Travel notice, and dining bonuses after Chase Sapphire Preferred

[update 1/18/15: Reader Ted reminded me of the American Express SImplyCash Business Credit Card which offers 5% cash back at office supply stores and 3% cash back on up to $25,000 in annual purchases in a single category of your choice, with a list of options including restaurants and gas stations. The card currently has a $250 signup bonus after spending $5,000 within 6 months.]

Traveling for the next 24 days

This is what it's all about, right? We hustle all year not just to pad our bank accounts, but to redeem our miles and points for travel with our loved ones. I'll be bouncing around the country for the next few weeks before heading to Italy for a 10-day caper in Milan, Venice, Florence, Rome, and Naples.

There's always a lot to write about and I don't anticipate much changing around here during my travels, but you should probably expect fewer datapoints that involve in-person experiments and more analysis, news, signup links, and that kind of thing.

I always find spending time with family to be exhausting and unexpectedly time-consuming (but meaningful!), so posting frequency will probably drop to 2 or 3 times per week from my usual 3-5 post frequency until I get back in the middle of January. I don't expect any extended blackout, so don't hesitate to reach out to me in the comments, by e-mail, and on Twitter.

Dining Bonuses after Chase Sapphire Preferred

Having finally thrown off the yoke of Chase's over-priced and under-performing Sapphire Preferred card and embraced the Ink Plus as my source of flexible Ultimate Rewards points, I was left with a serious question: which card should I use for my routine purchases that previously fell under the Sapphire Preferred's "dining" bonus category?

First let me stress that unless you have a lot of reimbursable travel expenses or you manufacture spend, this question shouldn't interest you: you should put all your everyday expenses on a 2% cash back, no-annual-fee credit card like the Citi Double Cash or Fidelity Investment Rewards American Express and never think about it again. Even a person who spends an above-average amount every year is unlikely to recoup the cost of an annual fee in the difference between the value of their spend on a premium credit card and the 2% they would earn on a no-annual-fee card.

If you do manufacture spend, on the other hand, your new "dining" credit card will ideally be one you already carry, either in order to manufacture spend or because it doesn't have an annual fee. Here are the obvious candidates:

• Sam's Club MasterCard. Both travel hackers and civilians already carry this no-annual-fee credit card because it gives 5% cash back on up to $6,000 in gas station spend each year (the site doesn't make clear whether this is calendar or cardmember year). If you do, you may want to use it at restaurants as well, where it earns 3% cash back, 50% more than a 2% cash back card. Note that rewards earning is capped at a total of $5,000 in cash back per year.
• Chase AARP Rewards Visa. A lower, but unlimited, 3% cash back earning rate at gas stations may make this card worth carrying if you manufacture a lot of spend at gas stations. If that's the case, it's probably also your best bet for restaurant spend, likewise earning unlimited 3% cash back with no annual fee.
• Ink Cash. If you already completed your first year with a premium Ink credit card like Ink Plus or Ink Bold, you may have requested a product change to the no-annual-fee Ink Cash. If so, you're in luck: it earns 2 non-flexible Ultimate Rewards points per dollar spent at restaurants. If you have a spouse or domestic partner who still carries a premium Ultimate Rewards card, you can transfer your non-flexible points to their account and keep the ability to transfer them.
• Hilton HHonors Surpass American Express. Now we're getting into more speculative territory, so we need to be careful: the Surpass card has an annual fee of $75, so this is definitely not a card you should carry just for restaurant spend. But if you already carry it, in order to earn 6 HHonors points per dollar spent at gas stations and grocery stores and Hilton Diamond elite status after spending $40,000 on the card in a calendar year, then you're already implicitly valuing the 6 HHonors points you earn per dollar spent at restaurants at more than roughly 0.36 cents each, after accounting for the annual fee (if you spend exactly $40,000 on the card each calendar year, that's the valuation that recoups both the $800 you could earn with a 2% cash back card and your $75 annual fee).
• Citi ThankYou Premier. I don't pay $125 annual fees, and don't suggest my readers do so either. But there are a (vanishingly small) number of situations where it might make sense to have a ThankYou Premier card. For example, if you are still sitting on a huge balance of ThankYou points from the days of ThankYou Preferred bonus earning at gas stations, drug stores, and grocery stores, you may have signed up for a ThankYour Premier card in order to increase the value of that stockpile. In that case, why not take advantage of the card's 3 ThankYou point per dollar earning rate at restaurants?

The rest of the bunch

There are other credit cards that earn as much as 3% cash back at restaurants. The problem is there's no reason you would ever have one of these cards, and it's unlikely to be worth a "hard" credit pull to apply for one:

• Santander Bravo. Earns 3 points per dollar at gas stations, supermarkets, and restaurants, but a low signup bonus, $49 annual fee, and all bonus earning is capped at $5,000 in spend per calendar quarter.
• Huntington Voice. Earns 3% cash back with no annual fee, but with no signup bonus and bonused earning capped at $2,000 in spend per calendar quarter.

A possible exception is the PayPal Extras MasterCard, which you may well carry for other reasons. The trouble is that you're likely to easily max out the 50,000-point cardmember-year earning limit without spending a dime at restaurants, so using the card there doesn't offer any marginal value over the cards I described above.

Any I missed?

What's your favorite card for legitimate restaurant spend? Did I miss any lesser-known gems? See you in the comments.

You could do worse than Zeugma Rewards accounts

As my regular readers know, this is not a personal finance blog. In fact, I find the personal finance industry distasteful in the extreme. My opinions on personal finance are simple and wouldn't make for a very good (or long) read:

• Invest in Vanguard Target Retirement Date mutual funds;
• Don't pay interest (unless it makes sense).

But when you keep your eyes out for opportunities the way the travel hacking game trains you to, you'll inevitably spot some that aren't strictly speaking "travel" hacks.

There are 6% APY saving accounts

I've written before about Mango prepaid cards and savings accounts. Mango pays 6% APY on up to $5,000 held in the savings account linked to their prepaid cards, as long as you meet their direct deposit requirements. Those requirements are a bit fuzzy, but are certainly satisfied by depositing $50 per month, whether from your paycheck or from another bank account that allows ACH "pushes" to external accounts.

Mango has started charging $3 per month for the required prepaid account, but the savings account still allows you to earn around $264 in interest on a $5,000 savings account balance, or 5.28% annually (actually a bit less since the 6% is calculated APY, not APR). It's quite liquid (since Mango allows ACH pulls from the linked prepaid card), and beats any other federally-insured, liquid account I know of.

Likewise, the PayPal Prepaid Debit MasterCard and Netspend prepaid cards have 5% APY savings accounts, again on up to $5,000 in savings, and have their own fees and requirements to waive them.

Zeugma Rewards savings accounts earn 2.05% APY

Last weekend, I returned to New England for a long weekend catching up with a friend who lives out there, and for the thousandth time I walked by the Leader Bank branch in Cambridge. The same sign caught my eye as always: "Earn 2.05% APY on your Zeugma Rewards Savings Balance up to $50,000."

Let me attempt my best droll understatement and point out that 2.05% APY is much higher than current market interest rates on federally-insured savings accounts.

Activating Zeugma Rewards

What, you ask, is a Zeugma Rewards savings account? Similar to Santander's "extra20" accounts, you need both a Zeugma Rewards checking and savings account to participate, and in order to earn the full 2.05% APY on your Zeugma Rewards savings account, you'll need to meet three conditions with your Zeugma Rewards checking account:

• Elect to receive statements electronically;
• Direct deposit $500 or more each month;
• Make 8 or more debit card transactions.

Obviously these requirements aren't too heavy a lift for my readers, but you'll need to make sure you meet them all or you'll earn a tiny fraction of the 2.05% interest you were hoping for.

It gets better

Maybe you're interested in a 2.05% APY savings account and maybe you aren't. But I'll bet you're very interested in a 1% cash back debit card.

Remarkably, Zeugma Rewards checking account debit cards earn 1% cash back on all signature transactions, specifically "signature purchase transactions only where the customer selects 'credit' as the transaction type." On the one hand, that's less generous than the (no-longer-available) Suntrust Delta Skymiles debit card. On the other hand, it's comparable to the PayPal Business Debit MasterCard, but backed by a real bank that may value their relationship with customers more than PayPal appears to.

Now I'm getting into the realm of speculation, but it's my blog and I feel like speculating. There are a number of "signature" debit card transactions that PayPal does not award cash back on. For example, Evolve Money transactions funded with a PayPal Business Debit MasterCard appear in your account history as signature transactions, but don't earn cash back at the end of the month. It seems possible to me that a smaller regional bank like Leader Bank may not have PayPal's level of awareness with respect to these transactions, and may end up awarding 1% cash back on transactions that would not qualify for rewards when funded with the debit cards of other, larger banks.

That's not a promise; it's an invitation. If you experiment you may find some kinds of transactions end up being more profitable than you're otherwise able to achieve. Will online debit Bluebird and Serve loads earn 1% cash back? Almost certainly. Will Evolve Money bill payments earn 1% cash back? Probably. Will Square Cash transfers earn 1% cash back? Maybe.

Free online debit card services are increasingly popular because of the low, fixed processing fees now-enshrined in law, while rewards-earning debit cards are increasingly rare.

Conclusion

Personal finance is one of the many areas of life that is made more profitable by the habits of mind we develop while travel hacking. Zeugma Rewards may or may not turn out to fit into your own financial life, but I think for some of my readers it's probably an opportunity worth exploring.

IHG Rewards Into the Chaos: Points or Nights?

As you know, IHG Rewards' 4th quarter promotion is called Into the Nights, and gives you the option of earning up to 50,000 bonus points or 2 free nights at any IHG property, or a combination of points and nights.

As you may or may not know, depending on how many promotional thresholds you've met so far, the implementation of the promotion has been a fiasco, which has earned it the affectionate moniker "Into the Chaos." For months, stays weren't tracking or posting properly, and it was unclear how long it would take for IHG Rewards to resolve the situation.

I met the last of my promotional thresholds back on November 23, and recently noticed that my bonus points for each threshold finally posted on December 9:

View fullsize

I met my first threshold (booking through the IHG app) on November 2, and those points posted on November 17, which gives roughly the same delay (15-16 days).

You've earned them: Nights or Points?

The above points were automatically earned for meeting each threshold. Now I have to decide whether to select nights or points as my reward for meeting all 5 of my challenges:

View fullsize

I've been turning the problem over in my mind for a few days, because it has a number of angles worth considering.

• First, IHG has their periodic PointsBreaks List, which allows you to book rooms at any of the properties on the list during the current PointsBreaks period (currently November 2014 to February 2015) for just 5,000 IHG Rewards points. These stays are extremely popular, and if you plan on using your IHG Rewards points for a PointsBreaks stay, you should obviously select points as your Into the Nights rewards: 25,000 points translates into a 5-night PointsBreaks stay!
• Second, a mere look at IHG's hotel categories suggests that, on the contrary, free nights are the obvious choice. Just 3 of IHG's categories cost less than 25,000 points, so for stays at Category 4 and higher properties you'll want to redeem free nights, instead.
• Ultimately, the right choice will depend on your actual travel plans. I have two trips planned in the first half of 2015, to Austin and New Orleans, and the downtown IHG properties where I would consider staying in those cities are all Category 4 or higher. I don't know whether I'll end up staying at IHG properties on those trips, but those are the most likely candidates and would require free night certificates, not points.

Conclusion

As my readers know, the least valuable reward is always the one you don't redeem. That goes double for IHG's Into the Nights free night certificates, which must be redeemed by December 31, 2015. If you can't commit to redeeming your free night certificates at properties Category 4 or higher in 2015, or you plan on redeeming points for PointsBreaks stays, you may well be best off selecting points. But if you have a general idea of your 2015 travel plans, check the cities you plan to visit and see if you won't be better off redeeming free night certificates, instead.

Considering the US Bank Flexperks Travel American Express

[Update 12/9/14: Oops! I stopped into another US Bank branch today and studied the fine print of this offer. It turns out the American Express version of the card also bonuses charitable spending, it's just formatted slightly differently on the website and I missed it. The American Express card is different from the Visa Signature card in that it bonuses restaurant spend, in addition to the Visa Signature bonus categories. I apologize for the oversight.]

I frequently write about the US Bank Flexperks Travel Visa Signature, a card I hold and use aggressively to earn Flexpoints, worth up to 2 cents each on paid airfare redemptions and up to 1.5 cents each when redeemed for hotel stays.

Considering my travel needs, I like the Flexperks Travel Visa Signature for its low annual fee and lucrative bonus categories. The card costs $49 per year, against which you can redeem 3,500 Flexpoints. Additionally, you earn a 3,500 Flexpoint bonus each cardmember year you spend $24,000 or more. For that $49 fee, you'll earn 2 Flexpoints per dollar spend at either gas stations or grocery stores (or airlines), depending on which category you spend more in each statement cycle, plus 3 points per dollar spent with charitable organizations, including Kiva.

US Bank also issues a Flexperks Travel American Express

Over the Thanksgiving holiday I popped into a US Bank branch in my hometown to drop off some money orders and saw an advertisement for an American Express version of the Flexperks Travel card.

Judging strictly by the marketing materials, the principle difference between the American Express and Visa Signature versions of the card is that the American Express card, in addition to double points at gas stations, grocery stores, or airlines, also gives double points on restaurant purchases, but not on charitable spending.

That's a fairly small difference, given that I don't use my Flexperks Travel Visa Signature card for either restaurant or charitable spending anymore. Or it would be, except...

Visa and American Express code merchants differently in important ways

I ran some early experiments on this topic all the way back in 2013, finding that 7-Eleven store locations that did not sell gasoline were frequently coded as gas stations by Visa and MasterCard, but not American Express, while locations that did sell gas were coded as gas stations by all three.

There are other coding anomalies that make Visa and MasterCard credit cards generally preferable, strictly from the standpoint of manufactured spend, which subscribers can read more about in last week's newsletter.

American Express has its advantages, too

It may sound like I'm dumping on the American Express version of the card for being less lucrative than the Visa Signature version. On the contrary: actual grocery stores are coded as such by Visa, MasterCard, and American Express, and convenience stores that sell gas are likewise typically coded as gas stations by all three, so if that's where you do the bulk of your manufactured spending with the card, you may find either version suits you equally well.

Meanwhile, cards issued on the American Express network have their own unique advantages. They'll be eligible for any American Express offers that can be synced to Twitter (just set up each card in your Amex Sync Machine). And it's the season to remember that they'll be eligible for Small Business Saturday, as well, should that promotion return next year.

Flexpoint earning is throttled each calendar year

Every version of the Flexperks Travel Rewards credit card throttles earning each calendar year: after spending $120,000 during the calendar year, you'll earn just 1 Flexpoint for every $2 spent with your card.

That's just $10,000 per month, an amount easily exceeded if you have easy access to lucrative bonus category merchants, which may make you consider signing up for a second or third Flexperks Travel Rewards card. If you do, I don't think it's unreasonable to make one of those the American Express version of the product, in order to take advantage of the benefits mentioned above.

Conclusion

Just remember, whether you decide to sign up for one, two, or none of these cards, you should still freeze your IDA and ADS credit reports. It's not just a good idea: it's a great idea.

And incidentally, if you're interested in signing up for the Visa Signature version of the Flexperks Travel product, you can drop me a line and I'll be happy to pass along my personal referral information. It has the same signup bonus as the publicly available offer, but also offers me 5,000 Flexpoints, which is a nice touch.

Why everyone's talking about the Diners Club Card Elite

Back in September I was the first blogger to observe that the new Diners Club Card Elite, which earns 3 Club Rewards points per dollar spent at "grocery stores, supermarkets, drug stores, pharmacies and automobile fuel service stations when you pay at the pump," allows points transfers, according to Flyertalk, to Starwood Preferred Guest at the not-totally-unreasonable rate of 1250 Club Rewards points to 750 Starpoints.

Personally, I don't pay $300 annual fees, so I was a bit surprised to find that the Diners Club Card Elite was one of the most popular topics of conversation last weekend in Phoenix. That convinced me to take a second look at the card's value proposition.

Finding the right comparison

In my first back-of-the-envelope calculation, I compared the Diners Club Card Elite to the "old" Blue Cash, which turned out to be an unfortunately timely comparison, given the wave of Blue Cash shutdowns (and PayPal warnings!) that occurred in October.

It turned out that most folks I spoke with in Phoenix were actually comparing the Diners Club Card Elite not to a straight cash back card like Blue Cash, but rather to the American Express Starwood Preferred Guest card, which earns 1 Starpoint per dollar spent.

This comparison is complicated by the fact that the Starwood Preferred Guest American Express and Diners Club Card Elite earn points, while their annual fees have to be paid in US dollars. What we need is a common point of measurement, which is happily provided, as usual, by the Barclaycard Arrival Plus MasterCard.

Since the Starwood Preferred Guest American Express earns just 1 Starpoint per dollar, and has no bonus categories (besides SPG properties themselves), anyone who is willing to manufacture spend on the card is already implicitly giving their Starpoints a value of at least 2.2 cents each by foregoing the same amount of spend on the Barclaycard Arrival Plus MasterCard.

Since the Diners Club Card Elite, in its extremely common bonus categories, earns 1.8 Starpoints per dollar spent, a user will break even when she spends, in bonus categories, that amount of bonused spend which generates the $235 difference in the annual fees between the Diners Club Card Elite and the Starwood Preferred Guest American Express.

That break-even amount, remarkably, is just $13,352. At that level of spend, a user will generate 40,057 Club Rewards points, which can be transferred to 24,034 Starpoints, or 10,682 more than with the Starwood Preferred Guest American Express. As shown above, those points are worth $235, the difference in the two cards' annual fees.

Conclusion

On this blog, I always try to go where the numbers take me, leaving at the door as much prejudice and superstition as possible. And that's what the numbers say: at quite low levels of bonused spend, the Diners Club Card Elite generates enough "excess" Starpoints to justify paying the annual fee, assuming you do, in fact, value Starpoints at 2.2 cents or more each.

But this analysis requires two big caveats. First, there are other cards which bonus grocery store spend, like the American Express Preferred Rewards Gold and Hilton HHonors Surpass, and the US Bank Flexperks Travel Rewards cards. Ironically, the $300 annual fee of the Diners Club Card Elite will pay the annual fees of all three of those cards ($175, $75, and $49, respectively). And that's a big problem with paying high annual fees: it's not that it's impossible to recoup the annual fee in value – of course it's possible. But it requires a commitment to doing so, at the expense of other points you may want or need over the course of the year.

The second caveat is that any comparison with the American Express Starwood Preferred Guest or Barclaycard Arrival Plus is inherently misleading, since those cards earn at the same rate regardless of the merchant, while the Diners Club Card Elite requires cannibalizing already-bonused grocery or drug store spend.

Unless, of course, your "old" Blue Cash card has already been shut down. In that case I think there's a clear argument for moving drug store spend, a cheap and plentiful, but now rarely-bonused, merchant category, to the Diners Club Card Elite.

Statement credits are worth (much) less than cash

I've written several times in the last few weeks about hacking Marriott elite status using the Chase Marriott Rewards Premier Visa card, and received a number of e-mails and comments suggesting the Ritz Carlton Visa card might be a better option, allowing cardholders to earn Platinum, rather than Gold, status after $75,000 in annual spend.

In response to those comments and e-mails I tend to say the same thing: I don't pay $395 annual fees, and I don't recommend that my readers do either.

When affiliate bloggers promote cards like the Chase Ritz Carlton Visa and American Express Platinum cards, they usually repeat the tired canard that the hefty annual fees ($395 and $450, respectively) are discounted by the annual airline statement credits the cards offer. The usual approach is to point out that since airline gift cards are reimbursed at face value, you're "actually" paying $200 (American Express Platinum) or $300 (Chase Ritz Carlton) less per calendar year than the annual fee would suggest.

The problem with that argument is that a $50 American Airlines gift card (the usual example) is worth much less than $50.

Travel hacking means never paying retail

Using only the most trivial examples, redeeming US Bank Flexpoints, Chase Ultimate Rewards points, or Barclaycard Arrival+ miles for paid tickets allows you to purchase redeemable- and elite-qualifying-mile-earning revenue tickets at a fraction of face value.

Indeed, if you fund Kiva loans with a US Bank Flexperks Travel Rewards card, all you have to pay for your revenue tickets is the time value of your money and the risk of your Kiva loans defaulting (which can be substantially mitigated against by carefully choosing your loans and diversifying your loans across borrowers and countries).

Don't let annual fees lock you into paying retail

Using $50 American Airlines gift cards to purchase your revenue tickets means foregoing the opportunity to redeem alternative, cheaply-acquired rewards currencies for them. In other words, it means paying the full face value of your airline tickets.

When you pay a $395 annual fee for the Chase Ritz Carlton Visa card, and receive back a $50 American Airlines gift card, you shouldn't mentally deduct the full $50 from your annual fee as a rebate. Rather, you should deduct only the amount you would have paid for $50 in American Airlines air travel:

• if you redeem free Flexpoints for your travel, that amount is $0;
• if you redeem Arrival+ miles acquired at 0.29 cents each, that amount is $14.50;
• if you redeem Ultimate Rewards points acquired at 0.47 cents each, that amount is $18.80;
• and so on.

In no case is that amount $50, so you can't justify deducting a full $50 from your annual fee in your mental accounting.

Conclusion

Credit card annual fees have to be paid with cold hard cash, while the supposedly dollar-denominated annual benefits they provide can only be redeemed in restricted and restrictive ways. While annual benefits like companion tickets can sometimes justify paying annual fees, there are vanishingly few scenarios where paying annual fees over $100 is justified.

If I can make as controversial a claim as is supported by the evidence, even the American Express Delta Platinum credit card, with its $195 annual fee and companion ticket awarded on each account anniversary, only makes sense (compared to redeeming Arrival+ miles) if you can consistently redeem the companion ticket for flights costing more than $672 – the value of the Arrival+ miles you could manufacture with the same $195 in disposable income – or if you can use the Medallion Qualifying Miles earned with the card to achieve Platinum or Diamond Medallion status.

Reminder: status match to Alaska Airlines

Regular readers may remember my intention to request a status match to Alaska Airlines' MVP Gold status from my current (and soon to expire!) Delta Platinum Medallion status.

Platinum Medallion status is certainly the best value in Skymiles elite status, since it gives free award changes and redeposits (outside of 72 hours of departure). That has long been an invaluable benefit, allowing you to book each leg of an award trip as it becomes available, instead of relying on an entire, round-trip award reservation being available at the low level at the time of booking.

On January 1, 2014, Platinum Medallion status is about to become much less valuable. That's for two reasons:

• On the earning side, Delta's Skymiles program is going to become "revenue-based," meaning you'll no longer earn twice the number of miles flown in redeemable Skymiles as a Platinum Medallion.
• On the redemption side, Skymiles will be redeemable for one-way tickets, meaning there's no need to "lock in" low-level seats on one leg of your trip; instead, you can just book one-way reservations as low-level award seats become available.

Alaska Airlines status matches are good through 2015

While I've long planned to request a status match from Alaska Airlines, the FlyerTalk thread on the subject is surprisingly sparse. Most importantly, there's no definite answer to the following question: starting on what date are Alaska Airlines status matches valid through the entire following membership year?

In September one member claimed the cutoff date was November 1, while all the way back in July another member quoted an e-mail from Alaska saying the cutoff date was October 1.

To be safe, yesterday I sent in my status match request without the supporting documentation, so that I could wait if the critical date turned out to be November 1. I wrote:

"Dear sir or madam,

I’m currently a Platinum Medallion elite member of the Delta Skymiles program, and I’m disappointed with the changes Delta has planned for the Skymiles program in 2015.

I’m switching as much of my travel as possible to Alaska, and I’d like to know whether it’s possible to request an elite status match or challenge to Mileage Plan MVP or MVP Gold status based on my current Platinum Medallion status?

If so, could you inform me of the procedure and any additional documentation Alaska requires to process a status match or challenge?"

I almost immediately received back the following automated response:

"Thank you for your interest in our award winning Mileage Plan. To submit your request for a Tier Match, send a copy of both sides of your current elite card, an e-Statement showing current status and your drivers license. If your original email did not include all of these documents, please resubmit with all three attached. Allow 2-4 weeks for processing once we have received your documents. When your Tier Match is complete, you'll receive a welcome email and can check your status at alaskaair.com/myaccount.

Please note that Tier Matches can only be extended once during the life of your account and the status is valid through 12/31/2015.

We look forward to welcoming you into our program and flying with you for many years to come!

Also note, we only offer a Tier Match for: AeroMexico, Air Canada, American, Delta, Frontier, Hawaiian, Jet Blue, Southwest, United, US Airways, and Virgin America" (emphasis mine)

So it's official: get your status match started, and enjoy distance-based redeemable mile earnings for at least another year with Alaska's generous Mileage Plan!

Why would you book a stopover on a one-way trip?

On Wednesday I saw this post by The Miles Professor explaining how to book stopovers on one-way Alaska Airlines award tickets.

The thing is, it's not immediately obvious why you would ever do this.

As The Miles Professor writes:

"One of my favorite ways to use stopovers is to schedule a stopover in my actual home city and use the stopover to connect two completely different trips."

Of course Alaska Airlines has a zone-based, not distance-based, award chart, so there's no reason you would need to book two round-trip tickets from your home city as two one-way trips with stopovers in your home city. For example, a Seattle resident could book the following two one-way tickets:

• LAX-SEA (stopover)-BOS
• BOS-SEA (stopover)-LAX

Each of those tickets would cost 12,500 Alaska Mileage Plan miles, assuming there's low-level award availability. But remember, our hypothetical passenger is a resident of Seattle, so they'd need to find some way to get to LAX in the first place, and some way back from LAX at the end! Each of those one-ways would also cost 12,500, bringing the total cost for 2 roundtrips to 50,000, just as it's supposed to be.

Now, at this point you've probably seen the sleight of hand I'm pulling; in fact our passenger knows better than to spend 12,500 valuable Alaska miles on a short West Coast hop, and instead transfers 7,500 Chase Ultimate Rewards, Starwood Preferred Guest, or American Express Membership Rewards points to British Airways Avios, and ends up with reservations that look like this:

• SEA-LAX – 7,500 Avios
• LAX-SEA (stopover)-BOS – 12,500 Mileage Plan
• BOS-SEA (stopover)-LAX – 12,500 Mileage Plan

Here we've booked two-and-a-half round-trips for the price of one-and-a-half roundtrips. Not bad! Of course our passenger still has to find a way back from LAX if they decide to fly that leg, but even if they don't, they still end up a one-way flight ahead of the game, which isn't nothing.

If that's the obvious use for stopovers on one-way trips, I thought it'd be interesting to see which others I could come up with.

4 reasons to book stopovers on one-way award tickets

1. See more cities. As you can see in the comments to The Miles Professor's post, you can also book stopovers on one-way Alaska Airlines partner awards, so if you're booking an award ticket on a partner airline like KLM, you can stop over for a few days and enjoy Amsterdam on your way.
2. Cheap awards to Hawaii and Mexico. Since you can book award tickets from anywhere in the continental United States to Hawaii and Mexico for the same price, which is less than twice the cost of domestic awards, you can book future, onward travel to Hawaii for just 7,500 miles or Mexico for 5,000 miles, compared to the 20,000 and 17,500 Mileage Plan miles, respectively, you'd have to pay to book a separate itinerary.
3. Position for future flights. I showed one example of this technique above, but you can also use it to position for flights on other carriers. For example, United operates an international hub out of San Francisco, but you might have difficulty finding low-level award space between Seattle and San Francisco on United-operated flights. Instead, you can use your free one-way flight to position to San Francisco on an Alaska Airlines-operated flight.
4. Because you can. As long as you book your speculative onward connection at the end of your itinerary, you may as well tag an extra leg onto your reservation. Who knows, you might even end up using it! Just don't book a speculative connection at the beginning, since a missed first leg will typically cancel your entire itinerary.

Conclusion

Free one-ways are a fun and easy way to take advantage of airlines' generous award routing rules.

Which reasons to book a stopover on award tickets did I leave out?

Back-of-the-envelope assessment of the Diners Club Card Elite

I saw today that Diners Club is now issuing consumer credit cards in the United States, and I mentioned on Twitter that the $300 annual fee might be worth paying if you value miles transferred from the program at more than 1.7 cents. That's an extortionate annual fee, and I won't be applying for the card myself, but in case you do value your airline miles that highly I want to show my work to explain how I arrived at that number.

The Diners Club Card Elite card gives 3 points per dollar spent at gas stations, grocery stores, and drug stores. The problem is that gas stations and grocery stores are already such heavily-bonused categories that neither, alone or together, could justify paying a $300 annual fee.

You can already earn 3 flexible Membership Rewards points per dollar spent at gas stations with the Amex Everyday Preferred card, and earn 2 US Bank Flexpoints per dollar spent at grocery stores (worth between 1.33 and 2 cents each when redeemed for airfare) while paying just under 50% the annual fee of the Diners Club Card Elite.

Drug stores, on the other hand, are not as frequently-bonused as they used to be, so the most relevant comparison is the "old" American Express Blue Cash card, which earns 5% cash back at drug stores after the first $6,500 in spend per membership year.

The Comparison

I consider the risk-minimal amount of spend at drug stores per month to be $13,000 for a single person, in most parts of the country (two PayPal accounts and a Serve account, if you have access to Family Dollar store locations). It's easy to spend more, but that provides a benchmark for monthly drug store spend.

Over the course of a year, that amount of spend would earn $7,540 with the "old" Blue Cash card (since the first $6,500 would earn just 1% cash back), or 468,000 transferrable Diners Club points (in which case you'd incur an annual fee of $300).

At that point it's easy to see that the surplus of $7,840 implies a value per transferred mile of 1.67 cents. If you value each one of your transferred miles at more than that, you might be better off with the Diners Club Card Elite.

Note the emphasis above: it's not worth earning the transferrable points if you occasionally redeem them for high-value awards – you need to value all the miles you earn, on average, at over 1.67 cents each.

While I used the "risk-minimal" amount of drug store spend in this comparison, in fact this is very close to the analytical limit: doubling annual drug store spend yields $15,340 in cash back and 936,000 transferrable points, or 1.63 cents per mile, because of the slowly diminishing importance of the $6,500 "penalty." In other words, having either or both cards doesn't affect the imputed mile valuation by much, regardless of your annual spend.

So, what are your miles worth?

From FlyerTalk, here are the transfer partners for the Diners Club rewards program (the catalog requires you to log in to view redemptions):

• OneWorld: British Airways
• SkyTeam: Delta Airlines, Korean Air.
• Star Alliance: Air Canada, Eva Airways, SAS, South African Airways, Thai Airways.
• Independent: Alaska Airlines, El Al Airlines, (1000:20), Frontier Airlines, Hawaiian Airlines, Iceland Air, Southwest Airlines (1500:1200), Virgin Atlantic.
• Hotels: Best Western (1250:3300), Choice (1250:2400), Hilton (1250:2000), Hyatt (1250:750), Intercontinental Hotel Group (1250:1500), Marriott (1250:1500), Starwood (1250:750).
• Rail: Amtrak.

What caught my eye here is the not-totally-unreasonable hotel transfer ratios, particularly the "mere" 40% penalty you incur transferring your points to Starwood Preferred Guest. At 0.6 Starpoints per Diners Club rewards point, you can earn 1.8 Starpoints per dollar spent at drug stores. While it doesn't convince me personally, there's certainly a lot of value that can be unlocked there — plus it's a good escape valve in case you decide to apply for the Diners Club card and end up unable to use the points for direct airline transfers.

Conclusion

In any case, that's how I glance at an earning ratio and decide what mile valuation is imputed – plus a quick review of the Diners Club Card Elite!

Comparing Alaska promotional redemptions to year-round Avios redemptions

Introduction

Alaska Airlines has announced a promotion, whereby one-way economy awards between select city pairs on Alaska metal cost between 5,000 and 12,500 Mileage Plan miles, a 60% discount on some routes.

Of course, to qualify seats have to be available at the lowest level of award availability, and that means they're also bookable using British Airways' distance-based Avios award chart.

So I thought it would be fun to compare the standard cost in Avios and the promotional cost in Alaska Airlines Mileage Plan miles.

Why it matters

Alaska Airlines miles are very valuable when redeemed for partner awards (100,000 miles and trivial taxes and fees for Emirates A380 First Class to Asia, for example) and for last-seat availability, for example to Hawaii during the Christmas holiday season or when you just need to be somewhere and are miles-rich but cash-poor (I know the feeling!).

At the same time, they're relatively difficult to earn except through transfers from Starwood Preferred Guest, clicking through their online shopping portal, or crediting revenue flights on Delta, American, or Alaska to the Mileage Plan program.

That's why under most circumstances it would be preferable to redeem easily-acquired British Airways Avios for Alaska Airlines award flights, rather than Alaska's own, more valuable, Mileage Plan miles.

Sample analysis

Here are the city pairs between which Alaska Airlines is charging 5,000 Mileage Plan miles one-way from August 30 to October 31, 2014 (note that all these fares work both ways):

• Boise-Las Vegas
• Boise-Salt Lake City
• Los Angeles-Salt Lake City
• Oakland-Seattle
• Oakland-Portland
• Portland-San Jose
• Portland-San Francisco
• Salt Lake City-San Francisco
• Salt Lake City-San Jose
• Salt Lake City-San Diego
• San Francisco-Portland
• San Francisco-Seattle
• San Jose-Portland
• San Jose-Seattle

Of these city pairs, can you guess how many are more than 650 miles, the cutoff for British Airways 4,500 Avios one-way awards?

If you said 3, you'd be exactly right: the 3 Bay Area airports (SFO, OAK, and SJC) clock in at just under 700 miles to Seattle, putting those flights in the 7,500 Avios price band.

The next set of city pairs cost 7,500 Mileage Plan miles during the promotional period:

• Bellingham-San Francisco
• Bellingham-Oakland
• Boise-San Jose
• Boise-San Francisco
• Boise-Oakland
• Oakland-Vancouver
• San Francisco-Spokane
• San Francisco-Vancouver
• San Jose-Vancouver

What do you think? How do these discounts compare to a 7,500 Avios redemption, available year-round?

If you said they weren't any kind of discount at all, you'd only be 66% correct. That's because flights between Boise and the 3 Bay Area airports in fact cost just 4,500 Avios, clocking in at between 511 and 523 miles!

You get the picture.

Conclusion

I'll spare you the rest of the promotional city pairs (at the 10,000 and 12,500 Mileage Plan mile levels) and end with two thoughts.

First: there's nothing wrong with promotions like this. For folks who (rightly!) credit their revenue Delta and American Airlines tickets to Alaska's Mileage Plan, the ability to redeem those miles for short flights around the Western United States at a steep discount is a terrific opportunity, and I'm sure this promotion will be incredibly popular. The least valuable mile is the one you don't redeem, and if this promotion gets folks to redeem their miles for trips they want to take, it'll be an unqualified success.

Second: while this example involves small stakes – just a few thousand miles here or there – a rough background knowledge of airline partnerships like this will keep you from making shockingly expensive mistakes. The classic example is the couple who allegedly redeemed 2 million Starpoints for SPG Flights revenue First Class tickets to Australia on American Airlines — when they could have transferred just a few hundred thousand points to American and redeemed them for an AAnytime award!