Chase Freedom bonus categories and the Sapphire Preferred

I assume everyone who carries a Chase Freedom card has already received their quarterly text message telling them to register for next quarter's bonus categories of "restaurants and Lowe's home improvement stores."

So instead of reminding you to register for 5 Ultimate Rewards points per dollar spent on the Freedom in those categories next quarter, let me take the opportunity to continue my fruitless war against the Chase Sapphire Preferred.

The Sapphire Preferred, with its $95 annual fee, has 2 permanent bonus categories: restaurants and travel.

But neither category alone, nor both together, is worth a $95 annual fee. Here's why.

You should put non-bonused spend on a 2% cash back card

In non-bonused categories, a no-annual-fee 2% cash back card is clearly superior to a dollar spent on the Chase Sapphire Preferred. You would need to get over 2 cents per point in value from every Ultimate Rewards point earned in non-bonused categories in order to work your way up to a loss of only the $95 annual fee.

Just use the 2% cash back card instead.

You should put eligible travel purchases on the Barclaycard Arrival

As I reported back in December, the Arrival's definition of "travel" purchases doesn't align exactly with the Sapphire Preferred's. Namely, while Chase bonuses taxi fares, Barclaycard does not allow Arrival mile redemptions against them. That's a real difference, but of course its significance depends on how frequently you take taxis.

2 flexible Ultimate Rewards points are strictly more valuable than 2 Arrival miles, being worth a minimum of 2.5 cents towards paid travel through the Ultimate Rewards portal, compared to the 2 Arrival miles' value of 2.22 cents.

So why don't they justify putting your travel purchases on the Sapphire Preferred? Because of the annual fee.

Consider how much you'll have to spend in order to recoup the Sapphire Preferred's $95 annual fee:

• At 2.5 cents back per dollar, you'll need to spend $3,800 in travel categories in order to earn back the value of the annual fee.
• But it'll take another $3,040 to recover the $76 in value you would have earned from putting the initial $3,800 in travel spend on a no-annual-fee 2% cash back card!
• With the conservative valuation of 2.5 cents back per dollar spent in bonused travel categories, you'll need to spend $6,840 before you start showing a profit.

What makes the Barclaycard Arrival World MasterCard different? Redeeming Barclaycard Arrival miles against the same $6,840 in travel purchases will yield at least $752 in excess value over the 2% cash back card, with an annual fee of just $89:

• Redeeming 684,000 Arrival miles against a single transaction will yield a 10%, 68,400 mile, dividend, worth $684 towards a future redemption;
• That future redemption will yield a dividend of 6,840, redeemable for up to $68 towards a third purchase.

To rephrase this point slightly differently:

• The Barclaycard Arrival isn't superior in earnings to the Sapphire Preferred for travel purchases;
• It's superior to the Sapphire Preferred for travel purchases because that's how you can leverage its dominant 2.22% cash back earning rate on all non-bonused (manufactured) spend.

Lots of cards bonus restaurant spending

Earning 2 Ultimate Rewards points earned per dollar spent at restaurants with the Sapphire Preferred is a nice touch, but it's hardly revolutionary. Check out Frequent Miler's list of cards giving bonuses in various common categories to see why.

The no-annual-fee Chase Freedom offers 5 Ultimate Rewards points per dollar spent at restaurants this quarter.

So for 25% of this year you would be downright insane to put restaurant charges on your Sapphire Preferred card. And for the rest of the year, you can simply select restaurants as one of your US Bank Cash+ bonus categories to secure 5% cash back year-round on up to $2,000 per quarter spent at restaurants.

Conclusion

Leave the Sapphire Preferred at home.

Reflections on week 2 of #milemadness

This post is coming a little late, since week 2 of #milemadness ended last Friday, but I wanted to share my thoughts before the week 3 results are tabulated and released.

My War on CPD

Since I started travel hacking, and in particular manufacturing spend, I've had my eye trained on a single metric: cost per dollar of manufactured spend, or CPD. It's important to note that this is a minority view — the traditional metric thrown around is CPM, or cents per mile. It's basically the difference between judging the tool of manufactured spend versus judging the outcome of free travel.

A simple example will illustrate this difference. The new TD Go Visa Buxx card allows you to pay $1 to load up to $1,000 from any Visa or MasterCard credit or debit card, which can then be unloaded using PIN-based debit. This tool gives you a fixed CPD of $1 per $1,001 in manufactured spend, or $0.001. The CPM, on the other hand, depends entirely on which card you use to load the TD Go:

• the Bank of America Alaska Airlines debit card earns 1 Alaska mile per $2 spent on the card, leading to a "traditional" CPM of 0.2;
• the Chase British Airways Visa Signature earns 1.25 Avios per dollar spent, generating a CPM of 0.098.

My point is, it doesn't make any sense to judge the TD Go based on what cards you happen to carry or how you happen to value their respective rewards currencies. That's going to depend on your travel goals, your credit limits, your bank relationships, and spiritual factors known only to you.

Playing Against Myself

At this point I'm hopelessly behind the front-runners, who have been leveraging 5% cash back credit cards to run up huge scores buying PIN-enabled gift cards at drugstores and office supply stores. Meanwhile, I've stayed laser-focused on driving down my CPD, and am very pleased with the results. Here's my CPD calculations from the first two weeks of the competition:

• Week 1: $19,861 in spend, $170 in fees, 0.86 cents per dollar of spend;
• Week 2: $10,357 in spend, $91 in fees, 0.88 cents per dollar;
• Running total: $30,218 in spend, $261 in fees, 0.86 cents per dollar;
• Week 3 estimate: $9,060 in spend, $63 in fees, 0.7 cents per dollar.

I'm truly satisfied that I've been able to scale my manufactured spending activities as much as I have without giving very much up on the CPD front. I'm remaining well below what I consider my unofficial "ceiling" of 1 cent per dollar — the maximum I'd be willing to pay for a dollar of manufactured spend.

My Extracurricular Activities

One funny side effect of the way the manufactured spending tournament is being scored is that it almost completely discounts my favorite way of earning miles: using my Bank of America Alaska Airlines debit card. The reason is somewhat technical, but basically goes like this:

• Each day, we're only allowed to count towards the competition the spend that we do within our remaining "bankroll;"
• Therefore, in order to count my Alaska Airlines debit card spending, I would have to have that amount remaining in my bankroll at the end of the day;
• However, if I had money remaining in my bankroll at the end of the day, I'd be better off using it on credit card spending (earning 1 or more mile per dollar, or 2% cash back) rather than debit card spending (earning just 0.5 miles per dollar).

So even though I've already earned 7,000 Alaska miles this month, just a tiny fraction of them count towards my official score!

Reminder: Using Alaska miles for Delta BusinessElite

I love my complimentary Medallion upgrades as much as the next Delta flyer, but back in August of last year I threw together a quick explanation for why you and everyone you know should be crediting your paid Delta flights to Alaska's Mileage Plan, rather than to Delta Skymiles. Namely, the same Delta flights, on the same Delta aircraft, on the same Delta days, in many cases cost fewer Mileage Plan miles than Skymiles.

Of course, the changes to Skymiles earning rates coming in 2015 make the point even more convincingly than I ever could.

Still, I want to point out one additional wrinkle that I came across the other day: Alaska doesn't know or care that BusinessElite exists.

In case you, like Alaska, have never heard of BusinessElite, it's Delta's long-haul preimum international and transcontinental product. It features a curated wine list, lie-flat seats, and some other features you're more than capable of reading about on Delta's website.

Most importantly, redeeming Skymiles for BusinessElite seats on transcontinental routes costs more than redeeming them for domestic First Class.

A non-stop round-trip itinerary from New York's JFK airport to Los Angeles in BusinessElite costs 65,000 Skymiles:

View fullsize

The same trip in domestic First (without the fancy wine or lay-flat seats) with a layover in Detroit or Salt Lake City costs just 50,000 Skymiles. But both trips cost 50,000 Alaska Mileage Plan miles:

View fullsize

Conclusion

I don't consider redeeming miles for domestic first class a great deal under most circumstances.

But if it's ever a great deal, it's a great deal for premium transcontinental service.

That was fast: Hawaiian changes Hilton transfer rate

At the end of January I responded to the surge of posts about changes to the ratio at which Virgin Atlantic Flying Club miles could be transferred to Hilton HHonors points by pointing out that the Hawaiian Airlines transfer ratio hadn't changed.

Unfortunately, Hawaiian quickly followed suit and devalued their transfer ratio, so that Hawaiian Airlines mile can now be transferred to Hilton HHonors only at a ratio of 1 HawaiianMile for 1.5 HHonors points, in increments of 10,000 HawaiianMiles (for 15,000 HHonors points).

I don't like to play armchair industry analyst, but it was obviously problematic for Hilton's co-branded credit card issuers, American Express and Citi, that the Barclaycard-issued Hawaiian Airlines co-branded credit card was giving a higher signup bonus — in terms of HHonors points — than HHonors' own co-branded credit cards.

That problem has now been finessed, by reducing the appeal of the Hawaiian Airlines card for those interested only in transferring their miles to Hilton HHonors points, without devaluing Hawaiian's own award chart.

Update: JH Preferred spending limits

Background: Alert: JH Preferred limitations and shutdown reports
Background: JH Preferred cash advances: your miles may vary
Background: Update: JH Preferred

As you can see from the above background reports, the JH Preferred card is one that I've looked into in some depth. It's also a card about which there isn't a lot of information publicly available online.

Over the course of this month I've been using my own JH Preferred card fairly aggressively in order to manufacture as much spend as possible for the #milemadness manufactured spending competition. And that's caused me to run into one additional limitation of the card, in addition to those mentioned in the posts above.

Limitations on PIN-based debit card transactions

Between March 1 and March 13, 2014, I loaded $10,000 in Vanilla Reload Network reload cards to my JH Preferred account, unloading the same amount using PIN-based debit transactions at Walmart.

Today, I loaded an additional $1,000 without any problem, but was unable to make any PIN-based purchases at Walmart. Immediately fearing the worst, I made a signature-based "credit" transaction that was approved.

I ended up successfully unloading the remainder of my balance using a (credit) Amazon Payments transaction.

I dug up my cardholder agreement and found neatly filed with it an "Important Notice Regarding Changes to your JH Preferred Prepaid Visa Card:"

"The maximum amount that can be spent on your Card per month is $10,000.00."

From my experience, it appears that limit is enforced on PIN-based debit transactions, but not on signature or online credit transactions.

Conclusion

While I consider the above information valuable in its own right, for those seeking to take maximum advantage of the JH Preferred card, I also want to suggest that when your JH Preferred card is declined for the first time, don't panic. You may not have been shut down; you may simply have run up against the $10,000 monthly PIN-based debit transaction limit.

The next question I intend to investigate and report back on: is the $10,000 purchase limit based on the calendar month or a rolling 28-, 30-, or 31- day period?

Another trip to New York!

And you know what that means: more Uber signup links!

Thanks to my loyal readers I only spent a few bucks on cab fares on my last trip to New York, so it's time to fill my Uber credit balance back up. Yours too!

Back in January, in order to get $45 in Uber credit you needed to spend $5 on an Uber Groupon code. That deal's no longer available, but there's an even better, free, promo code that will give new users a $25 credit in addition to the $20 signup bonus you get for using my link.

To get the $45 in Uber credit, follow these steps in this order:

1. Sign up for Uber using my referral link (or anyone else's, but come on);
2. While signed into your new Uber account, click on the "Promotions" tab at the top and enter the promo code "Hipmunk".

Unlike the Groupon code, which worked for accounts that were already open, I was not able to apply the "Hipmunk" promo code to my existing Uber account.

My next application cycle

Background: What's in my wallet?

Compared to many travel bloggers, I rely on signup bonuses for a relatively small part of my travel needs. For example, my Barclaycard Arrival World MasterCard came with a 40,000 "mile" signup bonus, worth $444 in statement credits against travel purchases.

However, since it earns 2 miles per dollar, worth 2.22% cash back against travel purchases, it's also my go-to card for non-bonused manufactured spend, and I've earned and redeemed many tens of thousands of miles with the card. The 40,000 mile signup bonus is a great incentive to include it in any application cycle, but it's not the only reason to get the card, and in a lower-signup-bonus environment the card might still be worth applying for — at least for the first, fee-free, year.

All this leads me to say that since I rely on manufactured spend more than signup bonuses, it's more important for me to find the right combination of cards on the earning side than merely waiting for the highest signup bonuses. For example, I applied for the American Express Blue Cash back in January because of its earning potential, not its signup bonus — then I included a few cards with valuable signup bonuses to round out my application cycle.

The cards I'm waiting for

There are a few cards I don't yet have, which are going to complement my current holdings nicely. I plan to apply for these cards during my next application cycle:

• Bank of America Alaska Airlines Signature Visa. The signup bonus for this card went as high as 50,000 miles back in December, during what I called a perfect storm of signup bonuses. It's currently stuck at 40,000 miles after spending $10,000 within 6 months, which is a great offer. But I'm hoping it pops back up to 50,000 sometime soon, so I can keep earning Alaska miles after May 31, when the Bank of America Alaska Airlines debit card finally disappears;
• American Express Starwood Preferred Guest Personal or Business. This card has a 25,000 Starpoint signup bonus, and the ability to earn Starpoints, which are incredibly valuable for hotel stays, but also transferable to partner airlines and redeemable for paid airline tickets. In other words, if approved I'll be putting this card in heavy rotation, despite its earning rate of just 1 Starpoint per dollar;
• Chase Ink Bold or Plus. I write about the earning potential of these cards fairly regularly, mainly when I'm envying people who already have them. I've grown increasingly disgusted with my Chase Sapphire Preferred card, since I put my travel purchases on my Arrival card and just don't eat out all that often (no reimbursed business expenses here!). I'm looking forward to changing my Sapphire Preferred to a Chase Freedom card (doubling my quarterly bonus earnings) and adding an Ink Bold or Plus to retain the flexibility of my Ultimate Rewards points.

What's missing

After picking up those three cards I'll have access to virtually all the most valuable points currencies. But there are a few cards I'm still considering for their other benefits:

• Chase Hyatt Visa. I've written about this card before when contemplating whether it's worth renewing for its annual free night certificate (short answer: yes, if you'll use it). It simply isn't the case that staying at a Hyatt property is the best option for me very often, which makes it a tough decision to spend a hard credit pull on the card without specific upcoming plans;
• Membership Rewards. American Express has a number of cards with lucrative Membership Rewards earning structures, but until I can find a few reliable venders where I can maximize those bonus categories, I'm not willing to commit to a $95 or $175 annual fee, given the signup bonuses currently available;
• Club Carlson Premier Rewards Visa Signature. I already have the business version of this card, and I love it. The personal version has a slightly higher annual fee ($75 vs $60), and gives an additional 40,000 Gold Points on each account anniversary. That's a great value, but I'm not convinced it's worth another $75, given that I can manufacture 40,000 Gold Points whenever I want, without paying $75 or waiting for my account anniversary!

Those are the cards that are currently on my mind. What do you think: what cards do I need to include in my next application cycle?

Reflections on week 1 of #milemadness

As I've mentioned, this month I'm participating in a good-natured (but cut-throat) competition with a gaggle of other miles and points bloggers to see who can generate the most value at the lowest cost during the month of March. On March 1, we started with a $5,000 "bankroll" which we can use to fund any manufactured spending technique we want — on the condition that we can't use the money again until we've liquidated whatever product we purchased.

Frequent Miler, the competition's judge, has published the first week's results, so it's time for some serious reflection on my strategy (or lack thereof) so far.

My Score

As you can see, I'm in third-from-last place, earning just $250 in net "Fair Trading Value" using Frequent Miler's calculations on the cost of acquiring various mile and point currencies, after deducting the fees I incurred. But I can explain!

My Raw Data

Between March 1 and March 7, I manufactured $19,861 within the limits of my bankroll. That's the spend that I was allowed to count each day taking into account the amount of manufactured spend I had already liquidated.

That comes out to $2,837 in manufactured spend per day, on average, and that sum is in fact fairly competitive with the other players' average data.

Office Max Ruins Everything

The main reason I fell so far behind so quickly is that while I was earning 2-4% cash back in value, my competitors with Chase Ink credit cards were purchasing PIN-enabled Visa gift cards at Office Max for below face value.

That enabled them to quickly increase their bankrolls above the $5,000 limit: if they charged $4750, but liquidate $5,000, they're suddenly working with a bankroll of $5,250. That's an advantage that quickly added up for many.

Even worse, they were earning super-valuable Ultimate Rewards points, which brings me to...

The Curse of Fair Trading Prices

The tool we're using to judge this competition is Frequent Miler's proprietary system of "Fair Trading Prices," which you should read about here and here, if you're not already familiar with the concept.

The key thing to keep in mind about Fair Trading Prices is that they are not based on redemption value. Let me repeat that: Fair Trading Prices are not an attempt to assess the actual value of the points and miles we earn during the competition.

For example, I recently argued that under a variety of fairly realistic conditions, Club Carlson Gold Points can be worth 1 cent each, for example if you plan to spend exactly 2 nights in New York City and would otherwise spend $111 or more per night on a hotel room.

The Fair Trading Price of Club Carlson points is just 0.25 cents each.

So while I earned 18,710 Gold Points during the competition, which I value at around $187, I received just $47 in credit based on the Fair Trading Price.

Meanwhile, since the Fair Trading Price of Chase Ultimate Rewards points is 1.38 cents each, the 5 points per dollar my competitors were earning worked out to a 6.9% earning rate in Fair Trading Value!

My Strategy

Ultimately, while the competition is a great motivation to step up my game and see just how much I can manufacture when I really put my mind to it, it's not enough to convince me to change my overall strategy in order to game the Fair Trading Prices.

The fact is, I have a lot of irons in the fire:

• Meeting American Express Delta Platinum $50,000 spending threshold to earn 1.4 Skymiles per dollar;
• Meeting $20,000 Chase British Airways minimum spending requirement for 100,000 Avios;
• Earning just 1% cash back on my first $6,500 in purchases on my American Express Blue Cash card, with its woefully low credit limit;
• Meeting $3,000 minimum spending requirement on American Express Hilton HHonors Surpass for the 50,000 HHonors upgrade bonus.

While that last item isn't a large spending requirement, I am attempting to meet it at merchants that offer 6 HHonors points per dollar, which is a huge time-suck for me since my local gas station has been sold out of PayPal My Cash cards for weeks.

Conclusion

The competition goes on! For more real-time information on the state of play, you can follow me on Twitter or search for the hashtag #milemadness.

Update: Momentum shutdown

As my regular readers know, back in February I took a day trip down to Philadelphia in order to pick up a Momentum prepaid Visa. I had some initial difficulties activating the card, but then grew excited about the fact that Momentum could be loaded with Vanilla Reload Network reload cards, and unloaded using bank "cash advances" with a fee of just $1.

If you follow me on twitter, you know that a few days ago I was suddenly no longer able to log into my online Momentum account. At the time, I could still access the online phone system and find out my remaining balance of 3 bucks and change.

Today I decided to dig into the situation and figure out what's going on with my card, but found that the phone tree no longer recognized my card number.

Since I couldn't log into the website, and couldn't talk to a customer service representative, I filed a complaint with the FDIC about Bancorp, which is pretty much the only thing you can do at times like these.

My Transaction History

As I've done previously with my shutdown reports, I'm happy to share my own loading and unloading transaction history:

• February 15: purchase and $10 initial load;
• February 26: Square swipe for $9;
• February 27: $2,000 Vanilla Reload Network load;
• February 27: $1,995 cash advance;
• March 1: $2,000 Vanilla Reload Network load;
• March 1: $2,000 cash advance;
• March 3: $2,000 Vanilla Reload Network load;
• March 3: $2,000 cash advance.
• ~March 5: shutdown

Conclusion

What can I say? I redeemed 8,000 Ultimate Rewards points for an Amtrak Guest Rewards transfer which got me to Philadelphia and back. And I was able to liquidate $6,000 of Vanilla Reload Network reload cards at a cost of $3. So I probably broke roughly even on this experiment.

And I would (and will!) happily do it again for you, gentle readers.

Update: JH Preferred

Back on January 31, I shared some of my preliminary impressions of the JH Preferred prepaid Visa card. An Incomm product like MyVanilla Debit cards, the JH Preferred card was also "Vanilla-reloadable," but with no monthly fee and no transaction fee, which I argued made it the perfect candidate for Evolve Money liquidation. I also shared several posts from Flyertalk about account shutdowns after what seemed like pretty typical usage of the card.

On February 16, I related my experience unsuccessfully trying to get a $4,995 cash advance at my trustworthy local bank branch.

As I said in that post:

"I was ultimately able to liquidate my $5,000 JH Preferred balance by making 3 Walmart PIN-based debit transactions."

More information on load limits

Now that I'm entering my second calendar month with the card, I'm able to report some very interesting news: I loaded $1,000 in Vanilla Reload Network reload cards to my JH Preferred card on March 1, and was able to load an additional $1,000 each day thereafter. In other words, it appears that the $5,000 monthly load limit is based on the calendar month, not a rolling 30-day period.

Additionally, I was able to load $1,000 on March 6, 2014, even though that brought my total calendar month loads to $6,000. An additional load on March 7 was unsuccessful, so it's not clear whether the actual load limit is $6,000, or if there was some kind of technical error that allowed me to load an additional $1,000 this calendar month.

What is the shutdown risk?

I ask this not because I have an answer, but because I don't know. It certainly seems like the kind of activity I've had with the card – large loads and immediate unloads – is the kind of behavior that would attract shutdown risk. But my account is still open.

I've mentioned before that it's best not to take Flyertalk reports at face value, because there are certainly members there who have a vested interest in discouraging people from taking advantage of their preferred hacking techniques.

I'm not saying that's what happened here. But I am saying that – for now – it appears that JH Preferred cards have a slightly longer shelf life than I initially suggested.

I know my readers will share their own experiences in the comments.