Points don't care how much you paid for them

There's been some interesting discussion lately of how much you should be willing to pay for miles and points. I got the conversation started on Twitter by asking how much people would be willing to pay for an Ultimate Rewards point. The Saverocity Observation Deck podcast continued the conversation, and Joe at As The Joe Flies shared his thoughts as well.

It's possible to track the cost of individual points, but you probably shouldn't

One thing that I think is sometimes lost in these conversations is that it shouldn't matter how much you pay for any individual mile or point.

It is possible to track the cost of each mile and point you earn throughout the course of a manufactured spend cycle:

  • At the front end, you can see the fees you pay for each prepaid debit card you buy and each load fee you incur.
  • At the back end, you can see the price you pay when liquidating your manufactured spend back to cash: money order fees, bill payment charges, over-the-counter cash disbursement fees, etc.

There's an obvious advantage to doing so: if every individual transaction is profitable from start to finish, then you can't accidentally slip up and pay too much for your miles and points.

But there's a disadvantage, too: it doesn't make any conceptual sense.

Your points don't care how much you paid for them

If you insisted on rigidly tracking your cost per point, you might conceive of the following system: rank all your credit cards from most-lucrative to least-lucrative, then rank all your liquidation techniques from most-expensive to least-expensive.

You could then match your most lucrative credit card with your most expensive liquidation technique, your second-most-lucrative card with your second-most-expensive technique, and so on.

But since your points don't care how much you paid for them, that's virtually guaranteed to be the wrong approach.

Purchase and liquidation should be conceptually distinct

All manufactured spend, no matter how cheap, should generate the most valuable balance of miles, points, or cash, as possible.

All manufactured spend, no matter how valuable, should be liquidated back to cash as cheaply as possible.

Within that framework, it doesn't matter which gift cards you liquidate at your most expensive and cheapest merchants. Paying $1.88 to make a Walmart bill payment with a prepaid debit card you purchased for $3.95 at an unbonused merchant may not make sense in strict isolation, but if that's just one of hundreds of prepaid debit cards you purchased over the course of the month, it doesn't make sense to "keep track" of which prepaid debit cards you purchased with more-lucrative and which with less-lucrative credit cards.

Once you've put a charge on your credit card, the earning side is complete. At that point, all your prepaid debit cards need to be turned back into cash with whatever tools you have at your disposal, whether free, cheap, or expensive.


Once you accept that the cost of acquisition shouldn't influence the price you're wiling to pay for liquidation, you may well discover it's remarkably liberating: it doesn't matter which Metabank-issued prepaid debit cards you buy at grocery stores and which you buy at shopping malls — those are the cheap ones to liquidate. It doesn't matter which Vanilla-branded prepaid debit cards you paid more or less for — those cost more to liquidate.

The only thing that matters is whether you're maximizing your overall value, and minimizing your overall costs, over the course of a month, quarter, or year of manufactured spend.