How do you react to a shock to your travel budget? How should you?

Yesterday my scheduled flight out from my ancestral homeland was overbooked — very overbooked. They asked for 6 volunteers, and ended up taking 5 of them, each of whom received $1,300 in Delta voluntary denied boarding compensation. I was one of the lucky inconvenienced (my partner was volunteer #6, and had to actually fly home, the poor thing), and the proud owner of $1,300 in Delta travel.

Then I realized that I had a problem. I already manufacture enough miles and points to pay for my planned hotels and air travel. In fact, once my next statement closes and my HHonors points post, I'll have all 5 of my remaining planned vacations this calendar year fully booked.

Moreover, Delta transportation vouchers are non-transferrable: the recipient has to be one of the passengers on the reservation — although excess funds can be used to pay for additional passengers on the same reservation.

Air transportation vouchers are worth (much) less than cash

This is a corollary of my argument that statement credits are worth (much) less than cash: for me, $1,300 in airfare is worth a maximum of $700, since that's the cash value of the 70,000 US Bank Flexpoints I would otherwise redeem for a reservation costing between $1,200 and $1,400, and as little as $350 or so, which is roughly what I paid out of pocket for those Flexpoints.

But does that mean I should take my $1,300 in bump compensation by redeeming 70,000 Flexpoints for $700 in cash?

Thinking about travel budget shocks

With a nod to economics, we can describe what happened yesterday as a positive "shock" to my travel budget. If my miles and points balances, travel needs, and manufactured spend strategy were previously in equilibrium, they are now by definition out of equilibrium: I've now accidentally purchased more (deeply-discounted) travel than I have a current plan for using. Since I try to never earn miles and points speculatively, this disequilibrium requires action.

But what action? Here are four ways I could respond to this travel budget shock.

Monetization

No, I don't mean selling the transportation voucher — it can only be used for reservations where I'm one of the passengers. I have in mind the following logic:

• I just received $1,300 in airfare.
• I planned to redeem 70,000 Flexpoints for my next $1,300 in airfare.
• Instead I'll use the transportation voucher and redeem my Flexpoints for $700 in cash.

It's true that my Flexpoints are worth more than $700 when redeemed for airfare, but that's begging the question: the whole point is that $1,300 in airfare is worth less than $1,300.

Why do you think the airlines are so eager to give it away?

Travel more

I have a strategy for earning all the miles and points I need for the travel I already have planned, but now that I have $1,300 in Delta funny money, I can travel more than I expected. There's always somewhere to go, after all!

The simplest way to do this is to not alter my planned earning and redemption at all: if all my trips are already optimized between revenue fares (paid for with cheap Ultimate Rewards points and Flexpoints) and award trips, then I can convert my Delta transportation voucher directly into airfare for new trips.

A more nuanced (read: time-consuming) approach would be to re-optimize all my refundable and not-yet-booked air reservations. For example, a $450 ticket that I might have planned to reluctantly redeem 30,000 Flexpoints against can now be paid for with my transportation voucher, while I can redeem those Flexpoints for a new trip costing up to $600.

Likewise, a $250 flight against which I might have redeemed 20,000 Ultimate Rewards points can now be paid for with Delta funny money, and I can start looking around for a high-value Hyatt redemption where I can stretch those same Ultimate Rewards points.

Convert to leisure

My current manufactured spend strategy met my current needs before the travel budget shock, but now it exceeds those needs by $1,300. Sounds like it's time for a vacation! For the next 70,000 Flexpoints I had planned to earn, now I get to hit the alarm clock and go back to sleep.

Just kidding. I don't have an alarm clock.

But for those of you who do, if your goal is to earn the miles and points you need to meet your travel needs, a large positive travel budget shock like this is a godsend. Spend the time you would have spent at the grocery store, gas station, or hunting down promising Kiva loans with your kids. They probably won't appreciate it, but you will.

Switch to cash

Everyone has their "best" cash back option. Maybe it's 5% cash back with a US Bank Cash+ Visa card or a "new" "old" Blue Cash card. Maybe it's 2.625% cash back with a Bank of America Travel Rewards card. Maybe it's 2.105% cash back with a Barclaycard Arrival+ MasterCard. Maybe it's 2%+ with a Fidelity Investment Rewards American Express (or Visa, or MasterCard). Maybe it's a Citi Double Cash (although that's a stretch).

If you don't want to slow down your manufactured spend, and you don't want to monetize the points you've already earned, this is your hybrid option: start earning the most cash back possible with the cards you already have, instead of earning the points you had intended to redeem for your travel.

After all, everyone wants money. That's why they call it money.

What about negative travel budget shocks?

The impetus for this post was a huge positive travel budget shock. But there are other kinds of shocks: you could lose access to a merchant that previously allowed you to manufacture spend; you could suddenly learn of an unanticipated trip you have to take; Delta could stop publishing award charts and your miles could suddenly be worthless for the trips you planned to take.

You don't need to plan for every eventuality, but you should plan for some eventualities.

Conclusion

Don't for a second think that this post is meant to say that you need to treat every "win" as an excuse to lose sleep worrying over how to deal with it. The first thing you need to do is celebrate (I know I did).

But when you're done celebrating, you may want to spend a minute or two figuring out how you're going to work your win, big or small, into your overall miles and points strategy.

New Staples Visa gift cards got you down? Try these two weird old tricks

I like buying Visa gift cards from Staples. I buy a lot of Visa gift cards from Staples. But the new Staples Visa gift card design has been causing me enough frustration that it's started to disrupt my mellow manufactured spend lifestyle.

I was tossing and turning the other night, dreading liquidating the $600 in Visa gift cards I had in my sock drawer, when I had a vision, a vision of restoring my manufactured spend equilibrium.

Background: the new Visa gift card design

Via Miles to Memories, here's a handy picture of the "old" Visa gift card design (on the left) and the "new" Visa gift cards (on the right) that have been costing me so much tranquility:

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Problem 1: glue used on new peels is sticky and gross

The previous generation of Visa gift cards could be liquidated right out of the package, once you'd removed any obstructing glue dots. The new card design still has the last four digits of the card number set as the default PIN, but the card number is itself covered by a peel that uses the stickiest, most inconvenient glue I've ever seen on a prepaid debit card. While removing the peel, and while being transported in your pocket or wallet, this glue gets everywhere, and can seriously affect the ability of the card to be swiped smoothly through magnetic readers.

Solution 1: don't remove the peel

Remember, you only need the last four digits of the card number in order to use the card as a PIN-enabled prepaid debit card. So instead of removing the peel completely, just peel back the right corner and jot down the last four digits somewhere — for example, on the card itself:

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Once you've noted the last four digits, return the peel to its original position: no muss, no fuss.

Problem 2: stray scraps of terms and conditions coming off on cards

This has happened on one third of the cards I've purchased in the last few weeks: a random glue splotch causes a strip of the paper that the card's terms and conditions are printed on to come off on the card, directly opposite the magnetic strip. This catastrophe causes the card to catch every time it's swiped, making it frustrating or even impossible to liquidate using a magnetic card reader. Here's an offending example:

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Solution 2: wrap it in receipt paper

This is a trick I learned years ago, but haven't had occasion to use in a long time. But while tossing and turning last night, I remembered: by wrapping a card in receipt paper, you can prevent irregularities in the card's surface from preventing the card's magnetic strip from being recognized. Just hold the receipt paper folded tight around the magnetic strip, position it at the top of the magnetic reader, and give it a smooth stroke:

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Result: success on my first swipe, and no awkward insistence that my Walmart cashiers let me swipe my cards over, and over, and over again.

Quick hit: my annual fees and retention offers

I wrote yesterday that I don't chase signup bonuses as one of my principle methods of earning miles and points. But I also consider recurring annual benefits to be worth almost nothing.

I've written before that companion tickets are scams, with the exception of the very generous version offered by Bank of America's Alaska Airlines — if you happen to live in a city served by Alaska — since it can be paid for with any credit card.

I've written before that annual free hotel nights are scams, although the Citi Hilton Reserve and Chase Hyatt free nights are slightly better than the rest — if you otherwise manufacture Hilton HHonors points or transfer your Ultimate Rewards points to Hyatt.

And of course, I'm the leading proponent of the argument that airline statement credits are worth (much) less than cash.

Five annual fees I'm willing to pay

As a result, I carry only five cards with annual fees, and I pay those annual fees solely because I believe manufacturing spend on the cards makes them worth keeping for my own miles and points strategy:

• Chase Ink+. Bonus earning at office supply stores and gas stations, and turns my non-flexible Chase Freedom Ultimate Rewards points into flexible Ultimate Rewards points. $95 annual fee.
• US Bank Flexperks Travel Rewards. Makes flying on paid airfares very cheap. $49 annual fee.
• Barclaycard Arrival+. Makes hotels, Uber, and taxes and fees on award tickets cheap. $89 annual fee.
• American Express Hilton HHonors Surpass. Makes hotels cheap. $75 annual fee.
• American Express Delta Business Platinum. Makes Delta elite status cheap. $195 annual fee.

Even I'm willing to admit the Delta Business Platinum card is a marginal play, but I do really like checking bags, so the elite status is something I'm — for now — willing to pay for, as long as I'm also earning 1.4 SkyMiles per dollar spent with the card.

Don't pay annual fees you don't have to

Those are the annual fees I'm willing to pay. But I mostly don't.

• On Wednesday I called the number on the back of my Ink+ card and explained I was trying to decide whether to keep the card. The frontline representative (no transfer required) offered me a $95 bonus statement credit to keep the card. $0 annual fee.
• Every year I spend $24,000 on my Flexperks Travel Rewards card I receive 3,500 bonus Flexpoints, which I redeem against my annual fee. While the Flexpoints themselves are worth up to $70 when redeemed for airfare, this allows me to treat this card as a no-annual-fee card, which is my preference. $0 annual fee.
• Each year I call Barclaycard and ask them to waive my annual fee. They have been happy to oblige for the last two years. $0 annual fee.
• Also on Wednesday, I called American Express, told the computer I wanted to close my account, and was immediately directed to a representative who offered me a $50 statement credit to keep the card. $25 annual fee.
• I haven't yet called American Express about my Delta Business Platinum card, whose annual fee I paid back in May. Hopefully they'll offer me something, although gunning for low-level Delta elite status is such a marginal play that I'll probably cancel the card anyway once I've secured status for the 2016 program year. $195 annual fee, minus a prorated refund.

Conclusion: your miles will vary

I assume one reason I have had luck so far with retention offers is that I spend hundreds of thousands of dollars per year on these cards.

If you spend less — or more — you'll find that the credit card companies have different offers for you, or possibly no offers at all, which is why it's important to know what annual fees you are willing to pay if you can't get them waived.

Only once you know how much you value a card, whether for its recurring annual bonuses or earning rate on manufactured spend, will you be able to decide whether the offers you receive from your credit card companies make it worth paying to keep your accounts open.

Reminder: you can still sign up for Nationwide Visa Buxx cards

I earn only a small fraction of my miles and points chasing signup bonuses. There are people who get all the miles they need through signing up for new credit cards, but I have found that strategy leaves me me with large-but-not-large-enough balances scattered across multiple accounts in a way that mitigates most of the value of the points.

For example, after signing up for a Citi Platinum Select / AAdvantage World MasterCard and Barclaycard US Airways MasterCard in January, 2014, and receiving 85,000 miles between the two cards, I still have about 38,000 AAdvantage miles remaining (including my 10,000 US Airways anniversary miles).

This isn't because I don't fly American — I fly American fairly regularly, redeeming Chase Ultimate Rewards points for cheaper flights and US Bank Flexpoints for more expensive flights, and crediting those paid flights to Alaska Airlines Mileage Plan. What I don't do is find many occasions to redeem AAdvantage miles — especially such a small number of them.

Instead, I earn miles and points directly in the programs where I get the most value, and where I'm sure to redeem them, by manufacturing spend on the appropriate credit cards.

Nationwide Visa Buxx cards have been around for years

I first wrote about Nationwide Visa Buxx cards in February, 2013 (yes, I've really been blogging that long).

The opportunity offered by these cards is simple: after signing up for a "parent" account, you can add "teen" card accounts, each of which can be loaded with $1,000 per rolling 30-day period from any Visa or MasterCard (although beware of loading using Citi-issued credit cards), at a cost of $2 per $500 load. The "teen" cards, which you'll receive in the mail, are PIN-enabled and have a maximum purchase limit of $800 per rolling 7-day period.

Nationwide Visa Buxx cards are still available for new signups

Two other, more lucrative Visa Buxx products have been limited in various ways over the years: TD Go cards can now only be funded with TD Bank-issued credit cards, and US Bank Visa Buxx cards are no longer available for new signups.

But Nationwide Visa Buxx cards are! So if you don't yet have a card, consider opening an account today. No deal lasts forever, but those of us who opened US Bank Visa Buxx cards in time are still going strong, despite new applications for the card not being available since February, 2014, and I have no reason to believe the Nationwide gravy train will end any time soon.

I still don't understand the appeal of revenue-based rewards programs

Invariably when I write about Ultimate Rewards transfer partners, commenters chime in that I've left out Southwest. And this is invariably true: Southwest doesn't serve my local airport, I don't fly Southwest, and I don't like Southwest, so I don't write about Southwest.

But it's worse than that: I don't care about any revenue-based rewards programs.

Hotel revenue-based rewards programs are great — if you're a business traveler

If you're a business traveler who is reimbursed for their paid hotel stays, then it's essential to understand the concept of point "density:" how much you need to spend at each chain in order to earn enough points for award redemptions at that chain's properties.

If you pay for your own stays, on the other hand, then it's vanishingly unlikely that you're going to get a big enough rebate from a hotel's loyalty program to justify paying retail for hotel rooms booked through that chain, as is typically required in order to earn hotel points: after all, you can get a 17% rebate by simply booking paid stays through Hotels.com, after clicking through a cash back portal like TopCashBack.

Of course there are corner cases, like someone who otherwise pays for their stays through manufactured spend, but who is gunning for Hyatt Diamond elite status in anticipation of an upcoming trip where that status is going to pay for itself with suite upgrades, breakfast, or lounge access. But an extraordinary amount of digital ink is dedicated to those corner cases, which are simply not encountered by the typical traveler in any given year.

Airfare is too cheap to think about revenue-base airline rewards

Southwest has a "pure" revenue-based rewards program: you earn points based on the amount you spend on airfare, and then you redeem points based on the paid price of a ticket, after the appropriate conversion rate is applied.

So the ideal use case for Southwest points looks something like this: earn Ultimate Rewards points at 0.5 cents (gas stations) or 0.67 cents each (office supply stores), transfer them to Southwest, where you have a Companion Pass, and redeem them for between 2.5 cents and 3.4 cents each when booking award tickets for yourself and your designated companion, giving you a discount of 73% to 85% over retail.

And if you live in a city served by Southwest, and which serves many destinations with nonstop flights, that really might work out to a pretty good value. Baltimore and Dallas, I'm looking at you.

In exchange, of course, you have to fly Southwest. On the one hand, that means free checked bags. On the other hand, it means furiously checking in exactly 24 hours before departure, lining up for the alphabetical cattle call, and then crossing your fingers that you and your companion will actually get to sit together while the flight attendant raps his safety briefing at you.

Meanwhile, if you have access to grocery store or gas station manufactured spend, you can use a US Bank Flexperks Travel Rewards card to get up to 75% off paid airfare on a distance-based carrier like American, Alaska, or Delta (if credited to Alaska). And in addition to your air travel, you also earn miles that can be redeemed for additional airline award tickets.

That's the calculation that prevents me from having any interest in flying on Southwest, or crediting my paid flights to revenue-based carriers.

Crediting paid flights to revenue-based airlines is the least efficient method of earning miles

A general member crediting a paid United flight to United will earn 5 Mileage Plus miles per dollar spent on airfare. Pay $400 for a domestic roundtrip ticket, with $5.60 in taxes and fees, and you'll earn 2,000 Mileage Plus miles.

Pay the same $406 for gas station manufactured spend, and you can buy 82 OneVanilla prepaid debit cards, earning 82,811 Ultimate Rewards points. That's 3 domestic economy roundtrips at the "saver" level or 1.5 roundtrips at the "standard" level. It's $1035 in paid, mileage-earning airfare — on any airline, not just United.

The difference in scale here is geometric. Go ahead and bump your United earning up to 7, 8, 9 or 11 Mileage Plus miles per dollar spent, and you'll run into the exact same situation: the more you spend out-of-pocket on paid airfare, the more miles you're leaving on the table.

The same is true of Delta: as long as SkyMiles are a transfer partner of American Express Membership Rewards, you'll never get better value buying paid Delta-operated flights and crediting them to Delta than you will spending the same money manufacturing spend in bonus categories on your American Express cards.

Go ahead and credit to Delta and United — just don't do it for the miles

Of course I'm begging the question here: once you've manufactured the spend you need to redeem your miles for paid domestic travel, you still have to credit the flights somewhere.

Personally, I privilege flying American, Delta, and Alaska in order to credit flights from all three to Alaska'a Mileage Plan, but you may well find that United best serves your needs, and decide to credit your paid United flights to Mileage Plus.

Likewise, you might find that Delta Medallion elite benefits make it worth crediting your paid Delta flights there, whether for complimentary upgrades, preferred seating, or refundable and changeable award tickets.

But if you do, don't use the rebate value of your redeemable miles as justification. It's not there.

The only way I know how to value miles and points

Yesterday I saw Trevor at Tagging Miles musing about how he values his miles and points, but in listing the different methods he's seen people use, he doesn't mention the only one that makes any sense to me. Since he framed his post as a rhetorical question, I'll take this lazy Friday opportunity to answer it.

Points are worthless until you redeem them

Feel free to carve out a small exception for points that can be redeemed directly for cash, like Ultimate Rewards points and US Bank Flexpoints, but the essential fact is that banked miles and points are the worst possible form of savings, outside of a large investment with Bernie Madoff:

• Unlike money, they don't belong to you;
• Unlike money, they can lose some or all of their redemption value overnight, whether through mergers, devaluations, or bankruptcies;
• Unlike money, they don't earn interest.

That's why I keep my points balances as low as possible, and will almost always privilege redeeming miles and points over paying cash for reservations. Obviously I'll maximize the value of my miles and points over all my anticipated future reservations, but I don't store up miles and points for speculative, possible future reservations, when I need plane tickets and hotel rooms in the here and now.

When redeeming points, decide whether to earn more

The other reason to redeem miles and points, rather than cash, as aggressively as possible is that it affords a unique opportunity: the ability to see how much your miles and points are actually worth.

Like anyone else, in the process of planning each trip I search simultaneously for paid and award flights, and paid and award hotel nights – not because I'm interested in paying cash for a flight or hotel room, but because it gives an instant, accurate picture of how much my miles and points are worth: just look at the flight reservations you would make and hotel rooms you would book if you were paying cash, and look at the flights and hotels you would reserve if paying with miles and points.

For example, I earn 1.4 Delta SkyMiles per dollar spent on my Platinum Delta SkyMiles American Express card when I spend exactly $25,000 and $50,000 per calendar year (which, it follows, are the only amounts it makes sense to spend on the card). Since my next best card for unbonused spend is a 2.22% cash back Barclaycard Arrival+ card, I know I need to redeem my SkyMiles for "a bit more" than 1.59 cents each to justify manufacturing additional SkyMiles. I'll typically compare American, Delta, and Alaska fares, since those are the three airlines whose flights I can credit to the Alaska Airlines Mileage Plan.

If I find myself consistently redeeming my SkyMiles for less than 1.59 cents each, I know I need to shift my earning either to cash back or to another, more valuable rewards currency.

But note that this has no effect on my willingness to redeem my SkyMiles. With the ongoing devaluation disaster taking place at Delta, it would be madness itself to hoard SkyMiles for a speculative, future redemption if I already have enough SkyMiles in my account to book an award ticket (of course if I have another, higher-value redemption coming up, I'll redeem my SkyMiles first against that reservation before redeeming them against the less-valuable one).

Conclusion

That is the entirety of my methodology for valuing miles and points: I rely on the actual value I receive from the miles and points I manufacture, and use that value to decide which miles and points to manufacture on an ongoing basis. If, due to devaluations, movement of hotel properties between categories, or restrictions on award space, I find that I'm not getting enough value to continue manufacturing the miles and points I have in my accounts, I respond accordingly.

But I'll always privilege miles and points redemptions over paying for my travel with cash.

Exploring the Virgin Australia award chart

Yesterday MileValue wrote about the partnership between Virgin Australia and Singapore Airlines, which allows points to be transferred between the two programs at a 1.35:1 ratio (points can apparently be transferred either direction at the same ratio, although I haven’t tried it yet).

Virgin Australia doesn’t belong to any of the big three alliances but, like Hawaiian Airlines and Alaska Airlines, has a lot of partners around the world. It also has a distance-based award chart. Since Singapore Airlines is a transfer partner of all three major flexible rewards currencies, that got me wondering: are there awards that are booked more cheaply using Virgin Australia’s distance-based rewards chart than other transfer partners?

The transfer ratio isn’t great

Since 1.35 Singapore Airlines KrisFlyer miles become 1 Virgin Australia Velocity mile, you lose about 26% of your points right off the top. That means you’d need to spend 26% fewer Velocity miles than other rewards currencies before you'd start seeing a profit with this shell game.

airberlin is a bust

My first thought when seeing MileValue’s post was airberlin: it’s already a great airline to use distance-based Avios on because of the 3,749-mile distance between New York City and Dusseldorf, costing 20,000 Avios in economy with no fuel surcharges.

So I meticulously lined up the distance bands of Virgin Australia’s and British Airways award charts, adjusting for the transfer ratio between KrisFlyer and Velocity and looked for sweet spots.

Since I already made the chart, I’ll share it, but there’s nothing to see here.

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For any given distance, an airberlin flight booked with British Airways Avios will be cheaper than the same flight booked with Velocity miles transferred from KrisFlyer.

Between Australia and the United States

Virgin Australia operates flights between Los Angeles and both Sydney and Brisbane, which cover 7,488 and 7,161 miles, respectively. Both routes will cost 47,000 Velocity miles in economy, 94,000 in business, or 141,000 in First. Converting from Singapore Airlines, those values come to 63,450, 126,900, or 190,350 flexible points.

Since you could book the same Virgin Australia flights for 50,000 Delta SkyMiles in economy or 80,000 SkyMiles in business, transferring points through Singapore Airlines is unlikely to be your cheapest route to Australia, unless you have no Membership Rewards points or SkyMiles banked.

Virgin America

Next I turned to Virgin Australia’s more advantageous award chart for flights on "Virgin Australia, Virgin Atlantic, Virgin America, Virgin Samoa, Etihad, Delta, and trans-Tasman Air New Zealand flights." Here I got a little bit of traction:

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For extremely short flights along the West Coast of the United States, and between Austin and Dallas's Love Field, paying 6,900 Velocity miles (9,315 flexible points) may well be the cheapest option, depending of course on award availability and paid ticket prices.

Additionally, since award flights to Hawaii on domestic carriers will typically cost more miles than flights within the mainland, if you can find Virgin America award availability between San Francisco and Honolulu or Maui, you can come out a little bit ahead. Even if it’s not a windfall, it’s at least worth keeping in mind while searching for award seats, as an additional option in the face of dwindling award availability.

Transfer Starpoints directly to Virgin Australia

So far I’ve been talking about transferring Ultimate Rewards, Membership Rewards, or Citi ThankYou points to Singapore Airlines KrisFlyer in order to transfer them to Virgin Australia.

But Virgin Australia is also a transfer partner of Starwood Preferred Guest, at a 1:1 ratio, with a 25% bonus when you transfer in increments of 20,000 Starpoints.

If you’re Starpoint-rich, you don’t need to take the initial 26% hit by transferring your points to KrisFlyer; you can transfer them directly to Virgin Australia Velocity.

Conclusion

I've never given much thought to Virgin Australia, either as a transfer partner of Starwood Preferred Guest or of Singapore Airlines, so these are just my very preliminary thoughts on using their miles for fun and profit.

What else should I and my readers know?

The 20-cents-per-mile breakeven point for Delta and United mileage earning is still wrong

Regular readers know the sacred cows that get repeated daily by affiliate bloggers, which drive me bonkers whenever I accidentally glance at one:

• "The Chase Sapphire Preferred is the best travel credit card."
• "Statement credits reduce your annual fee."

But there's one seemingly minor one which makes my skin crawl in a way the outright lies don't: the claim that Delta and United travelers need to pay 20 cents per mile to break even under the new, revenue-based SkyMiles and Mileage Plus programs. It's not just incorrect, it's so blatantly innumerate it makes my head spin. Here's a thought leader in travel last week:

"Both United and Delta require spending at least 12.5 cents per mile flown to earn elite status as part of their revenue-based elite rules. But they both require an average of 20 cents per mile flown just to break even with the miles that had been earned under the old distance-based system."

That's still wrong, as I helpfully pointed out in September of last year. Since it apparently still hasn't sunk in, let's go over it again.

Elite mileage earning changed out of proportion to non-elite mileage earning

Since January 1, 2015, Delta and United have had the same mileage earning structure for passengers crediting flights to their frequent flyer programs:

• General members: 5 miles per dollar
• 25,000-mile elites: 7 miles per dollar (40% bonus)
• 50,000-mile elites: 8 miles per dollar (60% bonus)
• 75,000-mile elites: 9 miles per dollar (80% bonus)
• 100,000-mile (United) and 125,000-mile (Delta) elites: 11 miles per dollar (120% bonus)

Before January 1, 2015, redeemable miles were earned at the following rates:

• General members: distance flown
• 25,000-mile elites: 25% bonus
• 50,000-mile elites: 50% bonus (United) and 100% bonus (Delta)
• 75,000-mile elites: 75% bonus (United) and 100% bonus (Delta)
• 100,000-mile (United) and 125,000-mile elites (Delta): 100% bonus (United) and 125% bonus (Delta)

The mistake innumerate bloggers make is looking only at the first bullet points: if general members now earn 5 miles per dollar, then to earn as many miles as under the distance-based regime they'd need to spend 20 cents per mile flown. If they spend more than that, they'll earn more miles under the new regime; if they spend less, fewer.

Your actual breakeven point depends on your elite status

Since elite status with both airlines is still based on distance flown with them, the typical traveler's elite status will depend on their actual travel needs. With that in mind, here are the breakeven points for average cost per mile flown, depending on your elite status:

• General members: 20 cents per mile flown
• 25,000-mile elites: 17.9 cents per mile flown
• 50,000-mile elites: 18.8 cents per mile flown (United) and 25 cents per mile flown (Delta)
• 75,000-mile elites: 19.4 cents per mile flown (United) and 22.2 cents per mile flown (Delta)
• 100,000-mile and 125,000 mile elites: 18.2 cents per mile flown (United) and 20.5 cents per mile flown

To calculate these values on your own, take a sample trip of exactly 1000 miles. A Diamond Medallion would have previously earned 2,250 SkyMiles. To earn 2,250 SkyMiles at 11 SkyMiles per dollar, the same Diamond Medallion would now have to spend $204.55, or 20.5 cents per mile.

Conclusion

For mid-tier Delta elites, the situation is even worse than the 20-cent-per-mile conventional wisdom would have it, since their flights need to be, on average, 11-25% more expensive than that to earn the same number of miles as they did last year. Only Delta Diamond Medallions approach the same bonused earning rates under the new regime as they did under the old, distance-based system.

United elites, meanwhile, have it relatively easy since their redeemable-mile earning was never as heavily bonused as that of Delta Medallions.

Simplifying and automating debit card transactions

Last month I wrote about using Amazon Allowance to generate credit and debit transactions, like those required by Wells Fargo to waive monthly maintenance fees, by Bank of America's Better Balance Rewards card to ensure you receive your quarterly bonuses, and by Consumers Credit Union to trigger the high interest rates on their Rewards Checking accounts.

I like Amazon Allowances and I use Amazon Allowances, but there are reasons you might prefer not to use Amazon Allowances: you might not do enough shopping on Amazon to justify buying Amazon gift credit, or on the contrary, you might value your relationship with Amazon too much to entangle it in your extracurricular activities.

With that in mind, here are two other options for, if not automating, at least simplifying your monthly transaction requirements.

Evolve Money

Interest in Evolve Money has dwindled since they added fees for transactions funded by prepaid debit cards, but the site still exists, and they still have a large database of billers that's well worth exploring. For example, I'm able to make contributions to my Utah Educational Savings Plan account, which is in my opinion one of the better 529 Educational Savings Plans available — and, even better, it's not administered by Upromise Investments!

Importantly for our purposes, Evolve Money charges a flat 3% fee on credit card and "small bank" debit card transactions, rather than the more typical 2.9% + $0.30 fee charged by many payments processors. That means a $1 charge incurs a fee of exactly 3 cents. Since you are allowed to make 4 debit card-funded payments per month, per biller, if you can find 3 eligible billers in their database you can generate 12 transactions per month at a total cost of $0.36.

Unfortunately I cannot seem to set up recurring payments using Evolve Money, but since payments can be scheduled in advance you can just set aside 5 minutes per month to schedule your 10-12 monthly debit transactions. Likewise, a monthly $5 Better Balance Rewards payment would cost all of $0.15 in processing fees.

Bluebird, Serve, and Target Prepaid REDCard loads

American Express's full-service prepaid cards actually feature a powerful recurring payment service: you're able to schedule recurring transactions to move funds from a debit card to your prepaid account, as well as from any credit card on the American Express network (some American Express-issued credit cards do not earn rewards on such transactions, however).

Unfortunately, as with Evolve Money, I am no longer able to create new so-called "scheduled add" transactions. What I am able to do is edit existing scheduled add transactions and change the funding source to a new credit or debit card.

So on the Bluebird account I manage, I had three recurring "scheduled add" plans already created, and was able to change them to set up daily $0.50 funding transactions for the first 12 days of the next 3 months. That's not exactly automatic (I'll have to move the dates forward every 3 months), but it also doesn't take up too much mental bandwidth.

Conclusion

Frequent Miler and Matt at Saverocity have both raised the question lately, in their own ways, of how much cognitive space they're willing to devote to "smaller" deals when they could instead be pursuing big fish, and I think it's an absolutely essential conversation to have.

In my own travel hacking practice, I tend to err on the side of doing more, rather than less. I continue to pursue a number of "small fry," like Visa Buxx cards, which offer a small amount of unbonused spend each month. But I'm also eager to automate or simplify as many elements of my manufactured spend as possible, so I can devote more cognitive bandwidth to exploring new deals — and sharing them with my readers!

Recurring, small debit card transactions are precisely the kind of nuisance that can take up a disproportionate amount of attention, and are the kind of thing that are essential to simplify or automate if at all possible.

Ben Schlappig's hobby has nothing to do with mine

I don't know Ben Schlappig, although I've been in the same, large room with him a few times. But Ben has been the subject of a recent media blitz (Rolling Stone, Nightline, the Economist) which has upset a number of people I do know for the attention it has drawn to travel hacking.

PFDigest, for example, describes the Rolling Stone article as putting "another nail in the coffin," while TravelBloggerBuzz asserts about the Economist article and Nightline segment that "each one of these PR stunts hurts the hobby."

Ben Schlappig's hobby is buying remaindered premium-cabin seats at deep discounts

Ben Schlappig is a rich weirdo.

And God bless him! Many immigrant families take multiple generations to attain the middle class, and here he is: the son of immigrants, buying Florida condos, living out of luxury hotels, and subjected to the affection of fans and flight attendants all over the world.

But needless to say, virtually no actual travel hackers are the proprietors of popular blogs where they're able to earn hundreds of thousands of dollars selling credit cards to unsuspecting newbies while farming out their award booking business to independent contractors.

It's certainly an interesting fact that wealthy people with knowledge of loyalty programs can buy premium-cabin seats at a deep discount compared to their unknowledgeable peers.

But it has nothing to do with me.

My hobby is travel hacking

While buying discounted premium-cabin seats is a hobby, it isn't my hobby. My hobby is traveling, and figuring out how to pay as little as possible for my trips.

Before the site was rebranded, Travel Codex was called "Hack My Trip," which I always liked the sound of. A trip to me is more than a seat in a premium cabin: it's hotels, museums, restaurants, churches, universities, people, and more.

So I plan dozens of trips per year, often to visit friends and family, sometimes to visit new cities, sometimes just to take advantage of Bank of America's underrated "Museums on Us" program.

And since I'm the opposite of a rich weirdo (a poor weirdo?), my goal is to spend as little money as possible paying for the trips I want to take. Furthermore, those trips are often inflexible! I know when my brother's graduation is going to be, so if I want to be there, I need to be there on time. I know when my partner's work conferences are, so if I want to go, I need to be on flights that get me there while they're taking place.

And that's the experience of almost everyone I talk to in the travel hacking community. With limited vacation time or fixed school schedules, most people need to get where they actually want to go, and they hope to use travel hacking techniques to get there as cheaply as possible.

There is no reason for people like me to care when Lufthansa opens their premium cabin seats for partner award redemptions — unless I actually want to fly somewhere on Lufthansa!

And that's the difference between Ben Schlappig's hobby and mine: he cares even when he has nowhere to be and no reason to be there.

I'll worry when the mainstream media pays attention to real travel hacking

A photogenic, tortured protagonist. A whiff of scandal. Shots of first class cabins and luxury hotel rooms. That's the kind of story anyone can understand, and it's the kind of story the mainstream media eats up.

Merchant coding? Adverse action? ChexSystems? Maybe you'll read about them in trade publications, but what would Rolling Stone, Nightline, or the Economist have to say about them? And how many of their readers would care?

The fact is, most of what actual travel hackers do simply puts us out on the long tail of loyalty programs; we may be unprofitable, but we don't cost more than the profit generated by the vast bulk of customers who behave according to expectations. For every $7.90 in profit a travel hacker makes buying $2.10 Ticketmaster tickets, how many people buy $50 tickets instead? $100 tickets? Of course they're saving money on tickets they would buy anyway, but they're also generating a profit for American Express that, ultimately, more than offsets ours.

Conclusion

Naturally, any individual travel hacking technique is subject to more pressure the more people who take advantage of it, and consequently there are techniques which travel hackers prefer to receive as little publicity as possible. But travel hacking as a whole is too diverse a spectrum of behavior for the banks, airlines, hotels, and merchants to decide to bring it to an end simply because of "too much exposure."

So as long as Ben Schlappig is "revealing" to the media that he books last-minute premium-cabin seats with his Ultimate Rewards points, I'm not going to lose any sleep over it.