Lifecycle effects, Thanksgiving car rental edition

I often talk about lifecycle effects when it comes to travel hacking. That's what I call the phenomenon of people believing that travel hacking has become objectively more difficult when in fact it's their own lifecycle progression that has made them subjectively experience travel hacking as more time-consuming, laborious, or downright boring than when they had more time and fewer responsibilities.

This is a totally normal and indeed ubiquitous phenomenon in all fields of human endeavor, but it's important to keep in mind when you hear a retiree explain how much better everything used to be: sure, travel hacking might have been easier, but he also had more hair, better joints, and fewer kids.

I had my own lifecycle effect moment the other day while renting a car for a Thanksgiving trip.

How I think you're supposed to rent cars

Travel hackers have a lot of options when it comes to minimizing the cost and maximizing the value of car rentals:

  • Redeem Discover cash back for car rental certificates. You can redeem $20 in Discover cash back for a $40 certificate with National, Alamo, and Enterprise.
  • Earn frequent flyer miles by using airline promo codes when booking. I often see Frequent Miler posting these codes, for example here and here, but you can also earn miles by booking through airline car rental portals, e.g. Delta's.
  • Use Autoslash to track car rental prices. Autoslash has changed quite a bit through the years but you can still use it to track your car rental reservation and alert you when the price drops, so you can make a new reservation at the lower price.

Five years ago I probably would have done all that, and made sure to minimize the price I paid and maximized the rewards I earned on our 4-day rental.

How I actually rented a car for Thanksgiving

I logged onto Chase Ultimate Rewards and redeemed 15,840 Ultimate Rewards points for a rental that priced out at $198, which seemed in line with the prices I saw glancing at Kayak.

I did create a Hertz account and earned 275 points for the rental (worth approximately $0), but I didn't bother searching for referral codes or promo codes to apply to the reservation.

Coming to terms with lifecycle effects

There are still lots of marginal travel hacking techniques I pursue. I still credit all my paid flights to a frequent flyer program, even if it's a program like United's that doesn't offer me much if any value. I still try my best to keep my Delta SkyBonus small business account active in order to gradually earn points towards redemptions like drink coupons and domestic flights. I use shopping portals when I buy stuff online, even if the rewards end up being just a few thousand points per year.

But when it comes to renting a car once a year, I can't bring myself to care the way a younger me probably would have.

Travel hacking without manufactured spend

I was having lunch with a travel hacker in my area the other day and we got to talking about different approaches to the game.

My personal approach depends almost entirely on manufactured spend. I think it's fair to say that if every manufactured spend avenue died tomorrow, I'd close all my travel credit cards and put all my regular purchases on a 2% cash back card (or a 2.625% cash back card if I ever had $100,000 in assets). I don't have any reimbursed business travel, either to generate real credit card spend or to take advantage of the benefits of elite status. And I'm poor, so I don't have enough monthly expenses to meet even a "modest" minimum spend requirement of $3,000 or more. Remember, we're imagining a world without any manufactured spend opportunities, including whatever you're thinking of right now.

That's one extreme, but obviously it doesn't apply to most or all of my readers, especially the well-heeled ones! The fact is, travel hacking is and would be possible without any manufactured spend at all. But the benefits would still depend on the discipline you applied to it. With that in mind, here are a few approaches you could take.

Target individual expenses

The most intuitive way to travel hack without manufactured spend is to target individual expenses on upcoming trips. As I often say, at least for economy travel, your hotel expenses can quickly outstrip your flight expenses, so that's a natural place to start. Once you have a destination in mind, it's easy to find the credit card or cards with signup bonuses that will save you the most money on hotel stays — emphasis on you. I truly do not care what a point is "worth" in the abstract; I care what it's worth to you, and what it's worth to you depends on how much money it's going to save you.

If you are planning a trip with stays at Marriott properties, the Marriott Rewards Premier card can earn you 80,000 points after spending $3,000. That's a minimum of 2 nights at all but their top-tier Category 9 properties, and at least 3 nights at Category 5 properties and below. Category 5 properties are an endangered species these days, which is one reason I cancelled my card; the annual free night certificate is only redeemable at Category 1-5 properties. But if you have upcoming Marriott expenses it's easy to calculate the precise value to you of the 80,000-point signup bonus.

Likewise with the current 100,000-point Hilton Honors Surpass American Express signup offer (you can find my personal referral link on my Support the Site! page), and the Chase Hyatt Visa Signature offer of 40,000 points. If you don't have the ability to manufacture spend, then those one-time points hauls can save you a lot of money on trips involving stays at Hilton or Hyatt.

The point is that this exercise doesn't require figuring out how much points are worth in the abstract. Instead, you can ground the value you're getting from a signup bonus directly in your own experience: the amount of money you would otherwise spend on nights you're able to pay for with a credit card's signup bonus.

Targeting airfare is somewhat more difficult, and should be done cautiously. For example, there's a big difference between cards which only allow you to redeem points for the entire cost of a flight (like US Bank Flexpoints) and cards which allow you to redeem points against the partial cost of a flight (like Chase Sapphire and Ink cards, Barclaycard Arrival cards, BankAmericard Travel Rewards, and others).

Likewise, there's a difference between airlines that allow you to pay for your flights with miles (Delta), airlines that offer last-seat availability at much higher rates (Alaska and American), and airlines that offer last-seat availability only to certain customers (United). This difference matters less in a world with manufactured spend, since with plentiful points you are always free to use the right points for the right job. In a world without manufactured spend you have much less room for error in earning and redeeming precisely the points you need. United miles simply won't get you where you need to go, if where you need to go is served only by American.

Build trips around the signup bonuses you're eligible for

A totally different approach to travel hacking without manufactured spend is to build your travel around the signup bonuses you have available to you. It often feels like this is the approach implicitly endorsed by affiliate bloggers who, in promoting a given credit card, explain exactly how and where they think you should use the card's signup bonus.

The advantage of this strategy is that you may be able to reduce your out-of-pocket expenses much more than you would with the strategy of targeting individual expenses, since each part of the trip will be designed around a particular points balance.

The disadvantage is that you have much less control over where you go. While to a travel hacker this may sound like a commonsense trade-off, it's worth pointing out how unusual it would seem to a civilian who plans trips around places they actually want or need to visit.

Even reimbursed business travelers need to think carefully

I often hold up reimbursed business travelers as a sort of platonic ideal of a travel hacker, one who is able to spend her employer's money, accrue elite-qualifying miles with the airline of her choice, and earn top-tier hotel status on someone else's dime.

But that's no excuse for reimbursed business travelers to relax: they still have to make decisions about the cards they use to pay for their reimbursed travel, and to a lesser extent which airline and hotel programs to pursue loyalty with. I say "to a lesser extent" because the various loyalty programs have become extremely adept at making the value proposition of their programs closely track each other. In other words, for actual paid hotel stays and for actual paid flights, the rebate you receive will be similar regardless of the program you select, as long as you direct all your paid business to a single program.

When it comes to credit cards, however, slacking off can be expensive. For example, a reimbursed business traveler who spends $1,000 at a Marriott property could earn 5,000 Marriott Rewards points by paying with a Chase Marriott Rewards Premier card, or 2,000 Starpoints with an American Express Starwood Preferred Guest card — which can be instantly transferred to 6,000 Marriott Rewards points. If you aren't aware of that, you're simply leaving points on the table.

Likewise, a reimbursed business traveler who is able to pay for their own flights still has to decide whether to concentrate or diversify. Should a reimbursed Delta flight be paid for with a Delta American Express card in order to earn as many Delta SkyMiles as quickly as possible, or with another card that bonuses airline purchases in order to diversify their points balances, even if that means lower balances across multiple accounts?

Conclusion

At the end of the day, travel hacking means different things to different people. For some people it means manufacturing spend, for others it means earning points cheaply and redeeming them dearly, and for others it just means occasionally signing up for a new round of credit cards in order to chop off a chunk of the cost of their travel expenses.

The thing I think it can't mean, or rather the thing travel hacking is in contrast to, is applying, spending, and traveling without thinking. So: don't do that.

Washtubs, not teaspoons

A few years back, reclusive travel hacking personality Mr. Pickles started tweeting pictures of a gas pump dispensing hundreds of gallons of gas for free and asking "what am I filling up?" Twitter's an elusive medium and I can't dredge up the actual thread (send me a link and I'll update this post!), but as I recall it ended up being a large wheeled diesel generator of some kind. There's nothing special about a travel hacker being able to buy gas for next to nothing, if they have access to the right stores during the right promotions, but Mr. Pickles didn't just have free gas: he had a plan.

In Warren Buffett's latest shareholder letter he wrote:

"Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons. And that we will do."

Many people in the country today are in the midst of such a downpour, which has got me thinking about the ways a travel hacker can equip herself with washtubs, not teaspoons.

Maintain a diverse collection of credit cards

I've been taking advantage of the current promotion with my Hilton Surpass American Express and US Bank Flexperks Travel Rewards cards, which I consider worth manufacturing spend on even in the absence of a promotion. But reasonable people disagree, and might instead manufacture spend primarily at unbonused merchants using cards like the Starwood Preferred Guest American Express or Chase Freedom Unlimited. Most of the time, that's a perfectly defensible decision. But when an opportunity like the current one comes along, it leaves those people at a disadvantage compared to people who keep one or more credit cards bonusing grocery store spend.

Manage credit lines

Like most travel hackers I have a general awareness of my reported credit card utilization rate, but unlike many travel hackers I don't really care about that rate, since my practice focuses mainly on manufacturing spend, not accumulating signup bonuses. However, being sure that you have the credit lines available to maximize an opportunity while it exists is a totally separate question. It's absolutely worth thinking in advance about how you'll open up credit limits suddenly when a unique opportunity emerges. How fast can you liquidate your spend in order to create additional headroom? Even if you manufacture relatively little spend, you might consider having a plan in place when a particularly lucrative opportunity comes along.

Come up with a plan

The benefits of the current promotion expire on April 6, which means there are two different timelines: the deadline to earn additional benefits and the deadline to redeem them. There's no point earning benefits that won't be used, or using benefits for things you don't want. That means I've been spending a lot of time looking around my apartment thinking, "what can I buy today that I'm certain to use eventually?" If you're hitting this opportunity hard, you may need to think further outside the box than usual. A few suggestions:

  • Paper goods: Paper towels, toilet paper, facial tissue, coffee filters.
  • Occasionally used products: batteries, lightbulbs.
  • Toiletries: toothbrushes, toothpaste, soap, feminine hygiene products, razors, deodorant, shampoo.
  • Canned goods.

Of course, the best time to come up with a plan is in advance, which is what Mr. Pickles did. I'm not saying you should buy a diesel generator just in case an unlimited free gas opportunity arises. But I am saying Mr. Pickles did and was able to hit that opportunity as hard as humanly possible.

Give stuff away

Once you've stocked up on everything you can possibly imagine needing, it's as good a time as any to think about folks who have unmet needs. I don't particularly care if you think of this as "charity" or as "paying it forward" or as "sticking it to the man," but if you have the ability to make somebody's day by giving them free gas, free groceries, or whatever else your travel hacking practice gives you free or cheap access to, then I think it's worth considering.

Conclusion

I happen to be in a position to take advantage of the current promotion fairly aggressively, but it should be obvious that I'm trying to frame this discussion in more general terms. If you don't have a plan in place in advance of a promotion, you're more likely to waste valuable time coming up with one while the promotion is ongoing.

The advantages of prepaying for travel at a discount

I have never belonged to the "travel is free" school of travel hackers, not because I don't think there are free or negative-cost methods of manufacturing spend (there are) or because I think my time has intrinsic value (it doesn't), but for the much simpler reason that most techniques that can be used to generate travel rewards can also be used to generate cash back. No matter how cheap or profitable your travel hacking is, the same techniques can often be used to generate some amount of cash back; that cash is the price of your "free" trips.

Now, there are a few exceptions. The IHG Priceless Surprises promotion didn't have a "cash back" option (although I did make some money when I sold the Bose speaker system I won). Likewise if you had 24 paid stays or 49 paid nights at Hyatt in 2016, you could pay for one additional stay and get a free night at any Hyatt in the world when Hyatt Gold Passport switched over to World of Hyatt. That's good old-fashioned travel hacking, with no obvious cash back equivalent.

But if you earn most of your loyalty rewards from manufactured spend, fulfillment by Amazon, or reselling private label products, you can almost always choose to earn cash instead of travel rewards. That's the simple reason I think travel is almost never free.

Instead, I prefer to think of my travel hacking practice as prepaying for travel at a — sometimes very steep — discount.

Prepaying for travel can save you money

This is obviously the most attractive reason you might choose to earn rewards currencies instead of cash back. If you need to choose between earning 1.5 Ultimate Rewards points with a Chase Freedom Unlimited card or 2.625% cash back on a BankAmericard Travel Rewards card, the obvious reason to do so is if you expect to get more than 1.75 cents per Ultimate Rewards point, for example on a premium cabin United redemption, expensive Hyatt stay, or Wanna Get Away fare on Southwest.

While I mentioned manufacturing cash versus rewards currencies, there are other ways to prepay for travel at a discount: Hyatt gift cards, for instance, are often on sale for 10% or more off face value, allowing you to "lock in" savings by purchasing gift cards on sale and redeeming them over time as needed.

It's more convenient to spread travel spending throughout the year

The other day I was chatting with a travel hacker who consults with businesses to use rewards to lower their travel costs and started thinking about the way a firm could use rewards earned throughout the year on business expenses to avoid month-to-month fluctuations in travel costs. After all, if you absolutely have to go to Louisville for business in May during the Kentucky Derby, you don't have the choice of paying the October cash rate — but you do have the option of paying the year-round points rate if, of course, you can find a standard room available.

This is more or less how I think about my Delta SkyMiles. I earn a block of SkyMiles each year with my Platinum Delta SkyMiles American Express card at a fixed cost, and then redeem them for my Delta flights whenever appropriate. Sometimes (hopefully more often than not) I save money compared to a cash back or fixed-value points card and sometimes I don't, but I don't have sudden Delta flight expenses as long as I have enough points to cover my flights.

This is partly what Frequent Miler calls "the joy of free:"

"When you book travel using miles & points, it may feel like your trip is free (or nearly free), regardless of how many miles and points you spend. If so, the pleasure you get from spending points and miles may greatly outweigh the pleasure you’d get from paying for the same trip with cash. In this case, miles & points are arguably (and ironically) worth more to you because you do not value them like cash."

But there's a more serious side to it as well. Travel expenses that can't be covered by existing points balances and have to be charged to a credit card require you to have cash available to pay off those new charges, lest you be stuck paying interest charges that quickly devour any profit or savings from your travel hacking practice. If you aggressively invest as much of your monthly cash flow as possible (have I mentioned my new blog, Independently Financed?), then having additional cash on hand to cover credit card payments necessarily disrupts the pace of your investments.

In other words, there are potential advantages to steadily building up and redeeming an inventory of travel rewards currencies even if you save relatively little in out-of-pocket expenses.

Some people need a permission structure to travel as much or as well as they'd like

Reader ed commented the other day:

"once a certain cache of points is retained, a freedom opens up to divert efforts toward cash back while still retaining flexibility for award-based travel. It would seem perfectly OK to me to pay for that increased flexibility even if I didn't use it. Therefore, I'm not sure that points that go unredeemed are without value. The value may simply be to clarify what my priorities are in the present moment, while retaining the means to travel on very short notice."

I think this is an interesting point that I don't always fully take into account. It's not just that traveling for "free" is more joyful, as I quoted Frequent Miler writing above, but that some people need the permission that paying little or nothing out of pocket provides in order to travel at all. A person who's both frugal and wants to see the world may need the impetus of high or even excessive points balances, hopefully cheaply acquired, in order to give herself permission to take the trips she's always dreamed of.

In this spirit, the constant drumbeat of devaluations may actually be a positive for the reluctant traveler! A trip that's affordable today might not be tomorrow, which may be enough to get someone out the door.

Conclusion

I love earning cash back, and try to earn as much of it as possible each month. But I admit that each of these different motivations drives me in part to earn rewards currencies in lieu of cash back: there are rewards currencies that I know will invariably save me money compared to cash back, there are rewards currencies like Hilton HHonors points that are so easy to earn and redeem that I'm able to spread my hotel spending evenly throughout the year, and there are currencies I accumulate just to give myself permission to book trips I might otherwise consider too expensive.

While the three rationales may differ in the degree of their economic "rationality," hopefully there's more to life than maximizing a utility function.

Doubt, skepticism, and risk management

Late last week there was a widely-publicized deal allowing you to earn 150 Avios per dollar spent at Match.com (with follow-up here). I had an exchange on Twitter with Ralph at PointsCentric that got me thinking about an issue that comes up fairly regularly in any travel hacking practice: the intersection of doubt, skepticism, and risk aversion.

I doubt nothing

Every travel hacker knows the feeling early on when they say to themself, "there is no possible way this will work," only to discover that it does. Doubt gets pounded out of you fast when you're regularly being paid by banks and merchants to shuffle money in, around and through them.

That's why I doubt nothing, and am willing to evaluate any deal at face value: what's the out-of-pocket cost, how much will I earn in rewards, what's the potential upside of the deal compared to other opportunities?

I'm skeptical of everything

In this case, the best case scenario was purchasing roughly 82,000 British Airways Avios for roughly $550, or 0.67 cents each, a 33% discount compared to transferring Ultimate Rewards points (worth one cent each) to British Airways.

Next, you can start considering the risks:

  • The purchase won't track properly;
  • The purchase won't track at all;
  • The deal will be retroactively changed or revoked;
  • Your account will be closed for abuse.

It turns out that what appears to have happened so far is that points were only awarded for "base" subscription amounts, not any additional features added to the subscription, meaning people who "maxed out" the deal earned 30,500 Avios for $550, paying roughly 1.8 cents per Avios.

Let me be clear: I did not predict this in any way, and am not taking credit for being prescient. I stated clearly in the Twitter exchange I linked to that I expected they would honor the deal (as they partially did). What I did say was that "you can buy Avios for one cent each year-round. The extent of the discount is the extent of your confidence." While I thought they would honor the deal, my level of confidence was extremely low, far too low to commit $550 to finding out whether my prediction was right or not.

It does sound like people are being refunded their Match.com subscription fees upon request, so those folks who jumped on the deal will, fortunately, be made whole.

Risk management is the intersection of belief and skepticism

There are two rules that are as true in travel hacking as they are in virtually any other field of human endeavor:

  • The majority of gains accrue to those willing to take the most risk, and;
  • The majority of losses accrue to those willing to take the most risk.

While I'm willing to take unlimited risk in my investment portfolio, I'm willing to take virtually no risk in my travel hacking portfolio. For me, travel hacking is about easy, consistent wins: I can calculate my profit on manufactured spend down to the penny, and I can fully comprehend the (not inconsiderable) risks.

I wrote back in January about a relatively speculative play I made, counting on an increased portal payout that never arrived. For that play I managed my risk in several ways:

  • I made the purchase on a card the statement closing date of which had just passed, giving me the benefit of a full statement cycle and grace period to determine if the purchase would track and post properly;
  • I made the purchase from a merchant with a generous, extended return period, ensuring that if the purchase failed to track properly (as it ultimately didn't) I wouldn't have to resell the merchandise at a loss.

As I explained in a recent subscribers-only Newsletter, I ended up making a small profit on the deal anyway, but I was only willing to pursue the deal in the first place due to the risk-management I had available.

Conclusion

When these time-limited deals come along, the fear of missing out that is the object of much popular fascination swings into action.

My basic view is that people should have a perfectly rational fear of missing out on the experiences they want to have, while trying to assuage that fear with respect to a particular deal or particular opportunity is far more likely to lead to expensive (or at least time-consuming) errors.

It's perfectly reasonable to relentlessly chase every deal that helps you achieve your goals, while only pursuing the fashionable deal of the moment after the most careful consideration.

Sustainability: value, cost, and risk

When a good deal comes along, especially if it doesn't have a designated expiration date, folks often talk about whether the deal is "sustainable" or not. The general idea is that if a deal is "too good to last," then it won't.

Of course, there are lots of ways a deal can end. If it's ended retroactively, those who jumped on it quickly will find they've wasted their time, or worse. If it's ended going forward, the prospective benefits of a credit card application may be cut short, or someone can be left with a garage full of merchandise they have to return or resell at a loss.

I think there are three slightly different issues related to sustainability that guide how I think about how long a deal is likely to last: value, cost, and risk.

High-value deals aren't particularly vulnerable

For $75 per year, anyone can carry a Hilton HHonors Surpass American Express and earn 6 HHonors points per dollar spent at grocery stores. Applied to certain high-value redemptions, like a 5-night stay at a premier property like the Conrad Maldives Rangali Island, that might work out to a roughly 14% return on your grocery store spend (for a sample reservation from December 31, 2017, to January 5, 2018).

That's a great value. And since it costs American Express just a fraction of the value the cardholder receives, it's not particularly vulnerable. After all, American Express doesn't care where you redeem your Hilton points, they care what they pay for them, and they pay much less for 6 HHonors points than they earn on your grocery store swipe fees.

Likewise, the US Bank Flexperks Travel Rewards card offers "up to" 4 cents per dollar spent at grocery stores, but it's not like you get a check every month. Instead, you have to save up enough points to redeem for a flight you're planning to book. Then you have to hope the fare is close to the top of a redemption band. It could take the average customer years to save up enough points to redeem for a single flight, during which time they've paid multiple annual fees and they haven't cost US Bank a dime — in fact, they've been a profit center. That's a high-value deal to the travel hacker that has nonetheless proven extremely resilient over time.

High-cost deals are vulnerable in the medium-term

Compare that to the original "old" Blue Cash card from American Express, which offered 5% cash back at grocery stores and drug stores. Admittedly, cash back accrued with a 2-month lag time, but you could earn unlimited cash back far in excess of any swipe fees on a card, and with no annual fee. The "old" Blue Cash card was a loss center, and American Express noticed. They shut down some heavy hitters and transitioned the remaining cardholders to the product they continue to offer, which limits bonused earning to $50,000 of spend per calendar year.

Banks and other merchants have proven willing, but not particularly skillful, at shutting down opportunities like this. When you find an opportunity that moves cash directly to you from a bank or merchant, it's a good bet the opportunity will be closed within 6-18 months.

High-risk deals are extremely vulnerable

In my experience, banks don't seem to mind customers who grind away at them day in and day out. The reason isn't any secret: acquiring a single customer who runs up credit card balances they're unable to pay off covers the costs of many people happily earning 1-2% per month. A fisherman doesn't get at angry at all the fish he doesn't catch; he knows the more fish there are, the more likely he is to land a big one.

But unprofitable behavior is different from risky behavior. Spending a multiple of your credit limit each month isn't likely to get you shut down because it's unprofitable — lots of things we do are unprofitable in the short term. Spending multiple times your credit limit each month is likely to get you shut down because it's risky — if you look like you're struggling to juggle your credit limits across multiple cards, it creates the (not unreasonable!) fear that a particular bank might be the one left holding the bag.

That's not to say risky deals aren't worth pursuing. They're often very worth pursuing! But the riskier your behavior looks to the other participants in a deal, the more rapidly it's likely to be shut down — even if it's no more or less profitable than a high-value deal that's been available for years.

My Borgata Black Label trade up experience

For quite a while now My Borgata Rewards has been running a status match program called "Trade up to Black Label." New My Borgata Rewards members who show elite status with "Caesars Entertainment, MGM, Tropicana Atlantic City, or Trump Casinos" will instantly receive My Borgata Rewards Black Label status and:

  • "$100 BONUS SLOT DOLLARS or Match Play
  • "Complimentary Stay in a Classic Room
  • "Access to VIP Lounge"

During a weekend trip to Philadelphia I popped over to Atlantic City to see how the status match works in practice. Here's my report.

Getting the status match

When I arrived at the Borgata, which is not on the Boardwalk but rather stuffed into a little corner of Atlantic City along with the Golden Nugget and Harrah's, I went straight to the My Borgata center and got in line for a new account. I mentioned the promotion (it's prominently advertised on-site as well) and showed a screenshot on my phone of my M life Platinum status (showing 0 tier credits, points, etc.). In other words, I didn't need a physical M life Platinum card in order to take advantage of the status match.

The My Borgata agent was happy to get me set up with a new Red Label account and immediately upgrade me to Black Label.

Although she kept apologizing for her "system being down," it seemed to me to work perfectly so I'm not sure what she was talking about.

Using $100 Bonus Slot Dollars

I chose the $100 Bonus Slot Dollars option, which can be redeemed for credit on any of the casino's slot machines. The $100 in match play option can be used on table games, but requires a real dollar to be matched to each bonus dollar.

The only two things you need to know about Bonus Slot Dollars are that once added to a machine, they can't be withdrawn and added back to your account, and that only your winnings can be cashed out, not the Bonus Slot Dollars you add to a machine. To simplify things, I just added $10 at a time to the machines I played, then after betting $10 withdrew however much I had won.

I ultimately won about $280 on my $100 in free Bonus Slot Dollars. If you go to Atlantic City, you should definitely try to do that.

Hitting the Amphora Lounge

After "gambling" up an appetite, my partner and I decided to head to the Amphora Lounge for dinner. Both the Amphora Lounge and the buffet cost $10 for Black Label members (and $10 for up to one guest), and the My Borgata staff member had added $20 in comp dollars to my account when I signed up. My impression is that the Amphora Lounge has a more limited food selection than the buffet, but drinks are included (and as Matt suggested on Twitter, they are happy to make drinks to carry out).

(Not) redeeming my complimentary stay in a Classic Room

Once back in Philadelphia, I activated my online My Borgata Rewards account and logged in to see how the free night benefit works. The stay has to be booked within one month for a stay no later than 3 months in the future.

Long story short, there are no complimentary rooms available in the next 3 months, or at least none available online. I assume this varies with demand and with the season, so maybe if you status match at some other time of year there would be more complimentary rooms available. But there aren't any right now, so don't count on this benefit when deciding whether to make the trip.

Is it worth it?

On the one hand, I came out pretty far ahead on my day trip to Atlantic City: after backing out the $46 in train tickets, plus cabs and tips, I made about $200 and got material for this blog post.

On the other hand, if you go to Atlantic City and status match to My Borgata Rewards Black Label, you might not win $280 on the slot machines. After paying for gas and parking, or train tickets and cab fare, plus the obligatory salt water taffy, the trip might turn out to be a pretty expensive "free" dinner with cocktails in the Amphora Lounge.

Overdiversifying, underdiversifying, and practicing what I preach

I recently had the pleasure of redeeming 30,000 American AAdvantage miles for a $290, one-way domestic plane ticket, which gave me an excellent opportunity to reflect on some travel hacking wisdom I never get tired of preaching: the least valuable point is the one you don't redeem.

The real risk of underdiversifying is paying cash

The point of travel hacking should be to pay as little as possible for the trips you want to take. I'm absolutely indifferent to whether you want to travel domestically or internationally, by plane, train, or automobile, with your family or alone, in first class or in steerage. I just want to help you spend as little money as possible to do it.

Diversifying your points balances is a way of achieving that. With no rewards currencies at all, you'd pay the retail cost for all your travel, minus any savings achieved by booking through online portals, paying with discounted gift cards, taking advantage of best rate guarantees, and the other techniques we have available.

With a single rewards currency, you can start to save money when you're able to find award space with that loyalty program. If you only collect Hilton HHonors points, you're in good shape as long as you're visiting a city with a Hilton property, and that property has award space. You'll still pay cash for your airfare, but hotels can often be the biggest expense on a trip, so the savings there can quickly add up.

With multiple rewards currencies, you can start to bring down your costs considerably. If you earn Ultimate Rewards points with an Ink Plus card, then you'll be able to save money by redeeming Hyatt Gold Passport points when you visit a city served by Hyatt, and by redeeming United, British Airways, Flying Blue, and Southwest points when those airlines and their partners make award space available. Even better, when award space isn't available, you can still get a 20% discount on revenue flights by redeeming Ultimate Rewards points at 1.25 cents each.

I won't belabor the point: having more rewards currencies reduces the chance that you'll have to pay retail for your travel. As long as those rewards currencies are acquired cheaply enough, that means each redemption saves you money on your travel, which, again, is the point of the game.

The real risk of overdiversifying is unredeemed balances

Many travel hackers and bloggers believe that "earning and burning," or keeping points balances as low as possible by redeeming award currencies roughly as quickly as they're earned, is the best approach. The reason normally given for this is that regular devaluations decrease the value of earned miles and points, so your balances will never be worth as much in the future as they are in the present.

Meanwhile, I spend no time thinking about devaluations, and don't think you should either. Your travel hacking practice should be giving you big enough savings on each redemption that even substantial devaluations won't affect the calculus of redeeming miles versus spending cash.

But the logic of diversifying your points balances really can be taken too far!

Above I said that when you don't have the right currency to pay for the trip you want to take as cheaply as possible, you run the risk of having to pay cash and not save any money at all. One way to react to that possibility is to accumulate high balances in as many programs as possible, to ensure that you always have enough of the right currency for the job.

The problem with that approach is that it exposes you to the real risk of overdiversifying: unredeemed balances. From hundreds of interactions with readers and friends in the community, I have come to believe that accumulating large, unredeemed balances is the single biggest mistake made by even experienced travel hackers.

There's no mystery to how it happens: a new credit card is launched, or refreshed, or suddenly has a much higher-than-usual signup bonus. Once the credit card affiliate bloggers get their links, you see two or three weeks of blanket coverage online. Sometimes the coverage even runs over into the mainstream media. Even those who are disgusted by the orgy of profiteering start talking about the orgy of profiteering, bringing the offer in front of even more eyeballs.

And then, like clockwork, people start asking: "I have all these Wyndham/Membership Rewards/Amtrak/Choice/Trump Shuttle points. What do I do with them?"

The answer, unfortunately, is usually "nothing."

Pay as little as possible for the trips you want to take

Without travel hacking, most of us couldn't afford to spend a week in the Maldives. But even without travel hacking, many of us could afford to fly home for Thanksgiving.

Paying $150 for a $600 plane ticket you'd otherwise pay cash for is a savings of $450.

Spending $2,500 for a trip someone else paid $15,000 for is an expense of $2,500.

I've heard that the Maldives are lovely, and I'm sure I'd enjoy visiting. But speculatively accumulating huge balances at random as signup bonuses change and cards are launched or discontinued, instead of targeting programs that save you money on the trips you want to take is a way of spending money, not saving it!

Again, this says nothing about the merits, or lack thereof, of the Maldives, of your favorite Park Hyatt, or of Emirates First Class. I'm sure they're lovely. But being talked into taking someone else's idea of the perfect trip is an expensive mistake — travel hacking just makes it less expensive.

Conclusion: my fantastic AAdvantage redemption

All of that brings me to my 30,000-mile, $290 one-way American Airlines ticket. If you believe that the goal of travel hacking is to get the highest dollar value from each redeemed mile, this is a preposterous redemption — less than a penny per point!

But I had a different problem: an unredeemed American Airlines balance. I'd earned the miles cheaply, through Barclaycard US Airways anniversary miles, a negative-interest-rate loan I took out, and some experiments I'd been running through the American Airlines shopping portal, so I was certainly saving money on the ticket compared to paying cash.

But even more importantly, I judged ridiculous the idea of paying $200 (the cash value of the 20,000 US Bank Flexpoints I'd need to redeem) or $232 (the cash value of the 23,200 Ultimate Rewards points I'd need to redeem) when I had more than enough AAdvantage miles sitting in my account unredeemed. I didn't have a plan for the miles because I had earned them more or less accidentally: I had overdiversified into AAdvantage miles, and was sitting on a balance of miles that were, unredeemed, worthless to me.

The point of travel hacking is to pay as little as possible for the trips you want to take. I wanted to take a $290 flight and $5.60 in taxes and fees was as little as I could pay for it. Mission: accomplished.

Hacking business travel: the good, the bad, the ugly

Last night I was chatting with a friend who's going to be in town next month for a work conference. Even in my spare time I'm always trying to help people save money, so I quickly checked whether I could offer him a better rate than what he'd paid for the conference hotel. I offered to book the stay for about half of what he had reserved the same room for, and then he asked the fateful question: "will the hotel still give me a receipt?"

Most people travel mostly for business, and business travel is expensive

Loyalty programs have a fundamental genius in their core value proposition: direct your company's travel business to us during the week, when hotels and airlines are engaged in a cutthroat competition, and we'll give you free flights and rooms on the weekends, when we're empty.

Credit cards directed at business travelers have a similar premise: use our product, instead of our competitor's, for your reimbursed business expenses and we'll share our cut of the transaction fees with you.

The travel hacker would ideally like to complete this circle by redeeming loyalty currencies for his reimbursed business expenses, thereby monetizing his points balances precisely when those points are most valuable.

Taxes make hacking business travel difficult

The core problem with hacking business travel is taxes: taxes make business travel cheap.

The marginal federal tax rate on a self-employed person is between 14.13% and 50.93%. That means a self-employed person who pays for travel in cash already gets a huge discount off retail simply by excluding the cost from her self-employment income. A nominal 3 cent-per-point redemption therefore becomes a 2.58 cent-per-point redemption for someone in the lowest tax bracket, and a mere 1.47 cent-per-point redemption for a self-employed person in the highest federal income tax bracket. Accounting for state income taxes would make the situation correspondingly worse.

For employees, the situation is similar. Even if you were able to negotiate with your employer for higher pay in exchange for making your own travel reservations (I'm not even sure this arrangement would be legal), the increase would have to be higher than the retail value of your travel expenses to account for federal and state income taxes.

But we think outside the box around here, so here are three approaches to hacking your business travel: the right way, the wrong way, and the illegal way.

The right way: just ask

If you work at a company where travelers book their own travel and are later reimbursed, then you could simply ask your supervisor or boss whether you could redeem miles and points for your travel and be reimbursed with cash. The human resources and accounting departments would probably have to sign off on the idea, but at a small company those might be the same person, and they might agree.

They also might not, so you have to be willing to risk flat-out rejection (and potential followup questions about your sanity) to go this route.

The wrong way: spoof reservations

Another option I consider moderately unethical would be to in fact book paid reservations, print off your receipts and, if necessary, your credit card statements, then cancel the reservations and rebook the same reservations with points.

Naturally, this would only work if the travel department doesn't require, or doesn't check, that hotel folios and boarding pass ticket numbers match the supporting documentation.

There are two reasons I believe this approach to be at least moderately unethical, even though at face value the outcome is identical to the "proper" method of paying cash and being reimbursed for travel expenses. The first is that I regard any technique that requires you to obscure your activity is inherently suspect. Now, we all may hem and haw and come up with circular explanations for carrying around thousands of dollars in gift cards, but the fact is that money orders are, in fact, perfectly legal to buy and use in the United States — if pressed, no one would feel the need to deliberately conceal their use of gift cards to manufacture spend.

The second reason I'm wary of this technique is the potential consequences for the travel hacker's employer in case of audit. While the travel or bookkeeping department might not bother to compare PNR's, ticket, or reservation numbers, that's precisely the kind of information an audit team might notice, or even look for. If your behavior puts your employer in legal or business jeopardy, I regard that behavior as ethically suspect.

The (il)legal way

While misleading your employer about your travel reservations may be unethical, trying to do the same thing with the IRS is an excruciatingly bad idea. If you're deducting business travel from your Schedule C or other business tax form, you'd better have supporting receipts showing what you actually paid for your travel. Redeeming miles and points, then claiming the cash value of your trips as a deduction, is a recipe for disaster.

On the other hand, it's also true that miles and points are treated as having a cash value in other situations. For example, when you win a stash of miles and points in a sweepstakes, or when they're awarded as a bonus for signing up for a checking account, you're issued a 1099-INT or 1099-MISC for the value of the points.

If you have a large enough business, and travel enough, it may be worth consulting with a tax attorney and getting some formal advice about what values you might assign to the miles and points you redeem for your business travel.

For example, if you could convince a tax attorney to advise you that Hyatt Gold Passport points are worth 1 cent each, then a 15,000-point redemption for a $400 hotel night would yield a $150 deduction, compared to a $400 deduction. Applying the same 14.13% tax rate to both deductions yields $21.20 in tax savings for the point redemption and $56.52 for the cash rate, for a total redemption value of 2.43 cents per Hyatt Gold Passport point (an out of pocket cost of $400 minus $56.52, compared to 15,000 points minus $21.20).

Again, that's an avenue that's only worth pursuing if you have a large enough business that the savings involved comfortably cover any fees you pay to your tax attorneys.

Travel hacking without spend

While I write a lot about strategies for using manufactured spend to get pay for travel at deep discounts, I know that many of my readers find manufacturing spend to be distasteful, time-consuming, or impossible (I know because you never hesitate to tell me in the comments section).

So at a reader's suggestion, I want to share some thoughts on travel hacking without manufacturing spend, and indeed without the requirement to spend any money on credit cards at all (besides annual membership fees).

Annual benefits

There is a not-unreasonable intuition that in the absence of manufactured spend, which properly focuses on high earning rates, bonus categories, and valuable points, annual recurring benefits of credit cards would become more important in developing a travel hacking strategy.

For airlines, those benefits include things like American Express Delta Platinum and Reserve companion tickets, the Chase Southwest Airlines 3,000 (Plus) or 6,000 (Premier) annual bonus points, the Bank of America Alaska Airlines annual $99 companion ticket and, for those grandfathered in, the 10,000 bonus anniversary miles offered by the Barclaycard American Airlines Aviator card.

Many hotel co-branded credit cards offer anniversary nights: the Chase IHG credit card gives a free night worldwide, Chase's Hyatt credit card gives a Category 1-4 night annually, and US Bank's Club Carlson credit cards give 40,000 (Premier Rewards and Business Rewards) or 25,000 (Rewards) bonus Gold Points on each account anniversary.

If our intuition that recurring benefits are more valuable without manufactured spend is true, then one credit card strategy might be to carry:

  • both a personal and small business version of both the Platinum and Reserve cards ($1290 in annual fees);
  • a Chase Southwest Premier card ($99 annual fee);
  • a Chase IHG credit card ($49 annual fee);
  • a Chase Hyatt credit card ($75 annual fee);
  • and one or more US Bank Club Carlson Premier Rewards and Business Rewards credit cards ($75 and $60 annual fee, respectively). Note that US Bank doesn't impose a hard cap on the number of its products you're allowed to have.

For $1,648 in annual fees per year, you could thus buy 4 domestic companion tickets on Delta (subject to fare bucket constraints), 6,000 Southwest Rapid Rewards points (worth perhaps $100), a free night at any IHG Rewards property, a free night at a Category 1-4 Hyatt property, and 80,000 Club Carlson Gold Points (good for at least one free night at any Club Carlson property).

I'm deliberately leaving out the Citi Hilton Reserve free weekend night benefit and the Club Carlson free domestic night benefit, since they each require $10,000 in annual spend.

Without price compression, free nights are an expensive trap

In a world with plentiful manufactured spend, travelers experience a phenomenon I've dubbed "price compression:" nights and flights that have large differences in retail price have much smaller or nonexistent out-of-pocket differences in cost to the travel hacker.

For example, a free Category 4 Hyatt night from the Hyatt credit card can be combined with Hyatt Gold Passport points transferred from a Chase Ink Plus, where you've manufactured cheap Ultimate Rewards points.

Without manufactured spend, and the price compression it produces, you'll be paying the retail price of your stays out of pocket, less any rebates earned by booking through shopping portals and online travel agencies. Unless you typically spend only a single night in each city you visit, travel solo, or have a very understanding travel companion, this can become very expensive very quickly.

To see why, take a stylized example of a city with a Category 4 Hyatt that costs $125 per night and a nearby Holiday Inn that costs $100 per night. On a four-night stay, you'll pay $375 out of pocket for the Hyatt, and $400 out of pocket for the Holiday Inn: a savings of $25.

So far, so good. But remember you paid a $75 annual fee for your Hyatt credit card! If you only compared the value of your night to your annual fee, you'd mistakenly believe you saved $50. By taking into account how the "free" night benefit affects your behavior, you'll realize the truth: the Hyatt credit card in fact cost you $50.

Of course if you are a solo traveler or have an understanding travel companion, moving hotels in the middle of your stay may not be a big deal. If you have a lot of one-night stays, you may also save real money. But that's an individual assessment you should take seriously before paying hundreds, let alone thousands, of dollars in annual fees.

You'll find a similar principle applies to the airline credit cards: if Delta flights are consistently more expensive, or less convenient, than competitor flights you may find yourself over-paying just to take advantage of your companion ticket. Southwest Rapid Rewards points, likewise, are only valuable if you're able to earn enough of them to redeem them for the flights you want.

None of which is to say these are bad credit cards or bad benefits. They just need to approached critically if you're to have any hope of using them to save money on travel.

Everyday spend

My standard response when asked which credit card people should use for their actual purchases is that actual purchases should represent a rounding error in your miles and points balances. Without manufactured spend, of course, that rounding error may turn into the bulk of your balances!

In my view, there are only a few credit cards that have any measurable advantage over paying for your purchases with cash.

  • Discover it Miles. If you can sign up for a Discover it Miles card that doubles your cash back after your first year, you'll earn 3% cash back on all purchases and pay no annual fee or foreign transaction fees. You can boost your earning even more by redeeming your cash back for certain gift cards — you can currently redeem $90 in cash back for $100 in Hyatt gift cards, turning a Discover it Miles card into a 3.33% cash back card. Canceling and applying for a new card each year may let you continue on an ongoing basis.
  • BankAmericard Travel Rewards. If you have $100,000 on deposit with Bank of America, Merrill Lynch, or MerrillEdge, you'll earn 2.625% cash back on all purchases, and pay no annual fee or foreign transaction fee.
  • American Express Amex EveryDay Preferred. If you make 30 purchases per month, this card earns 1.5 Membership Rewards points per dollar spent everywhere, 3 points at gas stations and 4.5 points at grocery stores. Because of its $95 annual fee, you should only consider this card if you spend a lot of money each year. If you do, you might find the ability to transfer points to Delta, Air Canada, British Airways, or American Express's other partners more valuable than cash back.

Travel hacks that don't require spend

Of course, credit cards are just one tiny corner of the travel hacking universe. It's just a corner that's become unusually prominent because there's so much money to be made selling credit cards to the unwitting.

So here's a brief list of other travel hacking techniques, no credit card required:

  • Mistake fares and attack fares. Among the original travel hacks are simply waiting for an airline to slip up and forget to add a zero to an airfare, or to "attack" a rival's hub by cutting fares far below normal. By following Twitter accounts like @TheFlightDeal and @EscapeATX, and bookmarking sites like Flyertalk's mileage run forum, you can handily see whenever those hard workers find a new error fare or attack fare. Julian the Devil's Advocate wrote up a terrific guide to getting text alerts for a particular city or airline that interests you.
  • Stacking portal and online travel agency rewards. In the bleak world without manufactured spend, you've got to make every dollar count. By clicking through shopping portals to online travel agencies before making hotel reservations, you can earn portal rewards plus the rewards offered by whichever travel agency you select.
  • Best rate guarantees. I've written before that I find best rate guarantees to typically be a waste of time, and I don't think it makes a whole lot of sense to make booking decisions around best rate guarantees. But once you've identified a hotel and rate, it's common sense to check if there's a lower rate elsewhere that's eligible for a best rate guarantee claim.
  • Hidden city ticketing. It's not for everyone, and it won't work for every itinerary, but it's possible to save a lot of money searching for flights using Skiplagged, a service that takes care of the hard work of finding cheaper "hidden city" tickets. Note that you usually will not be able to check bags when flying domestically on such tickets.
  • Corporate rates and other discounts. There are a number of lists circulating of corporate rate codes, which can bring down the cost of chain hotel stays significantly. Likewise, if you find out there's a convention, conference, or athletic event in a city being held during your visit, you may be able to piggyback on their lower negotiated rates.
  • Aggressively book and rebook. Autoslash makes it easy to monitor rental car rates so you can rebook your car if and when the price goes down. By booking cancellable hotel reservations early on, periodically checking for price changes lets you lock in any price declines while being protected from any price increases.

None of those techniques will save you as much as manufacturing spend will, which is why I write a lot about the benefits of manufacturing spend. But the universe of travel hacking, like the universe itself, is vast and growing, so it pays to keep an open mind and to keep exploring!