How to feel about the Fidelity Rewards 2% cash back Visa Signature

The Fidelity Investment Rewards American Express has long been popular in the travel hacking community. The reason is simple: transactions are processed on American Express's network, so it can be used to fund Serve prepaid cards, but the card isn't issued by American Express, so it earns rewards on those transactions. In other words, it's an easy "set it and forget it" way to earn $240 per year in cash back at absolutely no cost.

That co-branding relationship has ended, and Fidelity's cash back offering is now being branded as the Fidelity Rewards Visa Signature Card, which still has no annual fee and still earns 2% cash back everywhere, but is now issued by a US Bank subsidiary ("Elan Financial Services") on the Visa network. 

This is great news

There's been some handwringing over the impending loss of the ability to load Serve with a 2% cash back card, and it's true that some people find change harder than others. But there's no shortage of American Express cards issued by banks besides American Express. Just get one of those. The US Bank Flexperks Travel Rewards American Express is a good choice if you're going to use it for manufacturing spend in general, although I wouldn't get it exclusively for this purpose due to its $49 annual fee.

The really great news is that there will be a no-annual-fee 2% cash back card issued on the Visa network!

It's true that Citi offers their Double Cash card on the MasterCard network, which is fine for manufacturing cash back at brick-and-mortar locations. But being issued by Citi means using that card for online manufactured spend is often worse than useless: it's expensive! That's because Citi often codes online bank account funding transactions as cash advances, and charges their customers the corresponding hefty fees and interest charges.

Fidelity Rewards Visa Signature is the Arrival+ killer

I've had a Barclaycard Arrival+ for a few years now, and have kept it year after year for two reasons:

  • It's not issued by Citi;
  • It's not issued on the American Express network.

That meant it was my go-to card for manufacturing spend online. That's true even though they've sharply reduced many of the card's benefits, cutting the card's award rebate from 10% to 5% and raising the redemption threshold from $25 to $100.

But for new Fidelity Rewards Visa Signature cardholders, and after existing cardholders are transitioned to the Visa Signature product, there will be no reason to hold an Arrival+ (unless you're fully enamored with the card's "true" chip-and-PIN functionality).

That's because the Arrival+'s $89 annual fee is essentially a wager, and it's a wager stacked heavily in Barclaycard's favor: will you or will you not spend more than $85,000 per year on the card? It's not that that figure is impossible to hit; it's that every year you don't hit it, you're paying Barclaycard more in annual fees than you're receiving in rebated travel redemptions.

Conclusion

There are a few marginal edge cases where people have legitimate complaints about the loss of their Fidelity Investment Rewards American Express cards.

As exhaustively documented by Milenomics, it's possible to redeem 25,000 Worldpoints (the currency the American Express card technically earns) for flights costing up to $400. If you don't have a US Bank Flexperks Travel Rewards card, that's a pretty good deal, although as Milenomics makes clear, achieving that redemption value isn't trivial. But if you're good at searching out qualifying flights, you may be better off in the status quo.

Another corner case is if you have a strained relationship with US Bank. It's currently unclear what will happen to people who are not currently able to open US Bank credit accounts when their account information is transferred over to Elan Financial Services.

And finally, if you currently transfer your Worldpoints to or from your Fidelity linked account in order to maximize the value of your other Worldpoints-earning credit cards, you'll lose that ability and that value once the transition is complete.

But if you just use your 2% cash back American Express to earn 2% cash back on purchases everywhere, you should be excited to learn that "everywhere" is about to get a lot bigger.

What role should non-bonused spend play in your miles and points strategy?

Last week Shawn at Miles to Memories wrote about his experience buying PIN-enabled, Metabak-issued, personalized Visa gift cards from GiftCardMall, after clicking through a cash back portal like TopCashBack.

I responded to him on Twitter, remarking "I think you're begging the question; real issue seems to me what role unbonused spend plays in strategy."

Since I have this blog lying around, I figured I can explain myself more completely.

How is your manufactured spend throttled?

I've written before about the kinds of throttles that prevent us all from manufacturing an unlimited amount of spend. Even with huge credit limits, unlimited stock, and compliant cashiers, you'll still be constrained by the time you're willing to spend manufacturing spend, so in a concrete sense everyone's manufactured spend is throttled.

Of course, most of us don't live in that ideal manufactured spend landscape, and so regularly run into credit limits, dwindling supplies, suspicious cashiers, and a simple shortage of convenient or accessible stores.

Liquidation throttles matter most

There is no way to manufacture, on a monthly basis, more spend than you're able to liquidate, and in a fundamental sense manufactured spend is really manufactured liquidation: the search for more, easier, faster, and cheaper ways to get cash back out of the products we buy. After all, there's no special trick to buying cheap printers; the trick is getting virtually all your money back, so you can pay off your credit card while pocketing the rewards you earned on your purchase.

Different forms of manufactured spend are throttled differently

A few examples illustrate this point clearly:

  • You may be able to buy an unlimited number of OneVanilla prepaid Visa debit cards on credit, earning 2 Ultimate Rewards points per dollar using a Chase Ink Plus card at 7-Eleven store locations, but if you have only one Serve card, you can only liquidate $5,000 in Vanilla Visa cards per month at Family Dollar. At the same time, you might be able to liquidate an unlimited number of Metabank-backed Visa gift cards at Walmart.
  • If you have a Target Prepaid REDcard, you may be able to liquidate up to $5,000 in PIN-enabled debit cards per month at Target for free, but if your Target store locations require you to use cards that match your ID, you may not be able to liquidate any cards purchased at merchants where your credit cards offer bonused earning.

Match your liquidation bandwidth to bonused spend first

By allocating your liquidation bandwidth to your credit cards' bonus categories, you'll maximize your earning over however much spend you're able to manufacture and liquidate each month.

The logic here is simple: Shawn's personalized GiftCardMall Visa gift cards may cost him just $4.59 each, while a Visa gift card purchased at a grocery store might cost $6.95. But if Shawn uses a Hilton HHonors Surpass American Express card to purchase each, he'll be paying 0.3 cents per HHonors point at GiftCardMall and just 0.23 cents per HHonors point at the grocery store. If he cannibalizes his liquidation bandwidth with "cheaper" GiftCardMall gift cards, he'll end up paying more per point than he would by swallowing the higher per-card charge.

A special note on American Express gift cards

American Express gift cards, purchased after clicking through a portal like TopCashBack, are capable of adding a cash back bonus to any non-bonused spend, which can be well worth doing to diversify your strategy away from just miles and points. On the other hand, you'll only be able to liquidate them at merchants that accept American Express cards and don't specifically prohibit gift cards (like Simon Malls).

If there's room left for non-bonused spend, that's fantastic

There are forms of manufactured spend that are intrinsically unbonusable:

  • Visa Buxx cards can only be loaded with Visa and MasterCard credit cards in the Buxx cardholder's name. If you load them with a Barclaycard Arrival+ MasterCard, for example, you'll earn 2.22% cash back, and there's no way to juice that earning rate with an intermediary step (although you may have a different preference for the funding card).
  • Serve cards can be loaded with third-party American Express cards like the Fidelity Investment Rewards American Express, but not with American Express gift cards. You'll earn 2% cash back on up to $1,000 in online loads each month, and you'll be glad to get it.

Finally, there are forms of manufactured spend like the personalized GiftCardMall Visa gift cards described by Shawn, and Simon Malls Visa gift cards, which can usually only be purchased with credit cards in the purchaser's name. They have the advantage of being relatively cheap and available in relatively large volumes, but the disadvantage of not receiving any spending category bonuses.

Conclusion

By now I hope my point is obvious: while the large volumes possible with those products do represent a real, concrete advantage that I have no intention of minimizing, if you're capable of liquidating such large volumes you have to first ask whether you've really exhausted all your bonused spending opportunities!

If you have, then manufacturing additional, non-bonused spending that fits within your liquidation bandwidth is common sense. But if you haven't, then you're leaving miles, points, and cash back on the altar of volume.

The newest 2% cash back card (and how to use it)

Introduction

For quite a while now, there have been two cards worth mentioning for everyday, non-manufactured, real honest-to-God spend: the Fidelity Investment Rewards American Express card, which gives 2% cash back on all purchases, and the Barclaycard Arrival (now Arrival+) MasterCard which earns 2 Arrival "miles" per dollar spend, redeemable for 1 cent each against travel purchases, with a 10% rebate on all travel purchase redemptions.

With its $89 annual fee, the Arrival+ MasterCard is theoretically only superior (with its 10% rebate) to the Fidelity Investment Rewards card if you spend over $44,500 per year on your Arrival+. Thanks to Barclaycard's liberal approach to annual fee waivers, that hasn't actually been a binding constraint for literally anyone I have talked to about the card. But that fee waiver policy could change at any time, so the annual fee is still important to be aware of.

Citibank has now entered the market with what claims to be a 2% cash back, no-annual-fee MasterCard. It's no secret that I've given Gary Leff a hard time about his fawning treatment of the card, but I'm not one to throw babies and bathwater out together. I'll probably get the card one of these days, and this is how I'll use it.

What we know – and don't know – about Citi Double Cash

The new Citi Double Cash card earns 1% cash back on purchases and an additional 1% cash back "as you pay." I assume my readers' first reaction to this scheme was the same as mine: "Wait, can I earn 1% cash back on bill payments?!?" Here's the relevant entry in the card's Terms and Conditions:

"Cash Back on Payments: You will also earn 1% cash back on payments you make that appear on your current month's billing statement as long as the amount paid is at least the Minimum Payment Due that is printed on your billing statement and there is a balance in the Purchase Tracker. The balance in the Purchase Tracker is reduced by eligible payments you make. When the Purchase Tracker reaches $0, you won't earn cash back on payments until more eligible purchases are made." (emphasis mine)

Good try, but whoever came up with the unlimited 5-ThankYou-Point-per-dollar offer has apparently been let go, so they aren't just shoveling cash willy-nilly into furnaces anymore.

What we don't know is what the hell a "Purchase Tracker" is and, most importantly, whether purchases show up there immediately upon posting or only after a statement has closed.

There's simply no way to know until datapoints start coming in, but that's a potentially huge difference: will folks who pay off their entire balance before each statement closes earn 1% or 2% cash back on their purchases?

For those who do wait to pay off their balances until after their statement closes, the final 1% cash back won't be earned until two months after the initial purchase was made. That makes the card a hybrid between the "old" Blue Cash's 2-statement delay and the Fidelity Investment Rewards card's 2% cash back program, which allows you to redeem all your rewards each month (as long as you've accumulated at least $50 in cash back).

The beauty of negative-interest-rate loans

Many cards offer 0% introductory interest rates on purchases. The goal, naturally, is for customers to run up large bills during the interest-free period, then pay them off over time (or, realistically, never) once the promotional period ends. It's a ludicrously simple – and effective – trap for unsuspecting customers.

Few of those 0% introductory rate cards offer 1% cash back on all purchases. None of them have offered 2% cash back on all purchases, until now.

The Citi Double Cash card offers 15 months of 0% interest rate financing for purchases (and balance transfers, but with their 3% balance transfer fee).

The 1% immediate cash back rate makes your initial manufactured spend purchases free once your first statement closes. Except they're better than free: they're interest-free. Fund Kiva loans with a US Bank Flexperks Travel Rewards card, stick the money in a Mango 6% APY saving account, or pay off your Blue Cash card and go around the track another time or two each month. No matter what you do with the money, your returns will be printed at the bank's expense, since the 15-month loan is interest-free.

Then 14-and-a-half months later, pay off your Citi Double Cash card with your favorite miles-earning debit card and pocket another 1% cash back on the amount you've been floating.

Conclusion

That's how I'll be using my Citi Double Cash card, once I make up my mind to actually apply for one. I'd love to hear from readers who have already decided to jump in: what the hell is a Purchase Tracker, and what else do we need to know about the card?

"What's the best credit card?"

I have a lot of family and friends who typically find themselves somewhere between amusement, shock, and awe when I talk about this crazy game we play. But sooner or later when they foresee a big upcoming expense, whether it's a wedding, a move, or a remodel, they come to me and ask, "Alright hotshot, you're the expert, what's the best credit card?"

After all, here I am, a starving artist trying to push books out the door and get people to pay for a blog they can read for free, but I take long weekends a few times a month and three or four long vacations each year – in first class, whenever possible. Nonetheless, my answer is almost always the same:

It doesn't really work like that.

Sure, I'll pass along a particularly good signup bonus, like the 55,000 mile Chase United MileagePlus Explorer offer I recommended to my Polish friend, or the 50,000 mile Citi Platinum Select / AAdvantage offer I signed up for earlier this month, since those bonuses are so high even a rookie is sure to get a good enough value that I'll be able to sleep at night.

One Question

Mile-and-point-earning credits cards are not right for everybody, and in fact they're right for almost nobody. When my brother recently asked what credit cards his friend should sign up for, the only question I asked was,

"Is she a businessman who is allowed to charge business travel to her personal credit card, and/or is she crazy?"

If the answer to both is no, a mile-and-point-earning credit card is not right for her.

One Size Fits All? Cash Back.

The best credit for the average civilian is the Fidelity Investment Rewards American Express card. It earns 2% cash back everywhere American Express is accepted, and has no annual fee. American Express isn't accepted everywhere, so our average civilian should carry a backup Visa, MasterCard, or Discover. I have both a Chase Freedom Visa and Discover it card, for example, and I'll be doing a product change to the Citi Dividend Platinum Select once I use up my ThankYou point balance from my current ThankYou Preferred card.

Even better, the rewards balance on Chase Freedom and Discover it cards can be used at their full value on Amazon.com purchases, so users can use their rewards immediately for online purchases, rather than waiting for them to accumulate. For example, Discover requires a $50 rewards balance to redeem for cash, the swine.

Foreign Transaction Fees

I would slightly lean towards the Discover it because it doesn't have a foreign transaction fee, so for the very occasional international trip the average user takes, that would provide some real savings. Discover cards are processed on the Diner's Club network, so they have quite good acceptance overseas, although somewhat less than Visa or MasterCard (and much better than American Express).

Of course a free Bluebird account also doesn't have foreign transaction fees, and can be used as an ATM card at many international ATMs, but does operate on the American Express card network so acceptance could be a problem depending on the destination.

The Exceptions

Of course, if you are a businessman who charges company expenses to your personal credit card, or you are crazy, travel hacking is an amazingly lucrative hobby that allows you to travel the world for pennies on the dollar. Buy my book! Read my blog! If you like it, consider setting up a monthly PayPal subscription! But when your friends ask, tell them the same thing I told my brother: a solid 2% cash back card is going to get them farther, faster, then messing around with co-branded credit cards that earn just one mile or point per dollar.

Fidelity Investment Rewards vs. Priceline Rewards

[Updated 5/25/13: I no longer know of a working landing page for the Priceline Rewards card that displays the 2% cash back offer. However, this FatWallet Forums thread has a link to this application, and if you click on the "Terms and Conditions" at the top of the page you'll see that they still show "2 points per $1 spent on all other transactions."]

[Update 6/29/13: the link above is no longer working, which means the Priceline 2% cash back offer is now well and truly dead. If you know of a working application link, let me know!] 

The two best all-purpose cash back credit cards available today are the Fidelity Investment Rewards American Express, which earns 2 points per dollar, worth 2% cash back when deposited to a Fidelity account, and the Priceline Rewards Visa, which earns 2 points per dollar spent on the card and allows you to redeem those points at 1 cent each for statement credits. Even better, neither card has an annual fee. Today, I'd like to clarify some of the important differences between the two cards.

Issuer

  • The Fidelity Investment Rewards card is issued by FIA Card Services, the credit card division of the Fidelity investment bank.
  • The Priceline Rewards Visa is issued by Barclaycard US. 

Since the Fidelity card is not issued by American Express, you can apply for it at the same time as a credit or charge card issued by American Express, like the Premier Rewards Gold or Platinum Membership Rewards-earning cards, or a Starwood or Delta co-branded card, without an automatic rejection. 

Barclaycard also issues the Arrival World MasterCard (which I just received in April) so you probably won't be able to receive both that card and the Priceline Rewards Visa in the same application cycle.

Signup Bonus

  • The Fidelity Investment Rewards American Express does not have a signup bonus.
  • The Priceline Rewards Visa has a signup bonus of 5,000 bonus points after your first purchase, worth $50 in statement credits. 

Acceptance

 

 

Fewer merchants, especially small local merchants, accept American Express cards than Visa cards, although I find that besides at the smallest grocers and restaurants American Express cards are very widely accepted in the United States. 

If you use the US Bank or Nationwide Visa Buxx cards to manufacture spending, those products only allow you to load using Visa and MasterCard.

On the other hand, if you do much of your shopping at Costco you know that their stores accept only American Express cards.

Minimum Redemption

  • The minimum redemption for the Fidelity Investment Rewards card is 5,000 points, worth $50 in cash deposited to a Fidelity account.
  • The Priceline Rewards card allows a minimum redemption of 2,500 points against a charge of at least $25. No partial redemptions are allowed, meaning you must have enough points to redeem for the entire amount of the charge to your account.

Redemption Method

  • Fidelity allows you to set up automatic disbursements at the end of each month, or you can manually redeem your points for cash deposited to a Fidelity account.  In either case you must have at least 5,000 points, worth $50, in order to redeem them (however, there does not appear to be a maximum).
  • Priceline Rewards allows you to redeem your points for a statement credit against any charge made in the last 90 days.  Since you need to have enough points to cover the entire charge, the best method to make sure you don't have any points left over is to manufacture a transaction of exactly the right size. For example, if you send $1,000 per month using Amazon Payments, you can break that into one $950 transaction and one $50 transaction, which you can then redeem your Priceline Rewards points for.

Conclusion

The Fidelity Investment Rewards American Express and Priceline Rewards Visa are fairly evenly matched, being the only two no-fee cards I know of that offer 2% cash back on all purchases.

The Priceline Rewards card has a lower minimum redemption, and more widespread acceptance as a Visa card, but a slightly more complicated redemption method, which doesn't allow you to redeem your points for cash directly.

 

Inside an application cycle: April 2013

ike many travel hackers, I sign up for rewards-earning credit cards periodically in order to secure high signup bonuses and add more tools to my miles- and points-earning toolbox. There are a few guidelines I typically follow:

  • Wait at least 91 days between credit card applications;
  • Apply for no more than 1 card per issuer;
  • Apply for no more than 5 cards per application cycle.

This is a mixture of superstition and what I've learned from hundreds of hours studying people's experiences on the many popular credit card forums, but especially the ones dedicated to miles- and points-earning cards, like Flyertalk and Milepoint.  I don't recommend anyone else follow my guidelines, but they work for me.

This month I applied for exactly 5 cards, from 5 different issuers.  It had been a little over 100 days since my last round of applications.  I was waiting until my credit card statements cut for April, so that their low balances would be reported to the credit bureaus before I applied.  I always pay off all my credit cards before an application cycle, so that credit issuers see as low a "credit utilization" as possible on my report.

With that out of the way, the five cards I applied for were:

  • Club Carlson Business Rewards Visa;
  • Delta Business Platinum American Express;
  • Barclaycard Arrival World MasterCard;
  • Marriott Rewards Premier;
  • Fidelity Investment Rewards American Express.

Today I want to discuss why I chose those cards, and the results of my application cycle.

Club Carlson Business Rewards Visa

  • Annual fee: $60, not waived the first year of card membership.
  • Signup bonus: 85,000 Gold Points after spending $2,500 in the first 3 months of card membership.
  • Ongoing benefits: Club Carlson Gold elite status; 40,000 Gold Point annual renewal bonus; last night free on all award stays of 2 or more nights.
  • Application outcome: instant approval.

Objectively speaking, I believe this is the most lucrative hotel credit card currently available.  The 85,000 Gold Point signup bonus, plus the last-night-free benefit means you have enough points for 2 free nights at any Club Carlson property in the world, since their top-tier Radisson Blu properties top out at 50,000 points per night.  The Hyatt Visa offers a similar signup bonus, of two nights at any Hyatt in the world, but offers less lucrative ongoing benefits.

dmittedly, Club Carlson doesn't have properties everywhere, and the ones they have aren't always conveniently located.  Their properties in Europe, where I travel frequently, are normally centrally located and high quality, so I'm confident I'll get more than $60 in value out of this card annually.

This is a card I plan on keeping indefinitely, thanks to the ongoing benefits, unless Club Carlson undergoes a massive devaluation, which is always a possibility in the world of hotel loyalty programs.

Delta Business Platinum American Express (see below for better offer)

  • Annual fee: $150, not waived the first year of card membership.
  • Signup bonus: 30,000 Skymiles, 5,000 of which count as Medallion Qualification Miles, after $500 in spending within 3 months.
  • Ongoing benefits: Annual economy companion ticket n account anniversary. 10,000 bonus Skymiles and Medallion Qualification Miles after spending $25,000 and $50,000 each calendar year.
  • Application outcome: instant approval.

The Delta Platinum business and personal American Express cards allow you to earn higher elite status with Delta without having to go on mileage runs, which cost time as well as money. Unfortunately I applied for this card after a higher signup bonus of 35,000 Skymiles and 10,000 MQM had already expired (the offer is still available for the personal card).

I plan on hitting the $25,000 spend threshold this year, and the $50,000 spend threshold in subsequent years.  The first year I'll earn 65,000 redeemable Skymiles and 15,000 MQM at a maximum cost of $348 ($150 annual fee and up to $198 to manufacture $25,000 in spending), or 0.5 cents per redeemable mile. In subsequent years I'll be able to earn 70,000 Skymiles and 20,000 MQM at a cost of up to $545, or 0.77 cents per redeemable mile, without taking into account the benefits of higher Delta Medallion elite status than I would otherwise qualify for.  The card also gives an economy class companion ticket on each account anniversary.

I'll keep this card as long as I continue to fly Delta regularly, since I'm getting such valuable ongoing benefits.  Starting in January I'll be keeping my eyes out for a good signup offer for the personal card, which has the same benefits as the business card, and which will allow me to almost reach Gold Medallion status each year without setting foot on an airplane.

Barclaycard Arrival World MasterCard

  • Annual fee: $89, waived the first year of card membership.
  • Signup bonus: 40,000 "miles," worth $444 in travel reimbursements, after spending $1,000 ithin the first 3 months of card membership.
  • Ongoing benefits: none.
  • Application outcome: instant approval.

This is a good example of a card that's only worth getting for the signup bonus.  I discussed it in detail at the end of this post in February.  I plan on using the signup bonus for paid hotel stays, since this card allows you to use your "miles" for a statement credit against charges made with the card, allowing you to earn points and stay and night credit with your hotel chain of choice, unlike hotel reservations made with points through the Ultimate Rewards travel portal.  If I don't end up using all of the card's signup bonus on hotel stays I'll use it to cover other travel expenses, like airline or rail tickets, which I buy constantly.

The Arrival World MasterCard's earning rate of 2 miles per dollar (worth 2.22 cents) spent on the card means that it may be worth manufacturing some spending on the card as well, if I don't have any higher spending priorities, like meeting the $25,000 spend threshold on the Delta Business Platinum card.

Marriott Rewards Premier Visa (see below for signup links)

  • Annnual fee: $85, waived the first year of card membership.
  • Signup bonus: 1 free night at any Category 1-4 Marriott property on account approval, and 50,000 Marriott Rewards points after spending $1,000 within 3 months of card membership.  $75 statement credit after first purchase.
  • Ongoing benefits: 1 free night at any Category 1-5 Marriott property on each account anniversary.  However, the certificate expires 6 months after being issued. Additionally, the card annually gives credit for 15 nights towards elite status qualification, which is enough to qualify for Silver elite status every year without any paid stays.
  • Application outcome: decision pending.  I called the Chase reconsideration line at 88-245-0625, gave the account representative my name and Social Security number, and was approved over the phone in about 90 seconds.

have an upcoming stay this summer in Portland, Oregon and I'd like to stay downtown. I'll use the free night certificate that comes with account approval and 40,000 points to book 3 nights at the Courtyard Portland City Center, which would cost $684 after tax, and leave me 10,000 Marriott Rewards points from the signup bonus left over, plus a $75 statement credit.

The biggest complaint people ave about this card is the 6-month expiration of the annual free night certificate. I travel to a lot of mid-sized cities which have Category 1-5 Marriott properties, so I'm fairly confident I'll be able to use the free night certificate to get enough value to justify paying the $85 annual fee after the free first year.

There are three slightly different offers currently available. This public offer is for 50,000 Marriott Rewards points and the free night certificate.  To get the offer that includes the $75 statement credit, begin making a reservation through the Marriott website, until you get to the "Review Reservation" screen, where you'll see a banner with the credit card offer:

There is another, possibly better, offer of 70,000 Marriott Rewards points, a free night certificate, but no statement credit, which is available through this application page, although it doesn't have a landing page describing the offer, and I tend to avoid non-public offers out of an abundance of caution, so use that link at your own risk (there have been plenty of reports of success though).

Fidelity Investment Rewards American Express

  • Annual fee: $0.
  • Signup bonus: none.
  • Ongoing benefits: 2% cash back on all purchases.
  • Application outcome: Decision pending.  Fidelity said they'd mail me the application decision within 30 days. I'm in no hurry to get this card (since there's no signup bonus, minimum spending requirement, or bonused spending categories), so I'm going to wait to receive their decision through the mail.

This is the card I recommend to anyone getting started in the travel hacking game, because it's the best no-annual-fee straight cash back card available.  Unless you're meeting a minimum spending requirement or have a specific redemption in mind, I think 2% cash back is worth more than a dollar of non-bonused spending on virtually any other card.  But in order to make that comparison, you first need to have a 2% cash back card, which is why I decided to apply for it as the fifth card of this application cycle.

I plan to keep this card indefinitely, since it has no annual fee and as it ages on my credit report it will increase my average age of accounts, thereby increasing my credit score overall.

Conclusion

After spending $5,000 on these cards, I'll have earned a total of:

  • 97,500 Club Carlson Gold Points (almost enough for two 2-night stays at any Club Carlson property in the world);
  • 30,500 Delta Skymiles and 5,000 Medallion Qualification Miles;
  • 42,000 Barclaycard "miles," worth $466 in travel reimbursements;
  • 51,000 Marriott Rewards points and a free night certificate good at any Category 1-4 Marriott property.

Meanwhile, I'll have spend $210 in annual fees, and received a $75 statement credit. If I manufacture the entire $5,000 in spending at 0.79 cents per dollar (unlikely, but possible), I'll pay an additional $40, bringing my total cost to $175.

What's the best way to book a paid ticket?

Travelling on international premium cabin award tickets is one of the most lucrative uses you can make of your airline miles and flexible credit card points.  The example I usually give is a 100,000 United MileagePlus award to Europe in Business Class.  If you manufacture those points at .79 cents each, you'll pay $790, plus up to a few hundred dollars in taxes and fees.  The point is that you aren't saving much money over a paid economy ticket, but you get to enjoy the comfort of flying in a premium cabin instead.

The downside is that you don't earn elite status-qualifying airline miles for the distance you travel on award tickets, which can be substantial on international flights.  If you value the benefits of elite status, then you'll need to make some paid domestic flights to reach the elite status threshold you're interested in.

That's why today I'm going to cover the most lucrative methods for booking paid airline tickets.

Booking Directly Through an Airline

he most obvious reason to book through an airline's website directly is to use a credit or certificate issued by the airline.  Airlines typically hand out these certificates in exchange for voluntarily giving up your seat on an overbooked flight.  Likewise, if you cancel a non-refundable flight you may have a credit available to use for a later flight (after subtracting any cancellation fees).

When you do so, it's best to use a credit card that gives bonus points on airline purchases.  For example, the Sapphire Preferred Visa and MasterCard issued by Chase give double flexible Ultimate Rewards points on all "travel" purchases.  The American Express Business Gold Rewards and Premier Rewards Gold cards likewise offer triple Membership Rewards points on purchases made directly through an airline.

In terms of fixed-value and cash back cards, the US Bank Flexperks Travel Visa Signature card offers double points on airline purchases, if that is the bonus category you spent the most in during a given statement cycle.  These points are worth up to 2 cents each, meaning you can earn up to 4% back in value on travel redemptions.

Otherwise, your best bet is a 2% cash back card like the Fidelity Investment Rewards American Express or Visa card, or a card you're meeting a minimum spending requirement on.

If you have elite status with Delta, you'll also earn 1 Starwood Preferred Guest Starpoint per dollar spent on airfare directly through the Delta website.  As you'll see below, that's not necessarily the most lucrative method of making paid Delta reservations.

Clicking Through Ultimate Rewards to an Online Travel Agency

If you have a Chase Ultimate Rewards-earning credit card, you have access to the Ultimate Rewards Mall, which allows you to earn bonus Ultimate Rewards points on purchases made through online travel agencies, or OTAs.  You can earn 1 bonus point per dollar spent at Expedia, Priceline, or Orbitz and 2 bonus points per dollar spent at Travelocity or Hotwire.  These OTAs can price out itineraries very differently, so it's always worth checking whether you can find a better price or more convenient itinerary on one OTA rather than another.

The Chase Sapphire Preferred bonuses all travel spending, including OTA reservations, so that's a reliable way to earn a total of 3-4 Ultimate Rewards points per dollar spent on airline tickets (depending on which OTA you use).  In my experience, when booking only an airline ticket (and not a package which includes a hotel, rental car, or cruise) through Travelocity, there will be two credit card charges, one from the operating airline which covers airfare, taxes, and fees:

With a second charge from Travelocity to cover their booking fee (up to $10.99):

n these situations I believe the American Express Premier Rewards Gold and Business Gold Rewards cards will give triple points for the first, airline charge, for a total of 2 Ultimate Rewards points and 3 Membership Rewards points per dollar spent, a 5-10% rebate, depending on how you value those points.

Cash Back Portals

If you don't have access to he Ultimate Rewards mall, and you don't have a card that bonuses airline or travel purchases, and you don't have elite status on Delta (to earn 1 Starpoint per dollar), then you can still earn a small rebate on your flight purchases by clicking through a cash back portal.  All three of these cash back portals offer a fixed or variable amount of cash back when you click through to online travel agencies and make an airline reservation. 

  • TopCashBack (Expedia: $2.25, Travelocity: $3.00, CheapTickets: $5.50, Priceline: $5-$7)
  • BigCrumbs (Expedia: $1.75, Travelocity: $2.80, CheapTickets: $3.15, Priceline: $2.80)
  • Fat Wallet (Expedia: $1.25, Travelocity: $1.50, CheapTickets: $20(!), Priceline: 1%)

Conclusion

As this analysis makes clear, the best method of making paid airline reservations depends heavily on what tools you have at your disposal.  The single best combination is using the Premier Rewards Gold or Business Gold Rewards card from American Express at Travelocity or Hotwire, after clicking through to one of those travel agencies from the Chase Ultimate Rewards shopping portal.  To get access to that shopping portal, however, you'll need at the least least a no-annual-fee Chase Freedom card.  To turn those fixed-value Ultimate Rewards points into flexible Ultimate Rewards points, you'll need either a Sapphire Preferred, Ink Bold, or Ink Plus card.  However, even if you just redeem your Ultimate Rewards points for cash back through your Freedom card, you'll still be earning a generous 2% cash back on all your paid airline reservations, in addition to whatever awards you earn through the credit card you ultimately make your purchase with.

Maximizing fixed-value travel rewards points

Today I'd like to take a closer look at the value proposition offered by some of the cards discussed in Chapter 2 of my book: fixed-value travel rewards cards.  When looking at any card, you should ask three questions: is it worth signing up for; is it worth making purchases with; and is it worth renewing when the annual fee is due?

Signup Bonuses

The first question is easy to answer: since the annual fee is waived for all these cards, you can apply for any of them when the signup bonus is high enough to justify the hard credit inquiry, and you aren't applying for any other cards from the same issuer in your current application cycle.

Here are the current signup bonuses available for these cards: 

  • Capital One Venture Rewards.  10,000 Venture miles after $1,000 in spending within 3 months.  Earn 2 points per dollar, redeem them at 1 cent each for statement credits against travel purchases made with the card.  No partial redemptions (you must have enough points to pay for the entire travel purchase).  $59 annual fee, waived the first year.
  • US Bank Flexperks Travel Rewards Visa Signature.  17,500 FlexPoints after $2,500 in purchases within the first 5 months.  Earn 1 point per dollar, 2 points on airfare, groceries, or communications expenses, 3 points per dollar for transactions coded as charity.  Redeem points for travel redemptions using the Flexperks travel booking tool at up to 2 cents per point, in defined tiers.  No partial redemptions.  $49 annual fee, waived the first year.
  • Citi ThankYou Premier.  25,000 ThankYou points after spending $2,000 in the first 3 months.  Earn 1 point per dollar, 1.2 points at supermarkets, gas stations, commuter transportation and parking.  Redeem points at 1.33 cents each for travel purchases using the ThankYou Rewards booking tool, with partial redemptions allowed.  $125 annual fee, waived the first year.
  • BarclayCard Arrival World Mastercard .  40,000 points after $1,000 in spending within 90 days.  Earn 2 points per dollar spent on the card.  Redeem points for statement credits against travel purchases made on the card at 1 cent per point, and receive a 10% rebate after each redemption.  No partial redemptions.  $89 annual fee, waived the first year.
  • Priceline Rewards Visa Signature.   5,000 points after first purchase.  Earn 2 points per dollar spent on the card, and 5 points per dollar spent on Name Your Own Price reservations.  Redeem points at 1 cent each for statement credits against purchases made on the card, with no partial redemptions.

As you can see, the Priceline Rewards card has a signup bonus worth $50, the Venture Rewards card's signup bonus is worth about $100, the Flexperks card $260-$350, ThankYou Premier $332, and Arrival World $444.  In general, it's never worth signing up for the Venture Rewards card except during the periodic promotion when they offer a signup bonus of twice the number of miles you earned on a competing card during the previous calendar year, which can be quite lucrative.

Earning Points

All these cards, except the Venture Rewards and Priceline cards, are worth applying for and spending enough on to earn the signup bonus.  But are any of them worth making purchases on after you've spent enough to trigger the signup bonus?  The answer is usually no, since the Fidelity Investment Rewards American Express card offers 2% cash back on all purchases and the Fidelity Visa Signature card offers 1.5% cash back on the first $15,000 in spending each calendar year, and 2% thereafter, while also having no annual fee. The chart below illustrates the value proposition offered by spending on each of these cards:

This chart makes clear that the standout value among these cards is the US Bank Flexperks Travel card, which offers up to 6% back on charitable spending (which earns 3 Flexpoints per dollar), but also up to 4% back on airfare, gas, or groceries (whichever you spend most on each billing cycle), plus telecommunications expenses, when you redeem your points using the Flexperks booking tool.  

Redeeming Points

This brings us to the most fundamental difference between these cards: the method of redemption.  As you saw above, fixed-value rewards points are divided into two groups: those that require you to make prospective bookings using your points through their travel tools (ThankYou, Flexperks) and those that allow you to redeem your points for a statement credit against a purchase you've already made with the card.

When you have a choice, you should redeem for statement credits against paid hotel stays, and use rewards booking tools for airline reservations.  This is for the simple reason that unlike airline frequent flyer programs, hotel loyalty programs generally only award points for paid reservations made through the hotel's own website.  By booking a paid hotel reservation through the hotel's website, then redeeming your points for a statement credit against the cost of that reservation, you'll earn hotel loyalty points for your reservation, while you won't do so when you make a hotel reservation through a loyalty program's award booking tool.  This increases the value of your fixed-value points by allowing you to double-dip.

Summary

For everyday purchases, only the US Bank Flexperks Travel card can compete with the Fidelity Rewards 1.5% (Visa) and 2% (American Express) cash back cards.  However, several of the other cards discussed here can offer great value when you take advantage of their lucrative signup bonuses.  Just don't be suckered into paying an annual fee for a card that isn't worth keeping!