How much would you pay to be able to book any flight on any day?

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Another day, another devaluation.

Yesterday American Airlines announced the changes they'll be making to the AAdvantage program next year. You've likely already read all about them, but in summary, they are:

  • Revenue-based mileage earning (beginning in "the second half of 2016");
  • Award chart devaluation (effective March 22, 2016);
  • Elite status devaluation (effective for qualification after January 1, 2016).

Since I credit my paid American flights to Alaska, I don't care much about the first or third points. But the award chart devaluation is real and, for premium cabin redemptions, significant.

Premium cabin awards are not cheap or easy

With yesterday's announcement, American Airlines joined Delta and United in raising mileage prices for premium cabin awards, in some cases astronomically. For example, a first class award seat on a 3-cabin aircraft to Sydney from the continental United States will cost 110,000 AAdvantage miles starting March 22, 2016, up from the 72,500 miles it currently costs, a 52% increase.

Of course, that's purely academic. There are no first class award seats between the continental United States and Sydney.

Yes, if you're flexible, if you're searching far in advance, close-in, and on every single day in between, you might be able to find one or two seats during the Southern winter. But don't hold your breath.

Premium cabin seats are (not that) expensive

For a lot of people, "travel hacking" is synonymous with "loyalty program hacking." And indeed, historically the loyalty programs operated by hotels and airlines have been a great source of outsized value for people willing to dedicate the time and attention to maximizing the value of their miles and points.

But those airline award seats we hunt down so diligently are also available on the open market! Believe it or not, the airlines just sell them. Of course, in exchange for the flexibility buying revenue tickets grants, you're going to pay a little more.

Or a lot more. That 220,000-mile roundtrip first class award ticket American promised you might cost $10,000 or $15,000 if you choose the flexibility of a revenue ticket.

Well, it might cost someone $15,000. But it doesn't have to cost you $15,000, because you're a travel hacker.

The revenue premium may be smaller than you think

A $15,000 first class flight to Sydney will give about 6.8 cents per AAdvantage mile in value after the March 22 devaluation (if you could find first class award space).

Since the Citi Prestige card allows you to redeem ThankYou points for 1.6 cents each on American-marketed flights, you'd need about 938,000 ThankYou points to purchase your first class revenue ticket. That's a lot of points, but the ThankYou Premier card earns 3 ThankYou points per dollar spent at gas stations, so you'd only need to manufacture $312,666 in gas station spend to make your redemption. That's obviously not something you'll be able to do in a weekend, but it might be a reasonable goal if spread out over a year or two.

Since the Citi and Barclaycard AAdvantage co-branded credit cards earn just one mile per dollar spent everywhere, you'd need to manufacture $220,000 on those cards to make your first class award redemption. In other words, the revenue premium — the additional manufactured spend required to book any seat on any flight — in this case is about 42%.

The $15,000 flight has the additional advantage of earning an Executive Platinum 165,000 AAdvantage miles, enough for another roundtrip to Sydney (albeit in business class instead of first).

Conclusion

Most people aren't going to manufacture enough spend to pay what American is asking for a first class ticket to Australia. Those who do probably don't value a first class ticket to Australia at $15,000, and would rather redeem their fixed-value points for the domestic economy flights they'd book anyway. That's a perfectly reasonable point of view.

The point I want to make is that while I sometimes say that cash is a superior earning choice for manufactured spend unless you have a particular, high-value redemption in mind, it may be a superior earning choice even if you do have a particular, high-value redemption in mind!

In other words, it's not enough to say that an award redemption will get you more value per dollar in manufactured spend than earning a currency like Ultimate Rewards (1.25 cents per point), Flexpoints (up to 2 cents per point, redeemed in tiers), Membership Rewards (1.43 cents per point with the American Express Business Platinum), or ThankYou points. You also have to be willing to redeem your loyalty currencies exclusively on the dates, flights, and times that the airlines choose to make award seats available, and put the time into learning the intricacies of each alliance and each airline.

If you don't find that fun or interesting, you may well be better off saving your time and paying the revenue premium instead.

Uber is no longer selling gift credit (for now)

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A few people have reached out to me on Twitter to tell me that Uber is no longer selling gift cards. Sure enough, my account (in which I had asked them to re-enable the "Gifts" option after it mysteriously disappeared) no longer showed the option of buying gifts, and this cached version of an Uber help page reads: "Please note that we are no longer offering gift cards for purchase on the Uber system."

As a reminder, Uber gift credit was useful because an individual Uber ride is often cheaper than the $25 minimum redemption of the Barclaycard Arrival+ MasterCard. Buying Uber credit in bulk got around that restriction, and I probably would have continued to buy it $100 at a time even after today's Arrival+ devaluation.

Why the change?

It's always fun to speculate on why companies make sudden, unannounced changes like this. I have two pet theories to explain why Uber stopped selling gift credit.

The first theory is based on the possibility that whichever Uber city you originally sign up in is persistently linked to your account, even if you move. That being the case, it's possible that Uber gift credits were being improperly assigned as revenue to your home city, rather than the city you actually take your rides in, which may have been messing up some internal profit metric Uber uses.

The second theory is that since Uber is currently running an American Express Offer for $10 off $20 in rides, the last thing they want is for customers to buy thousands of dollars in Uber credit for 50% off! If this theory is true, gift credit may return after the American Express Offer expires on December 31, 2015.

Alternate Uber payment schemes

If you have an American Express card enrolled in Membership Rewards, you can use your Membership Rewards points for 1 cent each against Uber rides, or earn 2 Membership Rewards points per dollar. Since Membership Rewards points are relatively easy to earn and difficult to monetize, this is a straightforward way to redeem them for 1 cent per point.

You should be able to redeem Bank of America Travel Rewards points or Capital One Venture miles against Uber rides starting at $25, although I don't have either card so I don't know for sure.

While not exactly a payment scheme, also remember to link your Starwood Preferred Guest and Uber accounts, so you can earn 1 Starpoint per dollar spent on Uber rides (up to $10,000 per year, and only after your first qualifying Starwood Preferred Guest stay each calendar year).

Avios and cash followup: booking that Air Berlin flight

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Last month I wrote about an Air Berlin flight from Berlin to New York City, for which I was planning to redeem British Airways Avios. I had 24,000 Avios in my account, but since British Airways allows cash to be substituted for Avios at relatively favorable rates, I had to decide how many Avios to redeem (including transfers in from Chase Ultimate Rewards) and how much cash to pay for the two tickets I wanted to buy.

Here were my Avios and cash options for purchasing the tickets:

 

As I wrote then,

"ultimately, I fall on the side of redeeming my Ultimate Rewards points for 1.5 cents each. That's because I'm points-rich and cash-poor: if I "saved" my points by redeeming 20,000 or 14,000 of them against the Air Berlin itinerary, instead of transferring in 16,000 Ultimate Rewards points, I would then redeem the corresponding Ultimate Rewards points for cash at just one cent each."

Not so fast!

My decision was based on the best alternate redemption of the Ultimate Rewards points I already had, which was just 1 cent each for cash redemptions. However, I still wasn't sure how I was going to fly outbound from the United States to Budapest.

So before transferring 16,000 Ultimate Rewards points to British Airways, I first checked for award space between Chicago and Budapest, and sure enough the calendar was wide open for economy award travel on Turkish Airlines, United's Star Alliance partner. Suddenly, my alternate Ultimate Rewards redemption wasn't 1 cent each for a cash redemption, but a little over 3 cents each when transferred to United for a transatlantic flight redemption.

British Airways charges variable amounts of cash per substituted Avios

A close look at the Avios and cash chart above reveals something odd: the intervals between the Avios redemption levels are irregular. Here's the same chart, rearranged to illustrate the point:

Now, if I already had enough Avios in my account, I would certainly have redeemed the maximum 40,000 Avios and paid just $178.18 in cash.

But I didn't have enough Avios, which is why I had to ask the question of how many Ultimate Rewards points I was willing to transfer in.

  • Since I had 24,000 Avios in my account, the first 2,000 were a no brainer: I would get the full $60 in cash savings value but pay just $20 in Ultimate Rewards points.
  • The next 6,000 would give me just 1.17 cents per Ultimate Rewards point, less than the points' value when redeemed for paid travel and barely more than their cash value.
  • Finally, an additional 8,000 transferred points would yield 1.38 cents per point, which would be worth considering, except that in my case it would first require the above 6,000-point transfer, averaging out to just 1.29 cents per Ultimate Rewards point.

Since I already have a planned redemption that offers more than twice as much value per Ultimate Rewards point — my Turkish Airlines flight to Budapest — I ended up transferring just 2,000 Ultimate Rewards points and saving the remaining 14,000 points for my transfer to United Mileage Plus.

Conclusion

The lesson here is that the value of points and miles varies, not just between people but for the same person over time, depending on their points balances and plans for redemptions.

In my earlier post, I was fully ready to redeem 16,000 Ultimate Rewards in order to save $240 (1.5 cents each). When my plans developed further and I settled on a 3-cent-per-mile Turkish Airlines award, my calculus likewise changed and I became unwilling to transfer more than a nominal number of Ultimate Rewards points.

I was right both times, but the more information I had about my future plans, the better my decision became.

Portland is a city where young people go to retire

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I go to Portland, Oregon, three or four times a year. I think it's a little slice of paradise, so I thought I'd share some of the things that make it so special for me.

How to get there

  • Amtrak. Take the Empire Builder west from Chicago or the Coast Starlight north from Los Angeles. The first costs 40,000 Amtrak Guest Rewards points in a bedroom (or family bedroom), and the second costs 25,000 points in a bedroom until January 24, 2016. A single redemption includes tickets for up to the maximum occupancy of the room, e.g. 2 adults and 2 children in a family bedroom.
  • Portland International Airport. PDX has flights operated by the big 3 US carriers and Alaska Airlines, as well as Southwest. From PDX the MAX light rail will take you downtown in about 40 minutes for just $2.50 ($5 for a day pass).

Where to stay

  • Downtown. I usually stay at the Hilton Portland & Executive Tower (30,000 HHonors points November-March, 40,000 HHonors points April-October), although they sometimes play games with award availability. If you're a Gold or Diamond HHonors member, you can use your continental breakfast voucher for about $12 off anything on the breakfast menu, which I recommend since the continental breakfast is terrible. If you have Starwood Preferred Guest points, The Nines is a very fine hotel, and Urban Farmer is one of the best restaurants in Portland, located on the 8th floor of The Nines. Other than that, Marriott dominates the downtown hotel scene, and their properties are overpriced, unless you're able to get an especially good deal using Priceline.
  • AirBNB. AirBNB offers two advantages over staying at hotels: you'll often pay much less than you would staying at a downtown hotel, and you can stay in the neighborhoods, which are one of the things that make Portland so great. Three fantastic neighborhoods to check out are Northeast Alberta, between perhaps 9th and 33rd Streets; Southeast Hawthorne almost anywhere East of Grand St; and North of Burnside in the Pearl District or what's charmingly called "Nob Hill."

What to do

  • The 4T Trail. Do a loop around Portland taking the MAX light rail train, the trails between the Portland Zoo and the Oregon Health & Science University, the aerial tram down to the river and the Portland Streetcar Trolley back downtown. You can do the loop in either direction, but the aerial tram is only free going downhill. Warning: bring a printout of the trail segment, or you might get very, very lost (not that I'm speaking from experience or anything).
  • ZooLights. Speaking of the Portland Zoo, every winter the Zoo is open late and lit up with holiday lights. Fun for all ages.
  • Ground Kontrol Classic Arcade. Classic arcade games from your youth and your parents' youth, plus new additions like Killer Queen, the world's first 10-player arcade game. There's a huge selection of classic and new pinball games, as well.
  • Dante's Sinferno Caberet. Sundays at 11 pm until the wee hours of the morning, a mixture of nudity, profanity, and feats of strength. The pizza joint in the corner is now operated by Lonesome's Pizza, which is excellent.
  • Clinton Street Theater's Rocky Horror Picture Show. One of the longest-running screenings in the country, doors open at 11:30 pm on Saturday nights.
  • Laurelhurst Theater and Pub. $3-4 second run movies and classics, cheap beer and great pizza. Each seat has bar space to place your pitchers, pizzas, and salads, so you don't have to juggle your dishes.
  • Look for inspiration. Part of what makes Portland so magical is that you don't need a plan to have a good time. You can walk around, make friends, check out the local alternative weekly, and wait for inspiration to strike.

Where to eat

  • Pine State Biscuits. Three locations, always lines at all 3, but always worth the wait. Go at weird times for shorter waits, go during brunch for hour-plus waits.
  • Pacific Pie Co. Two locations. Great meat and vegetarian savory pies, sweet pies, and craft beer. Save money by going during happy hour, Monday-Friday 3-6 pm.
  • Bunk Sandwiches. Five locations. The Marinated Garbonzo Beans sandwich at Bunk Downtown is way, way spicier than it has any right to be.
  • Food carts. Portland food carts are clustered into groups called "pods." Make a food cart pod the beginning or end of a walk around town and you're guaranteed to find something delicious.
  • Anywhere. Portland bars are generally required to serve hot food, and it tends to be fantastic, or at least greasy, which can be almost the same thing.

Where to drink

  • Distillery Row. Portland's craft distilleries are clustered in Southeast Portland. Visit any one to try a flight of craft liquors, or buy a Passport and drink many flights of craft liquors.
  • Swift Lounge. Craft cocktails served in large or very-large mason jars. Great food.
  • Binks. Great cocktails made with house-infused spirits.
  • Ash Street Saloon. You will never find a more wretched hive of scum and villainy.
  • Craft breweries and brewpubs. There are a lot of them, including nationally known breweries and brewpubs like Widmer Brothers, Hopworks Urban Brewery, Full Sail, and Deschutes.

Conclusion

Remember, the dream of the 90's is alive in Portland.

Towards a theory of hotel points and cash redemptions

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Introduction

Regular readers know that I use the concept of "imputed redemption values" to calculate the relative value of manufactured spend on co-branded hotel credit cards. I've also written about the difficulty of thinking about "points and cash" redemptions conceptually.

Today I want to make a preliminary attempt at reconciling the concept of imputed redemption values and points and cash redemptions, something I've never seen attempted before in a comprehensive way.

I looked at five hotel loyalty programs that offer points and cash redemptions:

  • Marriott Rewards
  • Hyatt Gold Passport
  • Starwood Preferred Guest
  • Wyndham Rewards
  • Hilton HHonors

For each program, I used the following assumptions:

  • For Ultimate Rewards transfer partners (Marriott and Hyatt), I used a value of one cent per point (the value of the corresponding Ultimate Rewards points when redeemed for cash);
  • For the other programs, I compared each card's earning rate on spend to a 2% cash back card. The Starwood Preferred Guest American Express earns one Starpoint per dollar spent everywhere (2 cents per point), the $69-annual-fee Barclaycard Wyndham Rewards Visa earns 2 Wyndham Rewards points per dollar spent everywhere (1 cent per point), and the Hilton HHonors Surpass American Express earns 6 HHonors points per dollar spent at gas stations and grocery stores (0.33 cents per point).

I used these assumptions to investigate two questions:

  1. When do points and cash redemptions make sense compared to award nights?
  2. When do points and cash redemptions make sense compared to cash nights?

Marriott Rewards

Starting in "early 2016," Marriott Rewards will allow cash and points redemptions based on the following chart:

I used those values to calculate under what circumstances it would be worth making a cash and points redemptions, instead of a points redemption or paid stay:

This chart illustrates two points:

  • if your primary source of Marriott Rewards points is Ultimate Rewards transfers, cash and points stays are cheaper for all Category 3-8 properties, when compared to a points-only award stay;
  • but cash and points stays, just like points-only award stays, are extremely expensive, so unless your Category 8 stay costs more than $390, you're still better off paying with cash than transferring Ultimate Rewards points to Marriott Rewards.

Hyatt Gold Passport

Here's Hyatt's points-only and Points + Cash award chart:

And here's the same information, interpreted through a lens of Ultimate Rewards point transfers to Hyatt Gold Passport:

As this chart shows, there are no circumstances under which Cash + Points redemptions are cheaper, on a cash basis, than point-only redemptions (although you may still want to pay with cash in order to save your Ultimate Rewards points for other, higher-value redemptions).

Starwood Preferred Guest

Starwood produces the opposite situation. If you're earning 1 Starpoint per dollar spent on a Starwood Preferred Guest credit card, you will under virtually all circumstances save money using cash and points compared to a points-only redemption:

Wyndham Rewards

Wyndham Rewards is unique for having just one price point for points-only ("Go Free") stays: 15,000 Wyndham Rewards points per night.

For points and cash ("Go Faster") stays, all hotels in the chain cost 3,000 Wyndham Rewards points, plus a variable amount of cash.

Wyndham Rewards doesn't publish, as far as I can tell, a list of the variable cash amounts required by the hotels in their program, so this chart is based on my very extensive searching, but I can't promise it's totally comprehensive:

As you can see, at all but the most expensive properties (like the Wyndham Garden Long Island City Manhattan View), you'll pay less with a "Go Fast" cash and points stay, when available, compared to a "Go Free" points-only stay.

Hilton HHonors

Hilton HHonors, like Wyndham Rewards, doesn't publish a list of their points and cash award levels, so the following chart is based on my own extensive research, and its accuracy is not guaranteed:

This chart makes clear that if you're manufacturing spend on a Hilton HHonors Surpass American Express instead of a 2% cash back card, you'll come out ahead saving your HHonors points with cash and points redemptions at hotels priced in the 30,000-to-70,000-point range.

A note on the final column

The neatly highlighted calculations above are helpful, but I want to draw particular attention to the far right columns, showing the imputed redemption value of cash and points stays at each chain.

This column is relevant because in contrast to points-only award stays, which hotels are often required to offer as long as they have standard rooms available, cash and points stays are offered at the discretion of the property, and are generally made available only when rates are already unusually low.

The "Cash + Points" imputed redemption values I included for each chain is the price point above which cash and points redemptions become cheaper than cash-only stays, given the assumptions I outlined in the introduction. If you can find cash-only rooms at that price point or below, you're generally better off booking the cash rate rather than any cash and points or points-only rates available, unless you're particularly points rich and cash poor or have other extenuating circumstances.

Quick hit: in defense of Blue for Business

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Yesterday I dismissed the Blue for Business American Express credit card out of hand, writing that the "product earns 1 non-flexible Membership Rewards point everywhere, which isn't very interesting."

I was quickly corrected by reader Stvr, who commented, "Blue for Business is 1.3 MR per dollar."

What Stvr is referring to is the 30% bonus Membership Rewards points credited each year within 30 days of your account anniversary each year.

And Stvr is right! If you are willing to wait to receive 23% of your Membership Rewards points until the end of your cardmember year, you can think of the Blue for Business card as earning 1.3 points per dollar spent everywhere.

Does it matter?

The only situation in which I can imagine the Blue for Business card playing a useful role is if you also have a flexible Membership Rewards-earning credit card that isn't the EveryDay Preferred.

If you have a Business Platinum American Express, your Membership Rewards points are worth 1.43 cents each for paid airfare on a single airline you designate each year (the same airline you choose for your $200 statement credit). That makes your 1.3 Membership Rewards points per dollar spent on the Blue for Business worth 1.86 cents towards paid airfare. That's not great, but it's not terrible for a fee-free American Express card and it's 30% better than putting spend on the Business Platinum card itself, which earns just 1 Membership Rewards point per dollar spent everywhere.

Similarly, if you use a Premier Rewards Gold (2 points per dollar spent at supermarkets) or Business Gold Rewards (3 points per dollar spent at gas stations) card to manufacture spend in their respective bonus categories in order to transfer those points to their airline partners like Air Canada's Aeroplan, Delta SkyMiles, or Singapore KrisFlyer, you might get so much value out of your airline transfers that 1.3 Membership Rewards points per dollar gives you more value than putting the same spend on a 2% cash back card.

Of course, if you have an Amex EveryDay Preferred, then you can already earn 1.5 flexible Membership Rewards points per dollar spent everywhere with the card, as long as you make 30 or more purchases per statement cycle, which makes that card strictly superior to the Blue for Business.

American Express cards I'm thinking about

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Introduction

When I say that I don't chase signup bonuses, it sometimes gives readers the impression that I don't apply for new cards or that I don't think signup bonuses are a good deal. Nothing could be further from the truth!

If I need a new card, I'll apply for it, I'll call reconsideration lines, and I'll move credit around like anyone else hungry for approval. Likewise, if I'm planning to sign up for a card, I'll do my due diligence and hunt down the highest signup bonus available.

The difference, as I see it, come down to what cards I think I need. Since I earn the miles I redeem and redeem the miles I earn, I won't sign up for a new card just because it has a high signup bonus; I need to have a sense of where and when I'd redeem those miles. Otherwise, I might never redeem them and be left with a worthless novelty balance.

That being said, here are a few cards I'm currently thinking about adding to my collection.

Starwood Preferred Guest Business

I recently met the $50,000 spend threshold on my Platinum Delta SkyMiles Business American Express card, which makes the card all but useless for the rest of the calendar year. Last week I called American Express to ask which cards I was eligible to product change my card to, and was given two options: the Starwood Preferred Guest Business card, or the Blue for Business.

The latter product earns 1 non-flexible Membership Rewards point everywhere, which isn't very interesting, while the Starwood Preferred Guest card earns points that can be transferred to Delta, Alaska, or American (among others), in addition to booking Starwood hotel stays.

The main reason I'm interested in the Starwood card is for hotel stays. While Hilton is my primary hotel program because of their enormous footprint and the high bonused earning rate on the Hilton Surpass American Express, there are times when Hilton rooms aren't available or their properties are inconveniently located. At times like those, it's helpful to have points like Ultimate Rewards (for transfers to Hyatt) or Starpoints for booking alternatives.

On the one hand, requesting a product change to the Starwood Preferred Guest card would save me a hard credit pull and the risk of having my application denied. On the other hand, it would permanently cost me the 25,000 Starpoints I would earn if I applied for the card from scratch.

Ultimately, given the choice between canceling my Delta card, keeping it, or product changing to Starwood Preferred Guest, I'm leaning towards the product change, even if that means leaving 25,000 Starpoints on the table.

New "Old" Blue Cash

While my pre-devaluation "Old" Blue Cash card was closed by American Express in December, the "Old" Blue Cash card is still available, albeit in stunted form, and still earns up to $2,240 in annual cash back on purchases at supermarkets, gas stations, and drug stores. It's not as outrageously good a deal as it was before bonused earning was capped at $50,000 in yearly spend, but it's still low-hanging fruit, and I'm considering applying for another.

Amex EveryDay Preferred

While I'm not thrilled about the $95 annual fee, the EveryDay Preferred earns 4.5 Membership Rewards points per dollar spent at grocery stores (on up to $6,000 in spend) and 3 Membership Rewards points per dollar spent at gas stations (uncapped) when you make 30 purchases during your statement cycle.

I don't find Membership Rewards points to be particularly valuable, but this card would be a highly efficient method of earning Delta SkyMiles compared to my Delta Platinum Business American Express, and with a much lower annual fee. Delta is my primary airline program for domestic travel, so being able to earn those miles faster means paying less for the redemptions I already know I'm going to make.

The tradeoff, assuming I product change my Delta card to a Starwood card, would be giving up the opportunity to earn 20,000 Medallion Qualifying Miles per year through credit card spend.

However, I've already secured Silver Medallion status for 2016, and I don't trust Delta enough to pay a $195 annual fee purely in the hope that the SkyMiles program will retain value in 2017 and beyond.

Conclusion

When thinking about my credit card applications, as you can see above, signup bonuses play virtually no role in deciding whether to apply. If the Amex EveryDay Preferred is worth getting, it's worth getting in order to manufacture spend on the card year-round, not because its signup bonus was temporarily raised to 30,000 Membership Rewards points.

Likewise, for the convenience of a product change (keeping the same account number, avoiding a credit pull, etc.) I'll go so far as to permanently give up the chance to earn a 25,000 Starpoint signup bonus, because I believe the card is worth spending money on year-round, not just in order to trigger a one-time payday.

Replacing Hilton Surpass

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Introduction

I like the American Express Hilton HHonors Surpass card, which gives 6 HHonors points per dollar spent at gas stations and grocery stores, for the simple reason that with an earning rate that high, it's easy to get more value per dollar spent than you would using a 2% or 2.105% cash back credit card instead, a point I illustrated early this year with this chart:

This chart helpfully illustrates that whether or not it makes sense to manufacture spend on a mile- or point-earning credit card, instead of a cashback-earning credit card, depends entirely on what your next best alternative is. The worse your cashback alternative, the better a value loyalty programs potentially provide.

Hilton HHonors Surpass cannibalizes two of the most lucrative bonus categories

If you could earn an uncapped 6 HHonors points per dollar on spend everywhere, the above chart would suffice, since 2.105% and 2% are the currently-available options for "everywhere" manufactured spend.

Unfortunately, Surpass cards earn 6 points per dollar only at gas stations and grocery stores (and restaurants), and those are categories where it's easy to earn more than 2.105% cash back.

Replacing Surpass at grocery stores

If you have an "old" Blue Cash American Express card, you'll always do better earning 5% cash back at grocery stores and gas stations than you will manufacturing HHonors points; you'd have to value HHonors points consistently at more than 0.8 cents each to justify earning them instead. The same is true if you're earning 5% cash back during a Wells Fargo or TD Bank promotional period.

Once you've reached your limits with those cards, you can still earn 3% cash back at grocery stores with a card like the Consumers Credit Union Visa Signature Cash Rebate card (on up to $200,000 in annual spend).

Replacing Surpass at gas stations

Besides the "old" Blue Cash card, at gas stations you can earn 5% cash back with a card like the Fort Knox Federal Credit Union Visa Platinum card. Beyond that, there are also 3% cash back options like the Chase AARP credit card (uncapped) and the Bank of America Cash Rewards for Business MasterCard (on up to $250,000 in purchases).

Replacing Surpass everywhere

While it's only worth manufacturing spend on the Surpass card at gas stations and grocery stores, it's also possible to earn more than 2.105% cash back everywhere, including gas stations and grocery stores. Namely, the BankAmericard Travel Rewards credit card gives 1.5% cash back (when redeemed against travel purchases), which rises to 2.625% cash back when you have over $100,000 on deposit with Bank of America and Merrill Lynch through their Preferred Rewards program.

If your principle limitation is not purchase bandwidth, but rather liquidation bandwidth, you should look long and hard at whether manufacturing cheap spend at 2.625% is better than manufacturing potentially-expensive grocery store spend at 6 HHonors points per dollar.

Conclusion: running the numbers

As longtime readers know, the principle way I decide whether manufacturing spend on a co-branded credit card, instead of earning cash back, is worthwhile is through imputed redemption values like those I showed in the introduction. Here are those values for our newly-established points of comparison:

As you can see, for 50,000-to-70,000-point redemptions (which make up the bulk of my stays), with a 3%-cashback alternative Hilton properties go from $176-$246 (compared to using a post-devaluation 2.105% cashback Arrival+ card) to $250-$350.

Those values aren't outrageous, but would certainly require you to be much more diligent about pursuing the highest-value redemptions in order to make it worth manufacturing HHonors points instead of bonused cash back.

What Frequent Miler gets wrong about earning and burning

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On Tuesday, Greg over at Frequent Miler wrote a defense of hoarding miles and points. He's wrong, but to understand why he's wrong, you have to understand his argument.

Frequent Miler thinks the problem with hoarding is devaluations

In setting up his argument, Greg says the reason people recommend burning miles and points aggressively is out of fear of devaluations:

"There’s no question that points and miles frequently devalue in a number of ways: Loyalty programs change their award charts to make awards more expensive..Loyalty programs add new categories...Loyalty programs move hotels to different categories...Loyalty programs go revenue based...Loyalty programs change the rules..."

In this telling, innocent readers are redeeming their points too aggressively, missing out on occasional flash sales and keeping their balances too low to ever take advantage of the remaining award chart sweet spots.

If devaluations were the problem with hoarding, Greg would be right

Currently, up and down Hyatt's award chart Hyatt Gold Passport points are consistently worth well over a cent each. The Park Hyatt Paris-Vendôme costs 30,000 Gold Passport points or $993 next summer (3.3 cents per point) while the Hyatt Place Greenville/Haywood (South Carolina) costs 5,000 Gold Passport points or $171 on the same date (3.4 cents per point).

Hyatt could literally double the points cost of both properties and we'd still be better off transferring Ultimate Rewards points over to Hyatt than redeeming the same points for cash — not that I'm trying to give Hyatt any ideas!

If you manufacture your points cheaply enough, then it will take many years of devaluations before you'd need to worry about a significant effect on your earning calculus.

Greg's aphorisms have nothing to do with hoarding

Greg's proposed alternative to earning and burning points aggressively is "opportunistic hoarding:" signing up for the most lucrative credit card offers, manufacturing spend in the most lucrative bonus categories, and enjoying the luxury of flexibility when he ultimately begins planning a trip.

Sounds pretty good, right?

It sounds good because Greg chose to defend what is very close to a truism: "earn points cheaply and redeem them dearly!"

The problem with hoarding is that it's expensive

If Greg wants to actually defend hoarding, he needs to defend something more controversial. If hoarding means anything, it means paying with cash instead of points, despite having enough points in your account to pay for your trips.

A corollary of this might be making a cash-and-points redemption instead of a points-only redemption in order to "stretch" your points further, for example when given the option to buy Avios for 1.3 cents each while making economy award reservations.

Framed this way, the problem with hoarding is obvious: it's expensive!

In a world of unlimited cash, of course, this wouldn't be a problem. But in a world of unlimited cash, I hope you would have better things to do with your time than obsessing over miles and points!

Ostensibly, the reason we play this game, whether you're just starting out applying for a few credit cards per year or you're manufacturing hundreds of thousands of points per month, is to save money on travel. You might be trying to save money on trips you were already planning to take, or be planning trips you could never have imagined being able to afford in your previous life. But the object of the game is the same: end up with more money in your bank account than you would if you had to pay your travel providers in cash.

When you hoard miles and points, that fundamental logic break down: you start treating your rewards currencies as a retirement account and spending money that you could actually be saving for retirement!

Of course it's possible to redeem too aggressively

You can imagine, of course, someone so intent on redeeming their miles and points that they end up costing themselves more money in the long term. A 50,000-mile "Standard" award on United today is two 25,000-mile awards tomorrow, if you're able to plan ahead and hunt for award space, while if your account is empty and you have to pay cash for the two tickets tomorrow, you've cost yourself real money.

Don't do that.

If anything, the conventional wisdom is to save up miles and points for the "perfect" redemption

Ultimately, Greg's argument has a flaw at its inception: he thinks people tend to err on the side of redeeming miles and points, and I think the opposite is true.

When Thought Leaders In Travel are hounding their readers never to miss a limited time opportunity:

And rich weirdos are urging readers to buy United miles at outrageous out-of-pocket cost:

It makes no sense to me to assert that the number one problem facing the community is rewards currency balances being kept dangerously low by our eagerness to redeem points. Surely, the opposite is more likely.

Conclusion

Once you've earned miles and points, it's too late to start assigning some theoretical value to them; their value is only realized when you redeem them, and it's the value of those actual redemptions that should guide you when deciding whether to continue earning more of a given rewards currency.

Keep an emergency stockpile if you must, but don't second guess yourself when redeeming any and all excess points you earn — that's literally what they're there for!

Thinking about cash-and-points redemptions (is hard)

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There's a curious problem that everyone encounters eventually as they become increasingly involved in travel hacking: how do you think about award redemptions that combine both cash and points? For example, this hypothetical reservation in New York City offers three options:

You can pay $143 in cash, $125 in cash and 24,000 HHonors points (getting 0.075 cents per redeemed HHonors point), or 60,000 HHonors points (redeeming your HHonors points for 0.24 cents each).

Another way of putting the same facts is that you can pay 60,000 HHonors points, or 24,000 HHonors points and $125 in cash (buying 36,000 HHonors points for 0.35 cents each), or $143 (buying 60,000 HHonors points for 0.24 cents each).

In other words, a cash and points redemption can be thought of as buying HHonors points with the savings compared to a cash rate, or redeeming HHonors points to save money off the cash rate.

As I say, that's a curiosity built into the concept of points and cash redemptions, and I'm not going to resolve it one way or another for you today (or ever). I'm interested in something else.

British Airways sells Avios very cheaply when making economy award redemptions

I have a trip planned to Europe next summer, booked using the last of my Club Carlson points before the great devaluation of 2015. Since my partner has friends and relatives in Germany, we're going to end up there, giving me the opportunity to book our return flights by redeeming Avios on Air Berlin flights to New York City. Here are the pricing options (for two passengers):

I'll dispense with the comparison to a cash rate (around $1,622 for two passengers) and focus on the top and bottom redemption options. It's possible to redeem 40,000 Avios and pay $178.18 in taxes and fees, or 14,000 Avios (26,000 fewer) and $498.18 ($320 more). If I already had 40,000 Avios in my account, this would be a no-brainer: I'd redeem the miles I earned.

But as you can see, I have between 20,000 and 26,000 Avios in my account currently (a hair over 24,000, in fact). That means I can transfer 16,000 Ultimate Rewards points to British Airways in order to save $240 (getting 1.5 cents per transferred Ultimate Rewards point), or I can redeem 6,000 fewer Avios and pay $80 more in cash (buying Avios for 1.3 cents per point).

So what's the problem?

The problem is that those are both outstanding opportunities!

Buying Avios for 1.3 cents each is a great discount if I have any plans to redeem the saved Avios for short-haul American Airlines flights, which can offer phenomenal value.

Redeeming Ultimate Rewards points for 1.5 cents each is also a great opportunity, since Ultimate Rewards points are worth just 1 cent each when redeemed for cash and just 1.25 cents each when redeemed for paid airfare.

On the other hand, Ultimate Rewards points are potentially worth much more when transferred to Hyatt and redeemed for expensive stays.

My solution is definitely not your solution

If it sounds like I've been wrestling with this problem for a while, it's because I have. But ultimately, I fall on the side of redeeming my Ultimate Rewards points for 1.5 cents each. That's because I'm points-rich and cash-poor: if I "saved" my points by redeeming 20,000 or 14,000 of them against the Air Berlin itinerary, instead of transferring in 16,000 Ultimate Rewards points, I would then redeem the corresponding Ultimate Rewards points for cash at just one cent each.

In the business, that's what we call "false economy."

On the other hand, if you live in a city that's served by American Airlines — and they actually offer SAAver seat availability — you might be used to redeeming your Avios for astronomical sums and leap at the opportunity to buy them for just 1.3 cents each.

Similarly, if you value your Ultimate Rewards points highly because you're able to aggressively redeem them for super-high-value redemptions, the idea of transferring them to Avios in order to redeem them at 1.5 cents each should sound preposterous.

Conclusion

I'm one of the most vigorous enemies of earning points speculatively. But once you've earned them, speculatively or otherwise, it's even worse to speculatively forego redeeming them! They're sitting in your accounts, begging to save you money.

I'm going to do them a favor and let them.