Three cards worth manufacturing spend on

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Last Wednesday I laid out a simple, reproducible method for manufacturing spending at no net cost. Then on Friday I explained why for most travel hackers, it's not necessary to reduce net costs to zero. Rather, it makes more sense to use 2% cash back cards to merely reduce your net costs so that your individual travel hacking budget takes you farther.

Today I'd like to give an overview of some of the best cards to use when manufacturing spending in order to maximize your travel rewards. Some of this material will be familiar from my article in February on "true" credit card earning rates.

Here are 3 cards that I think have annual fees worth paying in order to manufacture spending using the card.

1. Delta Platinum American Express cards (personal and business)

First, a caveat: these cards are only relevant if you are interested in achieving a higher Delta Medallion elite status than you can earn through flight activity alone. However, if you are a Delta frequent flyer then one or both of these cards is indispensable for the ability to earn up to 20,000 Medallion Qualifying Miles per card each year.

  • How much you should spend: $25,000 or $50,000
  • How much you'll pay (at .79 cents per dollar): $197.50 or $395, plus a $150 annual fee
  • What you'll get: 35,000 or 70,000 Delta Skymiles and 10,000 or 20,000 Medallion Qualifying Miles
  • Why it's worth it: paying $545 for the 20,000 MQM alone is a good deal, since that's just 2.7 cents per MQM, which is very respectable as a mileage run alone.  The fact that you also receive 70,000 Skymiles, which are worth a minimum of $700 (because you can use them to Pay With Miles at a value of 1 cent each), makes this deal unbelievably good. Additionally, starting in 2014 it'll be necessary to spend at least $25,000 on a Delta co-branded credit card in order to escape the onerous new Medallion Qualifying Dollar requirements for Medallion status.

As I mentioned last month, I picked up the business version of this card during my April application cycle, and I'll get the personal card in January, once 12 months have passed since I canceled my last card, if there's still a lucrative enough signup bonus.

2. Citi Hilton HHonors Reserve

  • How much you should spend: $10,000
  • How much you'll pay: $79, plus a $95 annual fee
  • What you'll get: 30,000 Hilton HHonors points and a free weekend night certificate, good at any Hilton property in the world with the exception of Hilton's all-inclusive resorts and Hilton Grand Vacation properties
  • Why it's worth it: the free weekend night certificate is doing most of the work in this calculation. Since the certificate can be used at almost any Hilton property in the world, you can wait until your travels take you to a particularly expensive city during a weekend and score a free room at the most expensive Hilton in town. That kind of flexibility is worth an incredible amount to me.

I haven't had a chance to apply for this card yet, but I certainly will during my next application cycle, if a more lucrative Citi offer doesn't come along before then.

3. US Bank Flexperks Travel Rewards Visa

his is an interesting card because it offers two different opportunities to manufacture unlimited quantities of US Bank's fixed-value rewards currency, Flexpoints. The card has an annual fee of $49, which you can also pay by redeeming 3,500 Flexpoints.

Opportunity #1: Grocery Store Gift Cards

As described in Chapter 2 of my book, if grocery stores are the bonus category you spend the most in during a statement cycle, you'll earn 2 Flexpoints per dollar spent in that category. You can take advantage of this bonus category by buying Visa or Mastercard gift cards which can be used to fund a Bluebird or Gobank account at any Walmart register.

The objective is to purchase a high-denomination gift card with as low a fee as possible. Since your 2 Flexpoints are worth up to 4 cents each when redeemed for airfare, if the fee is less than 2% of the face value of the card (for example a $5.95 fee for a $500 gift card, or 1.1%), you'll earn more net value than you would by buying a Vanilla Reload Network reload card using a 2% cash back card.

Opportunity #2: Kiva Loans

Since Kiva loans are processed as "charitable contributions," loans funded using your Flexperks Travel Rewards card earn 3 Flexpoints per dollar loaned. Using this technique you can manufacture as many Flexpoints as your risk tolerance allows. Kiva loans have a repayment period of 6 to 60+ months; you receive the amount of your loan back as the borrower makes loan payments. If the borrower defaults, you lose your remaining loan amount. You can select short-term, low-risk Kiva loans using Kiva's tools or the tools available at kivalens.org.

I have 2 of these cards: US Bank allows you to apply for and carry as many of the same card type as your credit history allows you to be approved for. I applied for my first card under the standard signup bonus of 17,500 Flexpoints, and then again during the Summer Olympic Games promotion, where I ended up earning an additional 33,150 Flexpoints. When my first annual fee is due, I'll ask for a product change to the lucrative, no-fee US Bank Cash+ card.

Conclusion

Each of the cards in this post offers out-sized value when used to meet specific travel goals. The Delta Platinum cards allow you to jump almost an entire Medallion tier by aggressively manufacturing credit card spend; the Citi Hilton HHonors Reserve card offers a free weekend night that is begging to be redeemed for a super-expensive night at a property in the center of one of the world's reat cities; and the US Bank Flexperks Travel Rewards card lets you buy paid tickets at a huge discount, while earning elite-qualifying and redeemable miles for your flights.