Points vs cash back

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NuHere
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Points vs cash back

Postby NuHere » Thu Nov 13, 2014 6:44 pm

I got some great tips in my earlier thread regarding cash back cards. I would combine Citi Double Cash with BCE + Sallie Mae. This combo would give me 2% on everything and 5% on groceries. It would make the most sense at my spending level.

The other direction is to go points/miles. I have Chase Freedom, but I never use it. The 5% categories are stores or services I hardly shop at. So it's basically a 1% card for me. I see most people combining their Freedom card with Sapphire and transferring their points. That way, when they book flights/hotels through Chase UR, they get 20% discount. Does that pretty much equal getting 1.2 cents per dollar? I don't have any other card with specific airline. If I add Sapphire card, I would get 2X on travel (subway and railway, which I spend $360 monthly), 2X occasional dining and the rest would be just 1X.

I fly internationally once or twice a year, so I don't really care whether I get cash back or redeem miles. I have use for both, but obviously would prefer the approach that would give me more value.

Am I calculating right when I think the cash back approach is better in my case? It's 2% on everything and 5% on groceries ($300-$400 a month) versus 2X on travel ($360 a month plus airtickets.. usually 1 per year), 2X on dining (not much in my case) and 1X on everything else (which turns into 1.2X if redeemed through Chase UR)? Am I missing something regarding UR value of points?

Everyone's help is greatly appreciated.


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CarefulBuilder14
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Postby CarefulBuilder14 » Thu Nov 13, 2014 7:09 pm

One thing to correct:

Booking travel through UR with a CSP gets you a 20% reduction on the number of points you pay with. So each UR point is worth 1.25 cents that way, not 1.2 cents. You buy $100 of travel for 8000 UR points, not $120 for 10000 UR points.
Wallet: Prestige CSP SchwabPlat Freedom It Hyatt SallieMae AAPlat
SD: Arrival BrooksBros BCE ED IHG
Letting new accounts cool off since May
Really not sure what I'll add next or when

NuHere
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Postby NuHere » Fri Nov 14, 2014 4:48 am

Oh yeah, you're right! It is 1.25 cents. Thanks!

wiivile
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Postby wiivile » Fri Nov 14, 2014 8:37 am

This is a very difficult subject for me, as I constantly grapple with the same thing.

Currently I use the CSP and Freedom exclusively. The only Freedom category that really does anything for me is the Restaurants quarter, since I eat out every day and do not drive. But I only spend about $18,000 a year in total on credit cards, and I'm not sure if I'm earning enough points to justify the annual fee and if the points I earn are worth enough via travel partners to make it worth more than a simple cash back card (like the Double Cash, where everything is 2 cents per dollar, which you're pretty lucky if you manage to get this when transferring to a travel partner via CSP).

Basically, it's hard to calculate if the money I save on the few flights I take every year is more lucrative than straight cash back.

For example, a $186 flight on Southwest that I want to take in March costs 11,135 points, so it's effectively saving me $75 had I paid for that ticket in cash (assuming 11,135 pts is worth $111.35 in cash back on any other card). That is also 1.67 points per dollar, which is less than what the Double Cash would give me (with no AF!)

Even though points are worth more with the CSP than they would be on a cash back card, I can earn a lot more "points" with a card like the Citi Double Cash (where 1 point = 1 cent), so it kind of evens out? While I'm only getting 2x on dining and travel with the CSP (and 5x on dining for 1 quarter with the Freedom), 2x year round on everything is very tempting and I'm not sure it can be beat, even with the value of 1 UR point.

If I had the Citi Forward or if the U.S. Bank Cash+ still did restaurants as a 5% category, this would be a no-brainer, as 5% cash back on restaurants (my biggest spending) with 2% cash back on everything else with the Double Cash would be unbeatable.

There are a lot of intangibles that the CSP provides, though, like being able to book Amtrak trains at the last minute to DC or Boston (from NY) for 4,000 points without having to book way in advance for an affordable seat. Or booking flights that are somewhat refundable (even though you may have to pay a fee to get points re-credited).

SO, in sum, I can't really decide which is more lucrative for me, the Freedom+CSP or straight cash back with the Double Cash (along with ideally some restaurant card).

I also have 150,000 UR points on my CSP right now so I have to figure out what to do with them. It'll take me years (and a lot of annual fees) to use them all.

I would appreciate any thoughts people have on this too...
    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

NuHere
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Postby NuHere » Fri Nov 14, 2014 8:51 am

wiivile wrote:Even though points are worth more with the CSP than they would be on a cash back card, I can earn a lot more "points" with a card like the Citi Double Cash (where 1 point = 1 cent).

I think this is what it boils down to. The amount of points versus their value. As you say, even though CSP are worth more, I could probably accumulate more (I'm not sure though, that's why I outlined my spending patterns so more experienced people could help me decide) points by using Citi Double Cash and Sallie Mae. I believe I have read somewhere that CSP points can be worth up to 10%. At which point I'm not sure if I can beat that by using 2% Citi Double Cash.

The only difference in our spending is that your biggest category is dining and mine is either groceries or travel (both roughly $360 a month).

freyj6
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Postby freyj6 » Fri Nov 14, 2014 8:55 am

In your case the question is whether $360 per month + conversion of Freedom's points justifies an annual fee for CSP. That all depends on the value you get from UR points.

The best use of UR points is through their transfer partners. People are sometimes able to get a value of 1.5-3 cents per point depending on what routes they fly.

http://thepointsguy.com/2013/03/maximize-monday-ranking-the-chase-ultimate-rewards-transfer-partners/

http://thepointsguy.com/2014/10/10-ways-to-maximize-70000-chase-ultimate-rewards-points/

Let's assume that with restaurants included you spend $400 a month in CSP's bonus categories, or $4800 a year. In that case, you'd have to get a value of 2 cents out of UR points (2 cents = 4% back, subtract the 2% you'd be getting anyway and you have 2% extra back. 2% of $4800 = $96). So it would be worth it if you get a value of 2 or more, which really just depends on what routes you fly. If you consistently fly a route that has a really great conversion rate on a certain airline, 2+ cents is pretty easy. If you don't, 1.5 is a bit more realistic.

Obviously the more you spend the less value you'd have to get out of UR points. So if you spend $6000 it would be less. Freedom categories also play a big role because if you spent a combined $2000 in Freedom 5% categories, even if you only got 1.5 cents per point, you'd still cover half the annual fee just by turning that 5% into 7.5%.

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wiivile
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Postby wiivile » Fri Nov 14, 2014 8:58 am

NuHere wrote:
The only difference in our spending is that your biggest category is dining and mine is either groceries or travel (both roughly $360 a month).


You live in NYC and your biggest expense is groceries? Haha, I don't even have a kitchen. The reason I love this city is that I can get take out every night and never have to cook.
    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

wiivile
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Postby wiivile » Fri Nov 14, 2014 9:00 am

freyj6 wrote:The best use of UR points is through their transfer partners. People are sometimes able to get a value of 1.5-3 cents per point depending on what routes they fly.


Is it worth it, though, when the Double Cash gives you 2 cents on everything with no annual fee and without having to work hard to maximize the value of every single point? And the only scenarios I've seen with really good point values (3 cents+) are on international first class flights, which to most people is unrealistic, since you need absurd amount of points. (In general I find first class to be a huge waste of money unless you're a really really tall person and can't stand economy size seats).

I also have problems finding availability with the travel partners. For example, "Saver" are the only award flights worth taking in order to get good value from your points, and frequently you can only find "Saver" on crappy Wednesday morning 5am flights or some other time when demand is low.
    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

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kcm7
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Postby kcm7 » Fri Nov 14, 2014 11:30 am

wiivile wrote:Is it worth it, though, when the Double Cash gives you 2 cents on everything with no annual fee and without having to work hard to maximize the value of every single point?


That's always the question, isn't it?

I don't have the CSP, but my friend was telling me how he needed 1,000 more miles to pad his United account to get a free international flight. He just shuffled 1,000 points over with CSP. So those points got him an $1,800 flight. 1,000 "points" with the Double Cash would get you $10.

So sometimes points end up being worth more than their cash worth.

Of course, this guy is a frequent United Flier, so he had a nice cache of miles to begin with and needed "just" 1,000 more. I agree, for most people, a steady 2% cash back is probably the best (although less glamorous) bet.
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wiivile
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Postby wiivile » Fri Nov 14, 2014 11:50 am

kcm7 wrote:That's always the question, isn't it?

I don't have the CSP, but my friend was telling me how he needed 1,000 more miles to pad his United account to get a free international flight. He just shuffled 1,000 points over with CSP. So those points got him an $1,800 flight. 1,000 "points" with the Double Cash would get you $10.

So sometimes points end up being worth more than their cash worth.

Of course, this guy is a frequent United Flier, so he had a nice cache of miles to begin with and needed "just" 1,000 more. I agree, for most people, a steady 2% cash back is probably the best (although less glamorous) bet.


I don't think you can include a guy's previously earned United frequent flyer miles into the mathematics of this equation... though if you are a frequent flyer on United, BA, Southwest, etc, the card does have some added intangible value of you being able to "top off", but it really doesn't factor into the mathematics of the rewards.
    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



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