Points vs cash back

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wiivile
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Postby wiivile » Thu Nov 20, 2014 10:15 am

NuHere wrote:Then it's also a question of how fast you can accumulate those points. Yes, 50 000 points would be worth only $500, but if some cash back cards give you more %, the same amount dollars spent might give you the same $500 faster, which would even it out., right?

Citi Double Cash gives 2% on everything. CSP gives 2 points in some categories, 1 point on others. Then it's back to square one... value of points through UR versus how many points would you collect with some higher rate cash back cards.


Yeah, I mean, it's still only a value of just over 2 cents per point (redeeming 50,000 points for a $1000+ flight), which the Citi Double Cash can do easily, however, it does show how the $95 annual fee can be justified even where there isn't one on the Double Cash.

Though if you subtract the $95 AF from the amount saved on the flight, might that bring the value of the points below 2 cents per point, in which case the Double Cash was better all along?

This stuff is very confusing, I'll admit. :money: :money: :money:
    Chase Sapphire Preferred Visa Signature: 11/2013, $15,000 CL
    Chase Freedom Visa: 11/2009, $4,700 CL
    U.S. Bank Cash+ Visa Signature: 11/2013, $11,200 CL


freyj6
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Postby freyj6 » Fri Nov 21, 2014 2:12 am

Assume you have Double Cash.

That makes anything else that earns less than 2% is useless. For CSP to be worth having (other than for the sign up bonus) you either need to transfer a good amount of points from the Freedom card, or spend quite a bit on travel and dining to justify the annual fee. The amount depends on the value you get out of UR points.

If you get a value of 1.25 (the standard bonus from booking travel through CSP) you need to spend quite a lot. Either max out the $6000 in Freedom 5% categories (giving you an extra $75 from the 1.25 bonus) and then spend a few thousand on travel/dining, or spend $20000 on travel/dining. That's a lot for most people, imo.

If you get a value of 2.0 out of UR points, however, it's a completely different story. You'd only need to spend $2000 in Freedom bonus categories and that would cover the whole annual fee just converting those points (again, we're assuming you'd otherwise be getting 2%). Or just spending $5000 on travel/dining with no Freedom spending. That's a lot more doable.

Same goes for similar cards. Arrival+ you need to spend about 40k in uncategorized to make it better than Double Cash.

AMEX Everyday Preferred you'd generally have to get a value of 1.5 to make it better than the BCP (assuming you can hit the 30 transactions a month) and if you can get 2 cents out of MR points, you're looking at 3/6/9% back on general/gas/groceries spending respectively.

So it's really all about the value you can get vs the next best alternative. Yeah, there's some intangible stuff, but I think most people just want the most money back for the least money spent and the least hassle.
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yfan
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Postby yfan » Wed Nov 26, 2014 3:26 pm

For the vast majority of cases, cash is king. Even if you ignore the inherent disadvantage of points - i.e. shifting values, program restrictions, etc, there are other obvious advantages of cash that are often lost in these comparisons.

First, cash discounts that you just cannot have with points. Not every fare sale is available through your points. You may find a cash deal on Orbitz or Kayak for the same flight discounted at $340 that if you were to access through a points portal, would cost you 40,000 points (because it's listed at a regular price of $500). Same for hotels. Cash discounts are far more ubiquitous and accessible than point discounts.

Next, cash is much more fungible than points. Even if you are part of a big program like MR or UR points, you still only have a limited choice of partners. Guess what? Everyone takes cash! Also, you cannot mix points between two different programs (say MR and UR, for example). You can add up all the cash you get from all your cashback cards and use it anywhere.

If you really want a points card, go with one that caters to one merchant that you frequently do business with and that has its own rewards program that the card's points are built on top of. The Marriott Premier Rewards Visa is a good example. When you use it in Marriott locations, that's when the build rate soars and surpasses cash.

MB131174
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Postby MB131174 » Wed Nov 26, 2014 4:04 pm

yfan wrote:For the vast majority of cases, cash is king. Even if you ignore the inherent disadvantage of points - i.e. shifting values, program restrictions, etc, there are other obvious advantages of cash that are often lost in these comparisons.

First, cash discounts that you just cannot have with points. Not every fare sale is available through your points. You may find a cash deal on Orbitz or Kayak for the same flight discounted at $340 that if you were to access through a points portal, would cost you 40,000 points (because it's listed at a regular price of $500). Same for hotels. Cash discounts are far more ubiquitous and accessible than point discounts.

Next, cash is much more fungible than points. Even if you are part of a big program like MR or UR points, you still only have a limited choice of partners. Guess what? Everyone takes cash! Also, you cannot mix points between two different programs (say MR and UR, for example). You can add up all the cash you get from all your cashback cards and use it anywhere.

If you really wants a points card, go with one that caters to one merchant that you frequently do business with and that has its own rewards program that the card's points are built on top of. The Marriott Premier Rewards Visa is a good example. When you use it in Marriott locations, that's when the build rate soars and surpasses cash.


Very well said. Last month I flew round trip Washington DC to Amsterdam via Moscow on Aeroflot for only $860. That included taxes and fuel surcharges. There's no way I'd waste even 40,000 points on a flight that cheap. (Not forgetting you still have to pay tax on award tickets, and international can be well over $100, or almost $700 on British Airways. Yeah, I once found a round trip award for 40,000 points to London, plus taxes of over $600. INSANE! Needless to say I never took it.) I'm glad I made the switch to cash, and even then just using one card for simplicity. Juggling cards to save an extra $10 a month isn't worth it to me.
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yfan
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Postby yfan » Wed Nov 26, 2014 4:34 pm

MB131174 wrote:Very well said. Last month I flew round trip Washington DC to Amsterdam via Moscow on Aeroflot for only $860. That included taxes and fuel surcharges. There's no way I'd waste even 40,000 points on a flight that cheap. (Not forgetting you still have to pay tax on award tickets, and international can be well over $100, or almost $700 on British Airways. Yeah, I once found a round trip award for 40,000 points to London, plus taxes of over $600. INSANE! Needless to say I never took it.) I'm glad I made the switch to cash, and even then just using one card for simplicity. Juggling cards to save an extra $10 a month isn't worth it to me.

Right, I wasn't even thinking about the tax. That's insane. Most people don't even think of the tax and surcharges separated from the price of the ticket and then bam, they get hit by a cash bill anyway (for the tax).

There's also the fact that some cashback malls provide great discounts too - for example, Discover's, where you can not only get 5-10% cashback on popular sites like Apple and Orbitz but also redeem for gift cards that provide a good 20-25% bonus on your cashback ($25 gift cards are available for $20 in cashback rewards).

MB131174
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Postby MB131174 » Wed Nov 26, 2014 5:03 pm

yfan wrote:Right, I wasn't even thinking about the tax. That's insane. Most people don't even think of the tax and surcharges separated from the price of the ticket and then bam, they get hit by a cash bill anyway (for the tax).

There's also the fact that some cashback malls provide great discounts too - for example, Discover's, where you can not only get 5-10% cashback on popular sites like Apple and Orbitz but also redeem for gift cards that provide a good 20-25% bonus on your cashback ($25 gift cards are available for $20 in cashback rewards).


Say your "miles" or airline card cost $95 a year (seems average) and it takes you 2 years to earn enough points for an international flight (some faster, some slower, all depends on spending). That's $190 in annual fee. Then tack on about $125 in taxes. That's $315 (ish) you had to pay to get that "free flight". Say I had paid that for my last trip. Take $860 minus $315 and you're left with $545 saved. Say I got that flight for 40,000 points using American Airlines saver flight. $545/40,000 points = 0.0136, or basically, 1.36 cents per point. Le sad if you ask me.
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freyj6
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Postby freyj6 » Wed Nov 26, 2014 5:43 pm

International flights are different, but it's hard to compete with points for domestic trips where you can get a value of 2+ even after fees. For example, say you can get a value of 2 on MR from transferring to BA for expensive short haul domestic flights. That's 9/6/3% back on the AMEX Everyday Preferred... pretty hard to beat with cash.

But yeah, I think cash is massively underrated. People seem to like points because it's more like a game and they like getting "free" flights, but it's really the same thing with a lot more limitations.

Also, one other thing that no on really talks about is that cash can be invested. So rather than sitting on $1000 worth of points (which will probably be devalued over time) you could invest that amount.
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MB131174
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Postby MB131174 » Wed Nov 26, 2014 6:31 pm

If I flew domestic on my own dime, it would be different. All domestic travel by air goes on my corporate card. For personal travel, it's all overseas.
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