as never received.
• Redemption rate: when you convert points into airline miles or another program's points, 1 point may be worth less than 1. If it redeems at 0.5, treat the points rate as half.
• Timing: in campaigns where points arrive the following month or later, returning or cancelling before then also cancels the points.

How to count double and triple dipping

When one payment earns separate rewards, such as store points, credit card points and a mobile payment app campaign, it's often called “double dipping” or “triple dipping.” If each one is earned on the same amount paid, add the rates together and then convert the total.

• Converting the 16% total gives 0.16 ÷ 1.16 ≒ 13.8%, less than a 16%-off sale.
• Card points are calculated in different units by different cards, such as “on the monthly total” or “1 point per 200 spent.” On a card that rounds down to the nearest 200 per transaction, a 1,980 payment earns only 9 points (about 0.45%).
• Some combinations don't award card points when you top up a payment app with a credit card. Check each condition before adding up the total rate.

Even if a stacked rate looks high, points spread across three programs each come with their own expiry dates and minimum redemption amounts. If small leftover balances end up unused, it's safer to discount them in your estimate.

Worked examples for common situations

In the appliance example, 10% off lets you buy a 50,000 item for 45,000, and the 5,000 you save can be spent anywhere, on anything. 10% back means paying 50,000 and receiving 5,000 points that can usually only be used at that store. Even if you use them all, the value received is 55,000 and the effective discount is about 9.1%, short of 10% off.

With “Nx points,” what matters is the base rate, not the multiplier. 10x at a store with a 1% base rate is 10%, but 5x at a store with a 0.5% base rate is 2.5%. Don't judge an offer by the multiplier alone.

Save points or spend them? Deciding when to use them

When you use the points you earned also affects how much you gain. At stores where the part you pay with points earns no points, every time you use points you give up the points you would have earned on that amount. The loss is “points used × that day's points rate.”

Pay with cash or card on high-rate days to collect the points, and spend your points on regular days or on purchases that don't earn points anyway, and you'll keep the loss small. If a store also awards points on the part paid with points, you don't need to worry about timing.

• Use limited-time points first: spend them in order of expiry date; letting none expire is the top priority.
• Regular points can expire too: some programs cancel points after, say, one year without any activity.
• Don't hoard: a lower redemption rate or the end of a program can reduce the value of points you've saved. If you have a large balance with no plans for it, using it sooner is safer.
• Apply small leftover balances at checkout: a few dozen points left here and there tend to go unused. If a store lets you use points one at a time, applying them at every purchase is an option.

How to compare offers in the Discount Calculator's “Compare deals” tab

The “Compare deals” tab of the Discount Calculator lets you line up to six offers made of discounts, amounts off and points back, and sorts them from the highest effective discount down. Everything is calculated in your browser, so the amounts you enter are never sent to a server.

1. 1

   Open “Compare deals” and enter the price of the item to compare

   Under “The price tag is,” choose tax included or tax excluded. If you choose tax excluded, the offers are compared after adding tax.

2. 2

   Enter “Discount,” “Amount off” and “Back” for each offer

   Four offers are filled in to start with: “20% off,” “20% points back,” “10% off + 10% back” and “500 off.” Change the numbers, or rename the offers after the stores you're comparing.

3. 3

   Press “Add an offer (up to 6)” if you need more

   You can line up between two and six offers. Remove any you don't need with “Remove.”

4. 4

   Read “The best deal is” and the ranking

   Each offer shows the amount paid now, the points, the value received and the effective discount. When two offers have the same effective discount, the one with the lower payment now ranks higher.

Checklist before using a points-back campaign

• Did you convert the offer into a final points rate (%), rather than leaving it as “Nx”?
• Are points awarded on the tax-inclusive payment or on the pre-tax price?
• What is the earning cap? How large a purchase earns the full rate (cap ÷ points rate)?
• Are they regular points or limited-time points? Do you have a plan to use them before they expire?
• Does the part you pay with points also earn points?
• When are points awarded (immediately, next month, after the campaign)? What happens if you return the item before then?
• Compared with a discount of the same number on the spot, is the effective discount higher or lower?

Check these seven points and compare offers by effective discount rate, and you'll almost never end up choosing a high points rate only to find that the discount was the better deal. If you're unsure whether a price tag includes tax, see also Japan's total price display rule.

FAQ

Which is better: 20% off or 20% back in points?

20% off is better. With 20% back in points, you pay 1,000 and receive 200 points, so you paid 1,000 for 1,200 worth of value, an effective discount of 200 ÷ 1,200 ≒ 16.7%. To match 20% off, you'd need 25% back.

How do I calculate the effective discount rate of points back?

Use “points rate ÷ (1 + points rate).” 10% back is 0.1 ÷ 1.1 ≒ 9.1%, 20% back is 0.2 ÷ 1.2 ≒ 16.7%, and 50% back is 0.5 ÷ 1.5 ≒ 33.3%. When a discount and points overlap, use “1 − amount paid ÷ (list price + points).”

Is 10% off plus 10% back the same as 20% off?

No. On a list price of 10,000, 10% off means you pay 9,000, and points at 10% of that payment come to 900. The value received is 10,900, so the effective discount is about 17.4%: less than 20% off (20%) and slightly more than 20% back (about 16.7%).

Are points usually based on the price with or without tax?

It depends on the store or service. Some award points on the tax-inclusive amount and some on the pre-tax price. With a 10% tax, pre-tax-based points come to about one tenth less. On an 11,000 purchase (including tax) at 10% back, that's 1,100 points on a tax-inclusive basis and 1,000 points on a pre-tax basis.

What percentage back is “10x points”?

It depends on the base rate. At a store with a normal rate of 1%, 10x is 10%; at a store with a normal rate of 0.5% (1 point per 200), 10x is 5%. Convert the multiplier into a final points rate, then compare by effective discount (about 9.1% for 10% back).

How should I value points back that expire?

Multiply the points rate by the share you're likely to use. Even at 20% back, if you'll only use half before they expire, it's effectively 10% back, or about a 9.1% discount. Limited-time points with no planned use are safer to value below a discount on the spot.

If there's a cap on points, how much should I spend?

You get the advertised rate on purchases up to the cap divided by the points rate. For 20% back capped at 1,000 points, that's 1,000 ÷ 0.2 = 5,000. Anything above that earns nothing extra, so on a 10,000 purchase the real points rate falls to 10% (an effective discount of about 9.1%).

Is it better to save points or use them right away?

Given the risk of expiry and program changes, using them sooner is safer if you have something to spend them on. But at stores where the part paid with points earns no points, using points on a high-rate day reduces the points you earn. Using 2,000 points on a 5%-back day means missing out on 100 points, so it's more efficient to spend points on regular days and pay with cash or card on high-rate days.

Can I just add up stacked reward rates?

Yes, as long as each reward is earned on the same amount paid. Store 5%, card 1% and payment app 10% add up to 16%, an effective discount of about 13.8%. But card points may be calculated in different units, such as rounding down per 200 spent, and some combinations don't award points on payment app top-ups, so check each condition.