Manufacture spend furiously

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Yesterday Miles Per Day reported that US Bank Visa Buxx cards, which have been closed to new applicants for many months but have continued to work in the interim for existing cardholders, will no longer be loadable with new funds after October 24, 2015.

These cards are terrific, especially if you have access to US Bank ATM's, which allow free withdrawals of the $2,000 that can be loaded monthly to each card at a total cost of $10. If you used a card like the Barclaycard Arrival+ MasterCard, you could earn $40 in statement credits, per card, against travel purchases each month.

In other words, each US Bank Visa Buxx card you carried allowed you to purchase $480 in annual travel at a 75% discount.

I like small, isolated techniques

On the one hand, $480 in annual travel reimbursements is small fry compared to many other available techniques. But what I like about US Bank Visa Buxx cards is that the tool is isolated from all my other manufactured spend techniques: if you have access to US Bank ATM's, you don't need to cannibalize the liquidation bandwidth you're using with any other technique. It's $2,000 in "extra" manufactured spend per month — and cheap, too!

I do everything I can

Obviously, I don't use manufactured spend techniques I don't have access to (I sometimes hear from readers who can still buy Vanilla Reload Network cards!), and I don't use manufactured spend techniques I don't know about.

But to the extent possible, I pursue every avenue of manufactured spend available, because it's impossible to know when any particular technique will cease to be available. Since I do my best to redeem rewards currencies roughly as quickly as I earn them, I never want to find myself with empty account balances and no way forward to earn more.

Two ways to travel exclusively on miles and points

There are two ways to generate enough miles and points to fund the number of trips I want to take at deep enough discounts to make them affordable: be reimbursed by an employer for frequent business travel, or manufacture spend furiously.

While my takeaway from my point density charts is that paid hotel stays are an incredibly inefficient means of generating sufficient points for award stays, that only holds if you're paying for your own stays. A Starwood Preferred Guest elite paying for stays with the American Express co-branded credit card earns 5 Starpoints per dollar spent at Starwood properties, and would have to spend $2,000 on paid stays before they earned enough points for a single award night at a mid-tier property.

I don't think I've spent $2,000 on hotel stays in my entire life to date.

On the other hand, a Starwood Preferred Guest elite paying for stays with their co-branded credit card and being reimbursed by their employer for those stays wouldn't have to pay a penny for an award night at a mid-tier property; they'd just have to wait until their employer had spent $2,000 on their behalf.

Meanwhile, the same 10,000 Starpoints would cost someone manufacturing spend with their co-branded credit card perhaps $86 in fees, depending on the techniques used.

Manufacture spend furiously

If your reimbursed business trips generate enough miles and points to finance all the travel you're interested in, you're in luck.

Otherwise, you can research every technique you come across to find out whether it can be integrated into your miles and points strategy.

The stories affiliate bloggers tell about paying for travel with signup bonuses are "just so" stories, which is why I don't tell them. Of course if you work backwards from the signup bonus you're trying to sell, you can find trips that will be exactly covered by the points earned. But if you want to be in charge of your own miles and points strategy, rather than running off to the Maldives every time an affiliate blogger tells you to, you should be pursuing a robust, diverse miles-and-points-earning strategy.

And unless you're one of the lucky few, frequent business travelers, that strategy should include as many different manufactured spending techniques as possible.

Travel hacking when you've got plenty of money

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Before I learned the first thing about travel hacking, I still traveled, and I was still broke. So for me, travel hacking straightforwardly allowed me to take the trips I was already taking — and more! — while paying far less out of pocket than I had been when all my trips were paid for with cash.

I don't have to fly Spirit anymore, either.

That sometimes leads to some crossed wires between me and my readers, since on the one hand I don't pursue "aspirational" redemptions with the same fervor (the Maldives are expensive!), but on the other hand I have much more time to spend earning miles and points every day than prominent bankruptcy attorneys do.

But that doesn't mean I actually believe travel hacking is just for poor people! In fact, there are some opportunities that are either exclusively available to, or more lucrative for, people with plenty of assets to sink into them. Here are three opportunities I'd pursue if I had a few hundred thousand spare dollars lying around.

Brokerage bonuses

Perhaps the only links on my site that haven't changed in the years I've been blogging are those to Fidelity's United, Delta, and American brokerage bonuses. Deposit $100,000 for 9 months, earn 50,000 miles.

You're eligible for one bonus every rolling 12-month period.

Note that you shouldn't do this if you're going to let a Fidelity salesperson talk you into an expensive, actively managed fund. But if you are willing to put in the effort to coordinate your Fidelity account with your other cash and assets, these miles can be very close to free.

The next-lowest hanging fruit here may be Scottrade, which currently offers tiered bonuses up to $2,000 for deposits of $1,000,000. As a percentage return, you're best off depositing just $200,000, however, and earning a $600 bonus.

See Doctor of Credit's list of current bank account bonuses for some other opportunities available to the well-heeled.

Bank of America Preferred Rewards

With a cumulative $100,000 on deposit in Bank of America, Merrill Edge, and Merrill Lynch accounts, you qualify for Bank of America Preferred Rewards Platinum Honors, which has one key benefit: a 75% bonus on rewards earned with the BankAmericard Travel Rewards credit card. Since the card earns 1.5 cents per dollar spent everywhere, the 75% bonus makes it a 2.625% cash back card, when redeemed against travel purchases made with the card.

That's the best return you're going to get on a Visa or MasterCard for purchases everywhere (the Discover it Miles card gives 3% cash back everywhere for the first year of card membership).

Kiva Loans

I've left the Kiva loan business for two reasons: first, my PayPal accounts have all been closed! But second, I couldn't justify tying up money in months-long Kiva loans when the same money could be turned over weekly at my local merchants, albeit with far higher transaction fees.

With access to much more liquidity but finite local avenues for manufacturing spend, I'd be thrilled to pour that additional liquidity into Kiva loans using super-lucrative US Bank credit cards.

Conclusion

Fortunately, virtually all manufactured spend and travel hacking techniques are available regardless of your income, let alone your net worth, as long as your credit score and income get you approved for the credit cards you want. I'm living proof of that.

But there are advantages to having a few hundred thousand dollars to throw around, as well. This is America, after all!

Is cash really king for domestic economy travel?

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I love cash back. I earn a lot of cash back. Cash back can be used for all sorts of purposes that other currencies are ill-suited for. Things like food and shelter, paying taxes, and saving for retirement. But precisely because my personal preference is to earn as much cash as possible, I like to check in from time to time on exactly how cash back stacks up against other rewards currencies.

For example, that was the inspiration for my imputed redemption value tables, which I use whenever I have to decide whether to book hotel stays with cash or with points.

What's the best credit card?

It doesn't take long after you first get interested in travel hacking for someone to ask, "what's the best credit card?" As your game evolves, the answer naturally changes. If you just got started reading affiliate bloggers, you might confidently state the Chase Sapphire Preferred is the first card anyone should apply for. If you just started manufacturing spend, you might explain the (new) "old" Blue Cash is an easy money maker. And if you just spent an evening chasing phantom award space, you might just answer that it's best to run as fast as possible away from travel hacking.

I've been at this for a few years now, and my approach to advising curious acquaintances is to make sure they have a 2% cash back credit card. It doesn't really matter which one. Neither the Fidelity Investment Rewards American Express or Citi Double Cash has an annual fee. Fidelity's card gives you access to Amex Sync offers over Twitter, and the Citi card has slightly wider acceptance. Get either, or get both (I have both, although so far I've only used my Double Cash for the 15-month negative-interest-rate loan).

This isn't because a 2% cash back card is the best way to earn travel. It's because as long as 2% cash back cards exist, that's the standard you should judge all other travel rewards cards against. But if you don't have a 2% cash back card, the exercise is academic!

Is cash back the best way to earn economy travel?

The cliche that cash back is the best way to earn economy travel has two logical bases:

  • co-branded credit cards earn 1 mile per dollar spent;
  • and it's hard to get more than 2 cents per mile on economy redemptions.

The argument is then strengthened with reference to the fact that paying with cash gives you access to the airlines and flights of your choosing and that revenue fares are mileage-earning. It follows that while airline miles may give deep discounts on (capacity-controlled) premium-cabin redemptions, you're better off earning cash back if you're content to fly economy (as I, in fact, am).

It's an elegant argument. But is it true?

Do co-branded credit cards earn 1 mile per dollar?

It's true that most airline co-branded credit cards earn 1 mile per dollar.

But the American Express Starwood Preferred Guest card earns 1 Starpoint per dollar, which, when transferred in 20,000 increments, is worth 1.25 American AAdvantage or Alaska Mileage Plan mile.

Meanwhile, the Chase United Club card earns 1.5 Mileage Plus miles per dollar spent everywhere.

Suddenly we don't need to get 2 cents per mile, but just 1.6 (American and Alaska) or 1.3 (United) cents per dollar in order to break even compared to a 2% cash back card — although both the Starwood Preferred Guest and United Club cards have annual fees to beware of.

Is it hard to get 2 cents per mile on economy redemptions?

Because of capacity controls, the hoary wisdom states, award space is typically available only on dates when airlines expect to have unsold inventory, which are also the dates when airlines are supposed to price their seats most competitively.

But in addition to the "low"-level award inventory travel hackers love so dearly, American, United, and Alaska Airlines also offer more expensive awards that escape most capacity controls. While they're much-maligned by those who will pay any price to avoid using their miles on anything but low-level awards, this is in fact precisely the supposed benefit of booking with cash: access to any flight on any day!

Paying with cash, therefore, has to be compared not just to capacity-controlled low-level seats, but also to more expensive last-seat-availability awards. So, how do they compare?

Where do your domestic economy flights fall?

One could imagine four constellations of datapoints when looking at airfares and award availability:

  • Expensive fares with low-level availability. @turnbullben on Twitter suggested American's flight from Richmond to New York City as an example of an expensive fare, and he's right: American wants $405 for a one-way flight on November 2, 2015. But they'll take 12,500 AAdvantage miles, instead! These are the redemptions that are the airlines' worst enemy: when someone who would otherwise spend a lot of cash spends just a handful of miles.
  • Cheap fares without low-level availability. These are the opposite of the above: fares where you'd be crazy to redeem miles, getting well less than 1 cent per mile.
  • Cheap fares with low-level availability. If 12,500-mile seats are available, you need to be saving at least $200 to justify transferring Starpoints in for a low-level redemption. But there are plenty of airfares cheaper than that, and those are the ones cash was made for.
  • Expensive fares without low-level availability. These are the edge cases: do you spend more money than you'd like to spend or redeem more miles than you'd like to redeem? In January, American wants $1,122 for their nonstop flights between Chicago's O'Hare airport and San Jose, California. But they'll take 20,000 AAdvantage miles, instead. That's more AAdvantage miles than you'd prefer to spend on a domestic economy ticket, but it's also a 5.61-cent-per-mile return.

Conclusion

I don't get paid enough to give advice, so don't take this post as an invitation to apply for a $450-annual-fee United Club card. But the cliche that domestic economy flights should be paid for with cash, rather than miles, is treated as such gospel that I wanted to take a step back and interrogate it a little further today.

If your local airport is served by multiple competing airlines, you'll likely find fares too cheap to bother redeeming miles for. If you're a hub captive, you may find yourself buying fares so expensive that even high-level awards give you a better return on your credit card spend.

Booking Iberia award tickets for fun and profit

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Before I get started today, it would be irresponsible of me not to state that your Avios are fine. You see, the last time I wrote about Iberia, the travel hacking blogosphere exploded with speculation about an upcoming British Airways Avios devaluation. While British Airways Avios have since been devalued, they weren't devalued in the specific, weird way that Iberia was pricing out oneworld partner awards.

So promise you won't freak out.

Iberia charges lower fuel surcharges on their own flights than British Airways does

Once you've initialized your Iberia account, you can freely transfer Avios between a British Airways, Avios.com, and Iberia Plus Avios account.

The obvious reason to do so is that on identical Iberia-operated flights, you'll be charged lower fuel surcharges using Avios in an Iberia Plus account than Avios in a British Airways account.

For example, here's an Iberia Plus Avios redemption between Chicago and Madrid in early January, pricing out at 20,000 Iberia Plus Avios and €74.20 ($85.54):

And here's the exact same itinerary pricing out at 20,000 British Airways Avios and $275:

Did you see my sleight of hand?

I'll give you a hint: one of the fuel surcharges I cited had to be converted to US dollars. One of them was converted for me.

British Airways has a funny approach to currency conversion

Here's a British Airways-operated flight between Chicago and Budapest in June, 2015. With Great Britain's passenger charges, as expected there are some substantial taxes and fees on such a ticket. It prices out at 19,500 Avios and $321:

Here's the same ticket priced out on Iberia's website, costing 19,500 Avios and €264.34 ($304.70):

I understand, you're not impressed with my saving you $16.30 in surcharges. Now watch this.

British Airways and Iberia both let you buy Avios at deep discounts

Instead of paying 19,500 Avios and $321, British Airways will let you book the same itinerary for just 6,700 Avios and $481, letting you buy 12,800 Avios for $160, or 1.25 cents each:

Meanwhile, Iberia will let you buy 9,750 Avios for €90 ($103), or 1.06 cents each:

At this point you might start to admit that this currency conversion business is at least worth being aware of. Now watch this.

British Airways and Iberia both let you buy lots of Avios for premium-cabin awards

I've been showing you economy cabin redemptions so far. But British Airways also operates premium cabins!

Here are the same Chicago-Budapest flights in business class, priced out at 62,750 British Airways Avios and $491, allowing you to buy 30,950 Avios for $805, or 2.6 cents each:

And here's the same flight priced out for 62,750 Iberia Plus Avios and €412.26 ($475.82), allowing you to buy 30,100 Iberia Plus Avios for €510 ($588.63), or 1.96 cents each:

Conclusion

I would never suggest earning, let alone buying, rewards currencies speculatively: if your account balances are high enough, you'll be better off simply transferring your Membership Rewards or Ultimate Rewards points to Avios and booking traditional award tickets.

On the other hand, if you're diligently keeping your flexible balances as low as possible, and especially if you're planning trips involving high-value Hyatt redemptions (or if you have a Southwest companion pass), you may well find that buying up the Avios you need to complete a redemption makes sense compared to transferring the points in from Chase Ultimate Rewards.

If you happen to find yourself in that situation, do yourself a favor and see if an Iberia Avios redemption will save you a couple hundred dollars.

Personal finance digression: putting Mango in "time out"

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I periodically write about high-interest accounts which I think are obvious choices for people with basically unlimited access to cash. In June I wrote that Mango prepaid cards had stopped accepting new applications. Shortly after that, the similar Union Plus Prepaid card was discontinued and cardholders were told that our accounts would be closed and a new prepaid card provider would contact us by September 16, 2015.

Reminder: why these cards were great

Although it was never advertised or clearly communicated, the Mango and Union Plus prepaid cards were great savings vehicles for two reasons:

  • the linked 6% APY savings accounts did not, in fact, require any employer direct deposits to have their well-above-market interest rates triggered;
  • the prepaid card balance allowed Automated Clearing House (ACH) "pulls" initiated by most credit cards and banks.

That meant that simply parking $5,000 (or $15,000 — cardholders were allowed 3 distinct accounts with a $5,000 limit on each 6% APY savings account) in the linked savings accounts allowed cardholders to generate a little over 5% APY (after a $3 monthly fee) on what were completely liquid funds: each month, the interest could be moved from the savings account to the linked prepaid card account and withdrawn as a transfer to most bank accounts or as a credit card payment.

The new Mango product is not the same as the old Mango product

In July, Mango announced that they would transition from their existing MasterCard prepaid product to a Visa prepaid product, and invited existing cardholders to apply for the new product.

I've now completely transitioned one of my accounts to the new Visa prepaid product, and am not impressed. Here's what I know so far about the new product, and about transitioning from the old product:

  • Once you activate your new Visa prepaid card, your prepaid and savings account balances instantly transfer to the account you access at my.mangomoney.com, rather than at rev.mangomoney.com;
  • You can continue to make ACH deposits to your new, Visa prepaid account using the First Bank & Trust routing number you used previously (114994196) using your First Bank & Trust account number;
  • You can no longer make ACH withdrawals using that account information;
  • You can also not make ACH withdrawals using the Sunrise Bank routing number (091017138) that comes with your Visa prepaid card.

The new accounts have been around for too little time to provide definite answers to the following questions:

  • Do you need to receive $500 in direct deposits to qualify for 6% APY on the new savings accounts?
  • If so, what direct deposits qualify?
  • Is the $2,500 daily purchase limit enforced?

The answer to these questions is essential since the principle benefit of using these accounts for your high-interest savings was their liquidity. If the $2,500 daily purchase limit is enforced, than it would take 2 full days to withdraw $2,500 from the prepaid account by buying, for example, money orders. If the daily purchase limit is not enforced, then while there would be a slight inconvenience, you could still withdraw a $5,000 balance by simply buying five $1,000 money orders at a cost of roughly $3.50.

Likewise, if a $500 direct deposit is required to trigger the savings account's high interest rate, that will require also finding the time each month to move that $500 back to cash using a method besides ACH pulls.

Neither of those are deal-breakers, but they're both far short of complete liquidity.

I don't trust this company enough to find out

I'm not planning to close my Mango accounts for now, but I am putting them in "time out:" I'm withdrawing all the money from my accounts and redistributing it. In the case of my "old" MasterCard account, that means simply making ACH withdrawals from the linked checking account. In the case of my "new" Visa account, it means buying cheap money orders, since ACH withdrawals no longer work. Since I haven't maxed out my Consumers Credit Union Rewards Checking account yet, I'll park the money there until the dust settles and earn a "mere" 5.09% APY on it.

I'll keep an eye on the situation and if the state of play evolves significantly I'll be sure to update my readers.

In the meantime, here are two invaluable resources regarding all things Mango (if you don't mind wading through the personal attacks):

Weekend Roundup Roundup for August 23, 2015

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A lot of bloggers write weekend roundups of their own posts or posts from other bloggers they found interesting or helpful that week.

So many, in fact, that it can be hard to keep track of them all. To make it easier, here's the inaugural Weekend Roundup Roundup: your roundup of all the weekend roundups you may have missed:

How to get started travel hacking (hint: don't apply for any credit cards!)

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A lot of people seem to treat my site as a space for "advanced" travel hackers, but I've never felt that way myself; in fact, I don't think of myself as an "advanced" travel hacker at all!

  • I don't know the first thing about fuel dumps (although I took advantage of one for my January trip to Italy).
  • I don't game voluntary denied boarding vouchers (although I was pleased as punch to take one last Sunday).
  • I don't pore over portal bonuses, buying and reselling gift cards and merchandise in order to manufacture spend (although I'll always use portals and bonus categories to buy the things I need at the steepest discount possible).

I consider myself a working travel hacker. This is my job: I love it, I have a lot of fun, and my readers are the greatest, but I'm no expert.

I wrote my (now quite outdated) ebook, and launched this site, not because I had any special insight into travel hacking, but because all the major existing blogs were so obviously taking advantage of their readers' ignorance.

In other words, I've always thought of this site as a resource to save beginners from experts, not to pile more expert advice on them. With that in mind, here is the best beginner advice I can muster from my experience in the travel hacking game.

Don't apply for credit cards (until you're ready)

Manufacturing spend with the right co-branded and proprietary credit cards is a fantastic way to generate miles and points that you can redeem for travel.

Manufacturing spend with the wrong co-branded and proprietary credits cards is a fantastic way to generate profits for the issuing banks.

There is a whole industry committed to convincing you that what's good for the banks' bottom lines is good for you. It isn't. The only way you'll ever be able to make the right decision about what credit cards should be in your travel hacking portfolio is taking deep dives into the earning and redeeming structure of each card.

A lot of that information is here. A lot of that information is on Google. And if it's not in either place, ask!

Your credit score is not even among your most valuable assets

Bloggers who are paid based on the number of successful credit card applications you complete are naturally game to figure out how to "goose" your credit score as much as possible.

If you're interested in applying for new credit cards, it's worth learning how to improve your credit score in order to ensure those applications are successful.

For example, once you figure out when your credit cards report their balances to the credit bureaux, you can pay off those balances ahead of time: that will ensure that however much you spend each month, other credit card companies will treat you as debt-free.

But unless you're applying for new credit, you should basically not care about your credit score month-to-month. Your credit score does not hover above your head while you go about your daily business.

Plan around (your!) actual travel

One particularly pernicious feature of affiliate blogging is picking random "aspirational" destinations and explaining how the credit cards the blogger is selling will get you there.

But if you weren't interested in traveling to Bali before you discovered travel hacking, why would some random credit card bonus encourage you to go there?

Once you've examined your actual travel plans, you'll likely find that a 2% cash back card serves your needs best.

And when you've come to terms with that, you'll finally be able to calculate how other signup bonuses and earning rates will allow you to save money by leveraging hotel, airline, and proprietary bank points.

Conclusion

My animosity towards the "Big 5" affiliate travel blogs is no secret. But there's no straightforward way to keep folks who are newly interested in the hobby from falling into the same expensive mistakes over, and over, and over again. There may never be.

And as long as that's the case, I'll keep writing.

Using Mint to track travel hacking expenses and returns

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The single most important thing you can do to succeed in travel hacking is stay organized. That's true of every single aspect of the game:

  • If you're booking your hotel stays through a portal like Rocketmiles or Pointshound, you have to make sure the correct number of miles post for each and every reservation: miles posting incorrectly or not at all means foregoing hotel loyalty points in vain;
    • If you're chasing elite status, you have to make sure you know the number of elite-qualifying miles you need each year and game out each and every flight you plan to take: falling short by a few hundred — or even just a few — elite-qualifying miles is in most cases a catastrophic failure;
  • If you're manufacturing spend across a number of credit cards, you need to keep track of the statement closing and payment due dates of each and every one of your cards: a single missed payment will result in interest and penalties that can wipe out the returns on months of manufactured spend.

I use a variety of methods to track my manufactured spend, but just one to track my actual income and expenses: Mint.com.

Mint can download most transactions from most banks most of the time

Most major banks and many reloadable prepaid card accounts can be added to your Mint master account. When you do so, each time you refresh your Mint account your balances and transactions are downloaded from each bank's server.

The system's not perfect, and I find that Mint's servers are unable to download transactions from some banks most of the time. US Bank is a particular offender — don't bother using Mint to track business credit card accounts with US Bank.

Tracking transactions is nice in and of itself, but the real genius of Mint is allowing you to recategorize transactions, which is to say reassign them from the category Mint guesses they belong, to the category where you know they really belong.

Recategorizing transactions gives you a concrete sense of your actual income and expenses

Here's a deposit to my primary local credit union checking account. Mint originally categorized it as "Income," but I knew better and recategorized it as "Transfer:"

That keeps Mint from adding that amount to my monthly income statistics.

In addition to recategorizing transactions, Mint also allows you to "split" them. Here's a recent purchase I made at one popular merchant:

Mint, naturally enough, originally categorized the $504.94 transaction as an expense. But, knowing better, I categorized just $5.64 of it as "Fees & Charges," while the remaining $499.30 has no effect on how Mint reports my income and expenses since I recategorized it as a "Transfer."

As a final example, for tax reasons it's necessary for me to track my self-employment income. But I also want to treat things like credit card retention bonuses, statement credits, and cash back as positive income flow. To do that, I use Mint's "bonus" category (you can create your own categories to help refine transaction reporting even further):

Don't worry, I'll be paying self-employment tax on Andy's subscription come April.

Do you need to keep track of your manufactured spend expenses?

This practice gives me an instant grasp each month of every penny I spend on fees while manufacturing spend, and also lets me see at a glance how much of a cash return I get on those fees.

It's also a pain in the ass.

Don't get me wrong: I do all this coding while in bed each morning sipping a cup of coffee or three. But you don't get to sleep in every day, sipping coffee. You have a job. Hell, you may have two jobs!

So should you keep track of your manufactured spend expenses as closely as I do? There are strong arguments on both sides.

On the one hand, as I hopefully made clear, Mint can only keep track of dollar-denominated expenses and returns. It won't tell you how valuable your Hilton HHonors points or United Mileage Plus miles are; it will only tell you how much you paid for them. Since you aren't recording income each time you redeem your miles and points, why should you record your costs each time you earn them?

On the other hand, you really are spending cash money when you manufacture spend. That's money you can't put towards a down payment, towards tuition, or towards retirement. It's gone, and if you use Mint to track your expenses, logic demands that those expenditures be recorded somehow as well.

Conclusion

Ultimately, I come down on the side of meticulously tracking manufactured spend expenses, not because they make a huge impact on my net worth, but because I find it risky to dispense with absolutely rigorous honesty when so much is potentially at stake. I can't help but think that if someone doesn't face the concrete costs they pay when manufacturing spend, they'll be more likely to ignore similar expenses elsewhere in their financial life.

That being the case, I'm happy erring on the side of scrupulous honesty when it comes to my own income and expenses.

Loyalty is an expensive, annoying trap

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I shared on Monday that over the weekend I was the proud recipient of $1,300 in Delta voluntary denied boarding compensation, and reflected on some of the possible consequences for the miles and points I'd budgeted for my upcoming travel.

Since I booked some speculative hotel rooms in Eastern Europe for next summer before the latest Club Carlson devaluation, but haven't booked our flights yet, I thought that would be a good place to see how far $1,300 in Delta transportation would get me.

The answer, it turns out, is pretty far! I was able to find this great itinerary flying into Prague and out of Frankfurt, for example, for $1,294, marketed and operated by Delta:

Since there are two of us going, I decided I'd use my Delta transportation voucher to fully pay for my ticket (since the voucher was issued in my name), then redeem FlexPoints or even SkyMiles for the other (if low-level award space opens up — fat chance!).

Silver Medallion status has (a few) privileges

Then I remembered: as a Silver Medallion, I get to choose Comfort+ seats within 24 hours of departure on Delta-operated flights for myself and companions flying on the same itinerary. If I book my partner and I on separate itineraries, I won't be able to select a Comfort+ seat for her without paying $129 for the outbound leg and $99 for the return.

Alternatively, I can book the two tickets on Delta's website, using the transportation voucher to cover the first $1,300 and paying cash for the balance. That would be way too expensive, even if I used my Arrival+ MasterCard to pay the the balance.

On domestic flights, you may or may not care about Comfort+ seating, but on two long-haul international flights, I don't think it's unreasonable to want some additional legroom in economy.

Loyalty makes easy decisions harder

I'll grant that this sounds like a corner case – a curiosity – and not a real problem. But in fact, I find myself in similar situations with some regularity.

Later this year we're flying to Portland to celebrate my partner's birthday. The flights I wanted cost $330, and were pricing out at 20,000 SkyMiles roundtrip. This is basically a wash: redeeming 20,000 FlexPoints would give me the equivalent of 3.33% cash back on $10,000 in spend, while redeeming SkyMiles would get me a 2.3% return on $14,285 in spend (since I earn 1.4 SkyMiles per dollar spent on my American Express Delta Platinum card).

Both returns exceed the 2.22% I'd earn with my Barclaycard Arrival+ MasterCard, so there's no wrong choice. On the one hand, my preference is to redeem SkyMiles as aggressively as possible, because of their rapidly dropping value. On the other hand, I'd like to keep my Alaska Airlines MVP status next year, and to do so I'll need all the paid Delta flights I can get.

So I split the difference: I redeemed SkyMiles for my partner's ticket, and FlexPoints for mine, for an average return of 2.72% on $24,285 in manufactured spend.

Here again, only I'll have access to Comfort+ seating, but additionally I'll have a free checked bag thanks to my Medallion status, while my partner will have to pile her firearms, knives, and dry ice into my bag in order to avoid Delta's checked bag fees.

Conclusion

Checked bag fees and charges for preferred seating are huge revenue sources for the airlines, and can be huge expenses for passengers willing to pay them. The free checked bags and preferred seats offered to elites are therefore real, tangible benefits of elite status.

But elite status also makes it easier to be guided by motivated reasoning, allowing you to justify decisions you wouldn't otherwise consider.

In my first example, Delta is presenting me with a false choice: buy a second cash ticket in order to secure my partner Comfort+ seating, or redeem Flexpoints for the second ticket and pay to upgrade my partner. It's a false choice because absent elite status we would both be fine sitting in Main Cabin seats!

In my second example, I'm redeeming valuable Flexpoints for my ticket instead of taking the opportunity to empty my SkyMiles account even further, all in order to earn a few thousand more Alaska Airlines Mileage Plan elite-qualifying miles.