Final status report on my personal finance application cycle

Last June I wrote about my personal finance application cycle, in which I applied for a Chase Slate and Citi Double Cash credit card in order to run up high balances and use the resulting negative-interest-rate loans to finance other projects. Since my 0% APR introductory periods are coming to an end, I thought readers might enjoy a final update.

Did it work?

My strategy worked perfectly, as it had to.

Fees and interest rates, unlike other terms and conditions of credit card agreements, are heavily regulated and cannot be changed by the banks to retroactively apply to existing balances (as long as you stay current on payments). In fact, even if my Chase and Citi accounts had been closed for some reason, I still would have been entitled to continue making only the minimum payments on the two cards until the introductory interest rate period elapsed.

I had no trouble moving my existing Chase credit lines to my new Slate card, as I explained in the original post, and was able to transfer $15,000 in balances to the card at the promotional 0% APR. I also didn't have any problem manufacturing my $5,200 credit limit on the Citi Double Cash, maximizing the amount of cash I was able to borrow at a negative interest rate.

What happened to my credit score?

When reading about this tactic, many of my readers grow agitated about the horrific damage that must have been wreaked on my credit score by nearly maxing out two credit cards on an ongoing basis.

In the 12 months of FICO score history Barclaycard provides, my score has bounced around between 677 and 729. In the last 6 months, Citi has me between 667 and 683. And in the last 12 months American Express has my FICO score between 670 and 720.

But I don't care about my FICO score, and the "damage" didn't keep me from being approved for a new Chase Hyatt credit card.

As should be obvious, everyone's situation is different: if you have just a few cards, or a short credit history, then high utilization on one or more cards might do significant damage to your credit score, potentially keeping you from getting approved for the credit cards you want.

If you have a lot of cards, and a long credit history, it's more likely to have only a nominal effect on your score, as it did on mine.

What did I do with the money?

Not much! I funded my Consumers Credit Union Free Rewards Checking account with $10,000, and used the rest of my newfound cash flow to increase the speed and convenience with which I manufactured spend on my other credit cards. Even if you diligently pay off each of your credit cards with the same spend manufactured with that card, there are still inevitable delays connected with depositing funds and making payments. Having a substantial amount of cash on hand smooths out those inconvenient delays and increases my overall return.

What's next?

This month I paid off the balance on my Citi Double Cash, and have already started using the card to manufacture unbonused spend. It's a somewhat inconvenient product since you have to pay off your balance in full before your statement closes in order to earn a full 2% cash back on your spend each month. Still, 2% is a perfectly reasonable return on unbonused manufactured spend, so the card still has its uses to me.

After I pay off my Chase Slate balance at the end of the month, I'll call to request a product change to the Chase Freedom Unlimited, which earns 1.5 Ultimate Rewards points per dollar spent everywhere, and that card will enter my rotation as a go-to card for unbonused manufactured spend.

Once that's complete, I'll wait a few weeks until I'm safely out from under the shadow of Chase's 5/24 guideline for new account approvals, and apply for another Chase Slate. I'll move available credit from my new Chase Freedom Unlimited account, and start this process over again.

Should you do this?

I don't give advice. I don't know your situation, and have no idea whether a 15-month, negative-interest-rate loan is right for you. But there are a few reasons you might consider it.

First, there are purchases that you might be considering paying for over time, like a car, which will cost less in total if you accelerate your payments using a negative-interest-rate loan.

Second, holding borrowed cash in a high-interest checking account, as I did, can serve as an "emergency fund" to protect you from job loss, emergency medical bills, or losses in the stock market. Even if, like me, you don't find the idea of an emergency fund particularly interesting from a personal finance perspective, you'll still earn more in a high-interest checking account than you will in a fixed-income mutual fund, a subject I've written about elsewhere.

Third, if you're a reseller or the owner of a business that needs access to capital in order to grow, you might consider financing expansion with a negative-interest-rate loan, especially if you work with vendors who only accept cash or give a discount on cash transactions.

I moved. What did I miss?

Well, faithful readers, I'm back. For the past week I've been packing all my earthly possessions and transporting them 904 miles eastward. They're now, mostly, unpacked, and life should be very slowly returning to normal. Here's what I've learned in the past week.

Pay people to load and unload trucks for you

Packing your possessions into boxes for transport is a long, hard, chore, with a correspondingly high payoff. You can discover long-lost mementos, dispose of mountains of clutter, and get the opportunity to thank your old clothes and books for their service before disposing of them.

Loading and unloading trucks is an utterly thankless task that has no redeeming value. Pay someone else to do it for you. Don't try to help. Just watch.

There are only 81 Ritz-Carlton properties where you can use their new free night bonus

The new Chase Ritz-Carlton Rewards credit card has a signup bonus of 3 nights at any "participating" Tier 1 to Tier 4 Ritz-Carlton property after spending $5,000 in the first 3 months.

According to my brute force calculations (Tier 1, Tier 2, Tier 3, Tier 4), that leaves you with 81 properties in the world where you can use your 3 free night certificates.

Maybe you're planning to visit one of the 81 locations where you can use your free night certificates anyway. That makes the credit card a no-brainer, with a signup bonus worth thousands of dollars.

But if you aren't already planning to visit a Ritz-Carlton property, why would you be interested in a credit card that forces you to plan a whole vacation around it?

Travel is too cheap to chase signup bonuses that make you play by the loyalty industry's rules.

Chase Sapphire Reserve seems fine

Now that the details of the Chase Sapphire Reserve have been more-or-less-or-more officially confirmed, I can say with absolute conviction that it seems fine.

The 3 Ultimate Rewards points per dollar spent on travel and dining seems fine.

The $300 in annual statement credits seems fine.

The ability to get 1.5 cents per Ultimate Rewards point when redeeming them for travel through the Ultimate Rewards portal seems fine.

I personally don't chase signup bonuses. But I know a lot of people do! They'll no doubt enjoy the 100,000-point signup bonus after spending $4,000 within 3 months. That seems fine too.

I apply for cards that either help me earn more points or help me leverage the points I already have. The Chase Sapphire Reserve does neither, so I won't be getting it.

Conclusion

I'm sure I'll have more to say about all this (well, probably not about moving trucks) as time goes on and the affiliates continue harping on these cards' supposed benefits. But since I've been out of touch for over a week, I thought I'd get started by sharing my 10,000-foot view of these latest fads in the credit card marketing blogosphere.

Thinking about Hyatt Diamond requalification

I took advantage of the Hyatt Diamond status match late last year and have been enjoying my suite upgrades, free breakfast, lounge access, and check-in amenities for over half a year now. With just under 5 months left to requalify, I've been giving some thought to whether and how to do so.

Whether to requalify

I have a high baseline level of skepticism that elite status benefits are worth paying anything for.

For example, I manufacture elite status on Delta with a Business Platinum American Express card, but I also earn 1.4 SkyMiles per dollar spent when I meet the $25,000 and $50,000 annual spend thresholds. Since SkyMiles are the airline currency I use most frequently and to greatest effect, I manufacture spend on the card with the SkyMiles in mind, and appreciate the bonus Medallion Qualifying Miles merely as an ancillary benefit.

Requalifying for Hyatt Diamond status has a related logic: since Hyatt Gold Passport points are some of the most useful points, thanks to how easy they are to earn through Ultimate Rewards transfers, qualifying for Diamond status means getting more value from points I'll redeem anyway. I'm not going to try to quantify that additional value — I'm pointing out the difference between elite status in programs you already use aggressively and elite status in programs you use infrequently or never, like the periodic elite status challenges you see offered by airlines.

How to requalify

Hyatt Diamond status requires 25 paid or Points + Cash stays, or 50 paid or Points + Cash nights during the calendar year. There are three important things to consider when deciding on a path to requalification: the Chase Hyatt credit card; requalifying on stays; and requalifying on nights.

Chase Hyatt Credit Card elite-qualifying stays and nights

The Chase Hyatt credit card gives 2 elite-qualifying stays and 5 elite-qualifying nights after spending $20,000, and 3 additional elite-qualifying stays and 5 additional elite-qualifying nights after spending a total of $40,000 during the calendar year. If you spend $40,000 on the card, and value Hyatt Gold Passport points at the 1 cent each you can buy them for with a transfer from Ultimate Rewards, you'll pay $400 in foregone cash back for 5 stays and 10 nights, compared to a 2% cashback card.

Whether that's cheap or expensive depends both on your alternatives and on whether you decide to requalify on stays or nights.

Requalifying on stays

Qualifying with elite-qualifying stays is the option that gets the most attention from travel hackers for three reasons.

First, it's much cheaper to mattress run for additional stays than additional nights. If you are requalifying on stays and get 80% of the way to Diamond status (20 stays), you only need to book 5 more one-night stays. If you are requalifying on nights and get 80% of the way to Diamond status (40 nights), you need to book twice as many more nights, at double the cost.

Second, requalifying on stays allows you to mix and match your booking options. Since Hyatt guarantees standard room award availability, you can book just one night of each stay with cash or Points + Cash, and the remaining nights using only points. This is, in fact, the strategy I've been following this year.

Finally, requalifying on stays allows you to rapidly earn stay credits on longer trips by moving between multiple Hyatt properties in the same city. For example, the Andaz 5th Avenue is just 2 street blocks from the Grand Hyatt New York. It would get old fast, but if you travel alone or have understanding travel companions, on a 5-night stay in New York City you could earn 5 stay credits alternating between the two hotels each night.

As indicated above, if you choose to requalify on stays, then the Chase Hyatt credit card will earn you 5 stays for $400, or $80 each. Is that cheap or expensive? In general, it is cheaper than mattress running with Points + Cash stays unless you have access to Category 1 properties. Those Category 1 Hyatt properties cost 2,500 Hyatt Gold Passport points and $50 per night, plus taxes. If you're able to mattress run at one of the 12 Category 1 Hyatt Regency properties in the Americas (there are many more in the Asia/Pacific region), you'll be able to select a 1,000-point Diamond amenity and earn 325 Hyatt Gold Passport points per stay, bringing your total cost down to $61.75, plus taxes, cheaper than the $80 you'd pay manufacturing spend with the Chase Hyatt credit card.

Using the same logic, even a Category 2 Hyatt Regency Points + Cash stay would cost $81.42, plus taxes (the proof of this is left as an exercise for the reader).

Requalifying on nights

While the case for requalifying for Diamond status on stays is strong, it's not airtight.

Looking at my own stay history this year, I have 7 elite-qualifying stays and 15 elite-qualifying nights. But I have also redeemed 7 free nights. If I had booked those nights as elite-qualifying Points + Cash nights, I'd be at 22 total nights, or 44% of the way to Diamond status, whereas by trying to requalify on stays, I'm only 28% of the way there.

Of course, I had reasons for booking those nights as free awards: 4 of them were redemptions of Chase Hyatt credit card certificates, for example, which can't be booked as elite-qualifying nights!

There are three key questions when deciding whether to requalify on stays or nights: the average length of your stay, the availability of Points + Cash award availability, and the category of property you typically stay in.

If your average length of stay is less than 2 nights, you're strictly better off requalifying on stays, because twice as many nights than stays are required to requalify. This is true even if you have more than 25 stays or more than 50 nights! That's because the more easily you can qualify, the more flexibility you have in selecting between free nights, Points + Cash, and paid stays, and flexibility in this game is worth a lot.

If your average length of stay is 2 nights or longer, then you have to consider the category of property you typically stay in and the availability of Points + Cash award availability. Two extreme examples illustrate this point: if you stay exclusively at Category 7 properties, each night you book with Points + Cash instead of just points costs $150 in extra Hyatt Gold Passport points — that's an expensive elite-qualifying night! If you stay exclusively at Category 1 properties, each night you book with Points + Cash costs just $25 per elite-qualifying night, plus taxes. However, if the properties you stay at don't regularly make Points + Cash awards available, you're out of luck: back to requalifying on stays.

Manufacturing spend on the Chase Hyatt credit card, at $40 in foregone cash back per night, is far superior to mattress running for nights, which even with Points + Cash awards starts at $61.75, as shown above. However, if you already stay 50 nights per year at Hyatt properties, the Chase Hyatt credit card elite-qualifying nights are inferior to simply swapping your award nights for Points + Cash nights, which only requires a "top-up" of $15-25 in Hyatt Gold Passport points (until you get to Category 7 properties).

Conclusion

I already have 2 additional elite-qualifying stays booked, with another 2 planned. Together with the Chase Hyatt credit card elite-qualifying stays, those trips will get me to 16 of the required 25 stays. To mattress run for the 9 remaining elite-qualifying stays at a Category 1 Hyatt Regency property would cost $555.75, plus taxes, which is out of the question.

On the other hand, I haven't planned my fall and winter travel yet, so it's still possible that enough real trips will come along to either get me over the finish line naturally, or get me close enough to mattress run for the final few stays.

Some bonus categories I never think about

I belong to the noisy-but-unpopular school that believes everyday spending should properly be a rounding error in the typical travel hacker's overall miles and points strategy. That's because more miles can be earned in an afternoon of light manufactured spending than will be earned in a month or year of trying to earn as many points as possible on actual purchases.

The flip side of that is a blind spot when it comes to the bonused categories of spend on cards that I already carry, either for purposes of manufactured spend or recurring annual bonuses. In the interests of keeping my blind spots few and far between, I decided to take a closer look at a few of those categories.

Hotels

With increasingly limited access to gas station manufactured spend, you may find that you're not able to manufacture $50,000 in spend in a Chase Ink Plus's double point category of "gas stations and hotel accommodations when purchased directly with the hotel."

Since Ultimate Rewards points are worth 1.25 cents each when redeemed for paid airfare, or more when transferred to Hyatt Gold Passport, Southwest Rapid Rewards, and (usually) United MileagePlus, you're strictly better off paying for your hotel stays with a Chase Ink Plus than with the 2% cash back card you use for your other everyday purchases. One possible exception is if you are having trouble finding eligible expenses to redeem your Barclaycard Arrival Plus, Capital One Venture, or BankAmericard Travel Rewards miles against, although you can always consider refundable reservations in that case.

I'm fond of paying the revenue component of my Hyatt stays with Hyatt gift cards purchased at a discount using cashback rewards, but if you pay for Hyatt stays directly, the 3 Hyatt Gold Passport points earned per dollar with the Chase Hyatt credit card are superior to the 2 Ultimate Rewards points earned by both the Chase Ink Plus and Chase Sapphire Preferred — assuming you plan to transfer your Ultimate Rewards points to Hyatt Gold Passport at any point in the future.

The math is somewhat less favorable when paying for Hilton stays with the American Express Hilton HHonors Surpass card, which earns 12 HHonors points per dollar spent at Hilton properties. According to the Wandering Aramean visualization tool, 12 HHonors points are worth a median 5.376 cents, while 2 Ultimate Rewards points, transferred to Hyatt Gold Passport, are worth a median 3.724 cents. That's an edge, but it's an edge that's highly dependent on your actual redemption pattern.

Finally, the Chase Marriott Rewards Premier credit card is by and large not worth holding for either its recurring benefit (one free category 1-5 night each account anniversary) nor for manufactured spending (one elite night credit for each $3,000 spent). But if you do have it for one reason, the other, or both, you are still unlikely to get more value from the 5 Marriott Rewards points earned per dollar spent at Marriott properties than you would from 2 Ultimate Rewards points earned on the same spend — unless, of course, you are already planning to transfer Ultimate Rewards points to Marriott for some reason, like booking a 7-night Hotel + Air package.

Restaurants

As I've written before, most of the time one or more rotating cashback bonus card is offering 5% cash back at restaurants, so the idea of needing a particular card "dedicated" to restaurant spend is misleading: you should use your most lucrative card, which will, at least 6 months of this year, be a Discover it or Chase Freedom card. But that leaves the other half of the year, which makes it a legitimate question whether there are better cards than a straight 2% cashback card for use at restaurants.

Using the same median Hilton HHonors point value as above, the 6 HHonors points earned per dollar with the Hilton HHonors Surpass American Express at restaurants slightly edges out a 2% cash back card, earning the equivalent 2.688 cents per dollar spent, while the Chase Hyatt credit card earns 2 Hyatt Gold Passport points per dollar spent, or a median 3.724 cents per dollar.

This matters because the Chase Sapphire Preferred, often promoted by affiliate bloggers for its high affiliate payout and earning rate on travel and dining, earns 2 Ultimate Rewards points per dollar. In other words, for just $75, rather than $95, you can earn 2 Hyatt Gold Passport points at restaurants with a card that also offers a free night at Category 1-4 Hyatt properties worldwide. That's a fact that's helpful to keep in mind the next time someone tells you the Chase Sapphire Preferred is the best card to carry for restaurant spend.

Airline tickets

Finally, I very rarely find myself booking air travel directly through an airline (preferring to use miles, Ultimate Rewards points, or Flexpoints earned with a US Bank Flexperks Travel Rewards card), but if you do book air travel directly, or need to pay the taxes and fees attached to award tickets, you can do better than a 2% cashback card with cards you may already carry.

If you periodically sign up for a "spare" US Bank Flexperks Travel Rewards card, for example during the current Olympics promotion, you can use that extra card to pay for airfare, earning 2 Flexpoints per dollar spent, and transfer the resulting bonus Flexpoints to your primary account for future redemptions.

If you use an American Express Premier Rewards Gold card to manufacture grocery store spend on an ongoing basis, you may as well use it to pay for airfare, earning 3 Membership Rewards points for your airline tickets as well, which can be transferred to potentially lucrative travel partners like Delta SkyMiles. The same goes for a Citi Prestige card you may carry to raise the value of your existing Citi ThankYou points.

And the Chase Hyatt credit card earns 2 Hyatt Gold Passport points per dollar spent on airfare, giving it an edge over a straight 2% cashback card, depending as always on your actual planned redemptions.

Conclusion

I don't think it's useful, let alone necessary, for a travel hacker to stress over every possible bonus point at every possible merchant. But for the kind of purchases that you know you make frequently, it's at least worth considering finding additional value by keeping in mind the bonus categories offered by cards that you already use to manufacture spend, or hold for their recurring annual benefits.

As I indicated above, I don't usually pay for airline tickets or hotel stays with credit cards. But digging into my existing cards' bonus categories, I realized I could replicate the majority of the Chase Sapphire Preferred's "travel and dining" bonus categories with cards I already had: the Chase Ink Plus and Chase Hyatt credit cards. Between the two, they cover hotels, airlines, restaurants, and rental cars.

Obviously that leaves out things like cruises, travel agency bookings, local transportation, and so on. But they do include the bulk of reimbursable business travel, so if you do spend a large amount in those categories each year, you may find yourself coming out ahead by examining the bonus categories on your existing card card portfolio.

I don't buy points, but maybe you should!

Every major loyalty program sells their points for cash, normally at a fixed rate through the industry-sponsored site Points.com.

For example, you can buy up to 60,000 Delta SkyMiles per calendar year for 3.76 cents each, up to 75,000 United MileagePlus miles for 3.76 cents each, up to 150,000 American AAdvantage miles for 3.19 cents each, and up to 60,000 Alaska Mileage Plan miles for 2.96 cents each.

Hotel programs likewise sell their points currencies for cash, with IHG Rewards Club selling up to 60,000 points for 1.15 cents each, Hilton HHonors selling 80,000 points for one cent each, Marriott Rewards selling up to 50,000 points for 1.25 cents each, Starwood Preferred Guest selling up to 30,000 points for 3.5 cents each, and Hyatt Gold Passport selling up to 55,000 points for 2.4 cents each.

Purchased points are too expensive for me

I don't personally buy miles or points because it's a more expensive way of acquiring miles and points than the other methods I have available.

United MileagePlus miles and Hyatt Gold Passport points cost just 1 cent each when purchased with Ultimate Rewards points transferred from a Chase Ink Plus account.

I happen to have a Citi AAdvantage Platinum Select MasterCard, so if I ever needed to stock up on AAdvantage miles, I can do so for 2.105 cents each — the cash back I'd earn manufacturing the same unbonused spend on my Barclaycard Arrival+ MasterCard.

And of course I earn 6 HHonors points per dollar spent with my American Express Hilton HHonors Surpass card at grocery stores, so even compared to an "optimal" redemption rate of 2 cents per US Bank Flexpoint, I'm already buying HHonors points at a mere 0.67 cents each, 33% less than the 1 cent per point Hilton wants to charge.

Purchased points may make sense for you

As the examples above make clear, the decision whether to purchase miles and points or manufacture them rightly depends upon your next best alternative: your opportunity cost.

If you're currently manufacturing the bulk of your otherwise-unbonused spend on a 5% cash back card like the Wells Fargo Rewards Visa during the introductory promotional period, then manufacturing spend on a one-mile-per-dollar card costs not 2.105 cents per mile, but 5 cents per mile, 57% more than, for example, American is willing to sell them!

Likewise, if you have $100,000 on deposit with Bank of America, you might be earning 2.625% cash back with a BankAmericard Travel Rewards card. That may make purchasing Hyatt Gold Passport points at 2.4 cents each worthwhile, compared to manufacturing spend on a Chase Hyatt credit card.

Purchase small numbers of points for high-value, upcoming redemptions

While you usually see affiliate bloggers advocate buying large numbers of points speculatively when loyalty programs offer the highest bonuses on purchased points (bringing down the cost per point), I have exactly the opposite view.

If you find yourself with an upcoming, high-value redemption, and don't have the time to manufacture the required points, then go ahead and buy them. Paying "too much" per point, if it drastically brings down your total out-of-pocket cost, makes perfect sense: the goal isn't to pay as little as possible per point, it's to spend as little money as possible on the trips you actually want to take!

But the money you spend speculatively buying miles for redemptions you don't actually have planned could almost invariably be better spent building a credit card and manufacturing spend strategy that generates the trips you want to take at far lower out-of-pocket expense.

"Common Stocks and Uncommon Profits" is a beautiful, not-very-useful book

This is a review of "Common Stocks and Uncommon Profits" by Philip A. Fisher. You can find all my previous book reviews here. If you're interested in buying a copy, I hope you'll consider using my Amazon Associates referral link.

In my May review of the "Masters in Business" podcast I mentioned that the host asks his guests for book recommendations, and one extremely common recommendation is "Common Stocks and Uncommon Profits," by Philip A. Fisher. In it, the legendary fund manager describes his investment philosophy and, in great depth, his strategy for selecting stocks he believes will dramatically increase in price over a period of many years.

"Common Stocks and Uncommon Profits" is a book about late-1950's America

It is rare to come across a book that is so strongly rooted in a particular time and place. When reading "Pride and Prejudice" you notice some quirks of English law (like perpetual entails) but you basically get the idea that it's a story about a bunch of young people growing up and getting married.

"Common Stocks and Uncommon Profits" is not like that. Here's Fisher writing about labor unions:

"In this day of widespread unionization, those companies that still have no union or a company union probably also have well above average labor and personnel relations. If they did not, the unions would have organized them long ago. The investor can feel rather sure, for example, that Motorola, located in highly unionized Chicago, and Texas Instruments, Inc., in increasingly unionized Dallas, have convinced at least an important part of their work force of the company's genuine desire and ability to threat its employees well. Lack of affiliation with an international union can only be explained by successful personnel policies in instances of this sort."

That is an almost-unrecognizable vision of the American labor movement, but it's listed as one of the most important considerations when deciding whether to invest in a company!

Needless to say, an investor today should not base their decisions on 1958's union environment, which we now know was almost literally the peak of union membership as a percentage of the American workforce.

This is also a book about America as a manufacturing powerhouse. Fisher describes with wonder the almost-miraculous invention of titanium and exciting new uses for aluminum. Even DDT gets a nod as an exciting new insecticide, guaranteed to increase American agricultural production for many years to come (it's now illegal).

Importantly, Fisher is describing a world where the only investment choices for working Americans are actively-managed mutual funds and stock brokers. Because of that, the book can be read in two ways: if you're an active manager of a mutual fund, it's advice on how to do your job. If you're in investor, it's advice on how to select an active fund manager: pick one who agrees with Philip A. Fisher!

"Common Stocks and Uncommon Profits" provides no useful information about picking stocks

If you picked up a book like Michael Covel's "Trend Following," and read it cover to cover, you could start trading stocks using the strategies in that book.

You'd lose a lot of money, perhaps slowly at first, and then all at once, but the book does give you instructions on how to trade according to Covel's theories.

"Common Stocks and Uncommon Profits" isn't really like that. Fisher's strategy requires you to gather information about companies that is not publicly available. I don't mean "insider" information, but simply information that is not knowable without spending a lot of time hunting down employees, customers, vendors, and competitors and communicating with them at length. It's a strategy that could only be followed by a wealthy, well-connected mutual fund manager with a lot of money to invest.

The problem, of course, is that identifying the disciple of Philip A. Fisher (the author died in 2004) who truly and correctly follows his investment principles is impossible in advance. The successful fundamental fund manager will naturally say that he "correctly" applied Fisher's strategy, while his unsuccessful competitors "incorrectly" applied it, and give you all sorts of reasons why. Unfortunately, there's no reason to believe past performance is any indicator of future results.

Fisher has some interesting insights about dividends

Fisher makes two interesting arguments in his discussion of whether dividend-paying stocks are better or worse investments than companies that retain most or all of their profit for further investment.

The first is a straightforward mathematical insight that's frequently glossed over: the dividend yield that should matter to you is the yield on the price you purchased a stock at, not its current price. If a company pays the same 2% of its share price in dividends, but its share price quadruples over 15 years, the lucky owner over that time period will be earning an 8% yield on the price she paid for it, despite the stock never paying a "high" dividend at any point in the entire period.

The second point has to do with transaction costs. The high historical stock market yields you frequently see quoted in investing propaganda require the reinvestment of all dividends paid. If you, quite rightly, plan to reinvest all your dividends, you have three problems: first, until very recently, fixed commissions on stock purchases meant it was as expensive to make small purchases as large ones. If you immediately reinvest dividends, purchase commissions eat up a higher percentage of your capital. If you wait to invest a large amount, you suffer from having more time out of the market, losing some of the benefits of compounding.

The second problem is that it can be cumbersome to reinvest dividends because of the need to buy integer values of stocks.

And third, you also have to find a stock to invest in! It may be your current stocks have already gone up too much in value to be good candidates for further investment, which means you have to find something new to buy. That friction imposes another transaction cost. Retained earnings reinvested in a quality business, on the other hand, eliminate all those transaction costs by (hopefully) increasing further the value of your existing shares.

Basically, Fisher is not a big fan of dividends.

Conclusion: read this book for nostalgia, not for advice

This may sound like I'm being harsh on the author: after all, what period was he supposed to write about if not the period he was living in?

On the contrary, I actually found "Common Stocks and Uncommon Profits" to be a beautifully written description of the world our Baby Boomer leaders grew up in. When Donald Trump says he wants to make America great again, this is the America he has in mind: heavily unionized, highly-paid, a manufacturing powerhouse, with exciting research developments that would only years later prove to be toxic to humans and the environment. Men work in labs and factories, women purchase previously-unheard-of consumer goods, and during periods of economic recession the government runs a deficit of "25 to 30 billion dollars."

It sounds like a lovely place to visit, but I'm not sure I'd like to live there, and I definitely wouldn't recommend investing as if you did live there today!

Travel hacking without spend

While I write a lot about strategies for using manufactured spend to get pay for travel at deep discounts, I know that many of my readers find manufacturing spend to be distasteful, time-consuming, or impossible (I know because you never hesitate to tell me in the comments section).

So at a reader's suggestion, I want to share some thoughts on travel hacking without manufacturing spend, and indeed without the requirement to spend any money on credit cards at all (besides annual membership fees).

Annual benefits

There is a not-unreasonable intuition that in the absence of manufactured spend, which properly focuses on high earning rates, bonus categories, and valuable points, annual recurring benefits of credit cards would become more important in developing a travel hacking strategy.

For airlines, those benefits include things like American Express Delta Platinum and Reserve companion tickets, the Chase Southwest Airlines 3,000 (Plus) or 6,000 (Premier) annual bonus points, the Bank of America Alaska Airlines annual $99 companion ticket and, for those grandfathered in, the 10,000 bonus anniversary miles offered by the Barclaycard American Airlines Aviator card.

Many hotel co-branded credit cards offer anniversary nights: the Chase IHG credit card gives a free night worldwide, Chase's Hyatt credit card gives a Category 1-4 night annually, and US Bank's Club Carlson credit cards give 40,000 (Premier Rewards and Business Rewards) or 25,000 (Rewards) bonus Gold Points on each account anniversary.

If our intuition that recurring benefits are more valuable without manufactured spend is true, then one credit card strategy might be to carry:

• both a personal and small business version of both the Platinum and Reserve cards ($1290 in annual fees);
• a Chase Southwest Premier card ($99 annual fee);
• a Chase IHG credit card ($49 annual fee);
• a Chase Hyatt credit card ($75 annual fee);
• and one or more US Bank Club Carlson Premier Rewards and Business Rewards credit cards ($75 and $60 annual fee, respectively). Note that US Bank doesn't impose a hard cap on the number of its products you're allowed to have.

For $1,648 in annual fees per year, you could thus buy 4 domestic companion tickets on Delta (subject to fare bucket constraints), 6,000 Southwest Rapid Rewards points (worth perhaps $100), a free night at any IHG Rewards property, a free night at a Category 1-4 Hyatt property, and 80,000 Club Carlson Gold Points (good for at least one free night at any Club Carlson property).

I'm deliberately leaving out the Citi Hilton Reserve free weekend night benefit and the Club Carlson free domestic night benefit, since they each require $10,000 in annual spend.

Without price compression, free nights are an expensive trap

In a world with plentiful manufactured spend, travelers experience a phenomenon I've dubbed "price compression:" nights and flights that have large differences in retail price have much smaller or nonexistent out-of-pocket differences in cost to the travel hacker.

For example, a free Category 4 Hyatt night from the Hyatt credit card can be combined with Hyatt Gold Passport points transferred from a Chase Ink Plus, where you've manufactured cheap Ultimate Rewards points.

Without manufactured spend, and the price compression it produces, you'll be paying the retail price of your stays out of pocket, less any rebates earned by booking through shopping portals and online travel agencies. Unless you typically spend only a single night in each city you visit, travel solo, or have a very understanding travel companion, this can become very expensive very quickly.

To see why, take a stylized example of a city with a Category 4 Hyatt that costs $125 per night and a nearby Holiday Inn that costs $100 per night. On a four-night stay, you'll pay $375 out of pocket for the Hyatt, and $400 out of pocket for the Holiday Inn: a savings of $25.

So far, so good. But remember you paid a $75 annual fee for your Hyatt credit card! If you only compared the value of your night to your annual fee, you'd mistakenly believe you saved $50. By taking into account how the "free" night benefit affects your behavior, you'll realize the truth: the Hyatt credit card in fact cost you $50.

Of course if you are a solo traveler or have an understanding travel companion, moving hotels in the middle of your stay may not be a big deal. If you have a lot of one-night stays, you may also save real money. But that's an individual assessment you should take seriously before paying hundreds, let alone thousands, of dollars in annual fees.

You'll find a similar principle applies to the airline credit cards: if Delta flights are consistently more expensive, or less convenient, than competitor flights you may find yourself over-paying just to take advantage of your companion ticket. Southwest Rapid Rewards points, likewise, are only valuable if you're able to earn enough of them to redeem them for the flights you want.

None of which is to say these are bad credit cards or bad benefits. They just need to approached critically if you're to have any hope of using them to save money on travel.

Everyday spend

My standard response when asked which credit card people should use for their actual purchases is that actual purchases should represent a rounding error in your miles and points balances. Without manufactured spend, of course, that rounding error may turn into the bulk of your balances!

In my view, there are only a few credit cards that have any measurable advantage over paying for your purchases with cash.

• Discover it Miles. If you can sign up for a Discover it Miles card that doubles your cash back after your first year, you'll earn 3% cash back on all purchases and pay no annual fee or foreign transaction fees. You can boost your earning even more by redeeming your cash back for certain gift cards — you can currently redeem $90 in cash back for $100 in Hyatt gift cards, turning a Discover it Miles card into a 3.33% cash back card. Canceling and applying for a new card each year may let you continue on an ongoing basis.
• BankAmericard Travel Rewards. If you have $100,000 on deposit with Bank of America, Merrill Lynch, or MerrillEdge, you'll earn 2.625% cash back on all purchases, and pay no annual fee or foreign transaction fee.
• American Express Amex EveryDay Preferred. If you make 30 purchases per month, this card earns 1.5 Membership Rewards points per dollar spent everywhere, 3 points at gas stations and 4.5 points at grocery stores. Because of its $95 annual fee, you should only consider this card if you spend a lot of money each year. If you do, you might find the ability to transfer points to Delta, Air Canada, British Airways, or American Express's other partners more valuable than cash back.

Travel hacks that don't require spend

Of course, credit cards are just one tiny corner of the travel hacking universe. It's just a corner that's become unusually prominent because there's so much money to be made selling credit cards to the unwitting.

So here's a brief list of other travel hacking techniques, no credit card required:

• Mistake fares and attack fares. Among the original travel hacks are simply waiting for an airline to slip up and forget to add a zero to an airfare, or to "attack" a rival's hub by cutting fares far below normal. By following Twitter accounts like @TheFlightDeal and @EscapeATX, and bookmarking sites like Flyertalk's mileage run forum, you can handily see whenever those hard workers find a new error fare or attack fare. Julian the Devil's Advocate wrote up a terrific guide to getting text alerts for a particular city or airline that interests you.
• Stacking portal and online travel agency rewards. In the bleak world without manufactured spend, you've got to make every dollar count. By clicking through shopping portals to online travel agencies before making hotel reservations, you can earn portal rewards plus the rewards offered by whichever travel agency you select.
• Best rate guarantees. I've written before that I find best rate guarantees to typically be a waste of time, and I don't think it makes a whole lot of sense to make booking decisions around best rate guarantees. But once you've identified a hotel and rate, it's common sense to check if there's a lower rate elsewhere that's eligible for a best rate guarantee claim.
• Hidden city ticketing. It's not for everyone, and it won't work for every itinerary, but it's possible to save a lot of money searching for flights using Skiplagged, a service that takes care of the hard work of finding cheaper "hidden city" tickets. Note that you usually will not be able to check bags when flying domestically on such tickets.
• Corporate rates and other discounts. There are a number of lists circulating of corporate rate codes, which can bring down the cost of chain hotel stays significantly. Likewise, if you find out there's a convention, conference, or athletic event in a city being held during your visit, you may be able to piggyback on their lower negotiated rates.
• Aggressively book and rebook. Autoslash makes it easy to monitor rental car rates so you can rebook your car if and when the price goes down. By booking cancellable hotel reservations early on, periodically checking for price changes lets you lock in any price declines while being protected from any price increases.

None of those techniques will save you as much as manufacturing spend will, which is why I write a lot about the benefits of manufacturing spend. But the universe of travel hacking, like the universe itself, is vast and growing, so it pays to keep an open mind and to keep exploring!

In defense of mileage running for top-tier elites

I have the rather unfashionable view that mileage runs on Delta, American, and United are more likely to be worthwhile for top-tier elites now that those programs are revenue-based than they were under the previous, distance-based regime.

Mileage running is definitely not for everyone: it takes time, and unless you actually like flying, it's not particularly fun. You may end up paying for transportation, parking, and meals, so it's far from free besides whatever you pay for your actual airfare. But there are still reasons you might consider it.

So here's why I don't think mileage running is dead.

Revenue-based programs give a fixed rebate on airfare dollars

Top-tier elites in all three of the legacy carrier frequent flyer programs earn 11 redeemable miles per dollar spent on airfare on their own flights.

That fixed rebate in miles produces a rebate in value that's likewise fixed, although not by the carrier, but rather by your own planned pattern of future redemptions. If you redeem miles for domestic economy flights, you might get 1.5 cents per mile in value. For international business class flights, you might get 2.5 cents per mile. And on partner first class flights, you might get 4 or more cents per mile in value.

In an extreme case, you could imagine a top-tier elite consistently getting 9.09 cents or more per mile in value, in which case their entire airfare expenditure would be rebated back to them in the form of a future high-cost flight: buy one get one free.

Most travelers, however, don't consistently get 9.09 cents per mile in value, and so even top-tier elites don't earn enough miles to completely rebate their out-of-pocket expenses, if they're paying cash.

Using fixed-value points to fund mileage runs

The above is a strong argument against paying for mileage runs with cash: the difference between the amount paid and the rebate earned in miles is too large to justify wasting a day or more in flight, unless you're very close to top-tier elite status and have no opportunity to qualify otherwise (and plan to fly enough the following year to take advantage of your top-tier benefits).

But what if you're able to fund mileage runs with cheaply-acquired fixed-value points? How would that change the calculus?

Rather than look at the out-of-pocket cost of manufactured spend, as I did last Thursday, let's look at four fixed-value currencies and compare a straightforward cash redemption value of 1 cent each to the redemption value when spent on a mileage run.

• Chase Ultimate Rewards are worth 1.25 cents in paid airfare, earning 13.75 redeemable miles for a top tier elite. To break even compared to a one-cent cash redemption, you'd need to get 7.27 cents in value per redeemable mile.
• Citi ThankYou points in a Citi Prestige account are worth 1.33 cents when redeemed on Delta or United, or 1.6 cents when redeemed on American. Compared to a one-cent cash redemption (for example, for a student loan or mortgage rebate check), you'd need to get 6.8 cents per SkyMile or MileagePlus mile, or 5.7 cents per AAdvantage mile to break even.
• American Express Membership Rewards points in a Business Platinum accounts are worth 1.43 cents each when redeemed for flights on your selected airline, requiring a value of 6.4 cents per redeemable mile to break even compared to a cash redemption.
• US Bank Flexpoints are worth 2 cents each when redeemed for paid airfare, requiring 4.55 cents per redeemable mile in value compared to redeeming the same Flexpoints for cash at one cent each.

Obviously your out-of-pocket cost for those fixed-value points currencies will be lower than one cent each. However, once you've earned them, the question is how you'll redeem them, and at that point they're worth roughly one cent each in cash (slightly less in the case of Membership Rewards points, which have to be liquidated with American Express gift cards).

Why swap fixed-value points and time for redeemable miles and elite status?

My beloved readers sometimes accuse me of making arguments just to be difficult. My defense is that I don't give advice — my only advice is that people should do whatever they want to do!

But top-tier elites who have access to cheap fixed-value points and who redeem their Delta, United, and American miles for long-haul premium cabin awards may do well to consider mileage running to requalify for top-tier status for a few reasons:

• Upgrade priority. Smaller domestic first class cabins and more pressure to sell first class seats for cash means top-tier elite status is the only reliable way to secure free first class upgrades on routes with a lot of elite volume. If you fly on paid economy fares regularly, that may matter to you.
• Award flexibility. I haven't had high-tier elite status for a few years now, but when I was a Delta Platinum Medallion I used free award changes and redeposits constantly to make slight alterations to my itineraries or to recoup miles when cheaper awards became available. On my last trip to Europe business class award availability opened up at the last minute, which would have made our trip much more comfortable, but I couldn't bring myself to pay United's extortionate award change fees — top-tier elite status would have made the free change a no-brainer.
• Top-tier elite status benefits. United Global Premier Upgrades, American systemwide upgrades, and Delta's Platinum and Diamond Choice Benefits have concrete value if you're able to take advantage of them. Not everyone will, so like everything in the world of travel hacking, they're not worth pursuing if you don't have a plan or intention to use them. But for many people, being able to upgrade paid economy tickets may provide even greater value and flexibility than booking award tickets in premium cabins.

If redeemable miles are based on revenue, only distance matters

One important thing to note is that unlike the previous era of mileage running, the number of cents paid per mile flown is totally irrelevant to this calculation: if you've accurately calculated that you'll receive the total price of your airfare back in redeemable miles, your only goal should be to maximize the distance flown on any given mileage run, in order to secure top-tier elite status while spending as little out-of-pocket time as possible.

Long, multi-leg, inconvenient flight routings are ideal regardless of whether they're more or less expensive than direct flights.

Conclusion

Most people rightly think that mileage running, if it ever made sense, only did so in the distant past. However, for top-tier elites with access to cheap fixed-value points, mileage running in revenue-based legacy mileage programs may still make sense, if they plan to redeem their miles for long-haul premium cabin awards, if they have a realistic expectation that they will take full advantage of top-tier elite benefits, and if they have the time to do so.

That may be a smaller subset of the travel hacking population than it was when the legacy carriers offered miles based on distance, but it's not nobody.

When deals don't stack

One of the most popular approaches to travel hacking is finding deals that "stack:" when you can apply multiple techniques to a single transaction, you can bring your out of pocket expenses even lower than you would applying any one of them individually.

Some deals stack

Since stacking deals can amplify total savings, deals that stack tend to get a lot of attention. For a simple example, you might click through a cash back portal to Hotels.com, apply a Hotels.com coupon, and pay for your stay with an Arrival Plus card. The cash back portal and coupon lower the amount you're charged, and then your final out-of-pocket cost is reduced further by redeeming against the transaction Arrival Plus miles you've manufactured as cheaply as possible.

Stacked deals can get much, much more complicated that that: Frequent Miler has painstakingly shown how portal cashback, coupons, credit cards, and even the tax code can be stacked to earn a Southwest Companion Pass with as little out-of-pocket expense as possible.

Most deals don't stack

What's usually glossed over by credit card salesmen is that most deals don't stack, which is important to both understand and take into account when developing a travel hacking strategy.

To take an example from last Thursday's post, the 4th-night-free benefit of the Citi Prestige card gives a roughly 25% discount off paid stays of exactly 4 nights. Ideally, you'd like to stack that with something like the Barclaycard Arrival Plus or BankAmericard Travel Rewards credit card, to redeem cheap points against your final bill. But because the stay has to be paid for with the Citi Prestige, your discount is limited to 25% — less than you'd save simply paying for a 4-night stay with one of those credit cards.

Another example is the American Express Delta Platinum and Reserve credit cards, which offer an annual companion ticket in economy (Platinum) or first class (Reserve). Such tickets offer a discount of almost 50% off 2 domestic tickets (though only the primary ticket earns redeemable and Medallion Qualifying miles). But manufacturing spend at grocery stores with a US Bank Flexperks Travel Rewards card offers a discount of, for example, between 53.2% and 68.9% on paid airfare! Buy two tickets with Flexpoints and not only are you unconstrained by fare class, but both tickets will earn miles and be upgrade-eligible, as well.

That doesn't mean the Delta American Express cards are bad cards (I personally have a Delta Platinum small business card). It does mean you need to think critically about the value of the companion ticket, perhaps using it to book travel for friends or relatives who will reimburse you (maybe) rather than using it for your own travel.

Conclusion

The question, "can I stack this deal?" should be one of the first ones you ask whenever you see a pitch for a new credit card or discount on purchased points, but also as you proceed through your everyday routine. If the answer is yes, you can amplify your savings by applying as many angles as possible to each transaction.

If the answer is no, that doesn't render a deal instantly worthless. But it is an invitation to examine the deal more closely, to ask whether and how you'll incorporate it into your overall travel hacking strategy. It may turn out to be superior to your other techniques, and it's those other strategies that should yield to the new, cheaper method of paying for your travel.

But if it offers a smaller discount (like the Prestige 4th-night-free), less-flexible booking options (like the Delta companion tickets), or interferes with your other goals, like elite status requalification, then you should take seriously the possibility that you will get less value, or have greater out-of-pocket expense, then you would pursuing a different strategy that incorporates more, better, and stackable deals.

Is the Citi Prestige a good deal? Compared to what?

This isn't my favorite kind of blog post to write, but I do consider it essential service journalism in the context of a travel hacking blogosphere whose default mode is "breathlessly excited."

The Citi Prestige credit card is often pitched as an essential tool for the sophisticated travel hacker. In this post I want to make the argument that, on the contrary, the benefits of the Citi Prestige are valuable almost exclusively to the least-sophisticated travel hackers, who don't have a well-designed portfolio of credit cards, or to travelers who don't have access to even the most mundane techniques for manufacturing spend.

Let's take each of the benefits of the Citi Prestige card in turn.

Price compression makes airfare cheap

The first thing you hear about the Citi Prestige card is how it multiplies the value of your ThankYou points: with the card, ThankYou points are worth 1.33 cents each towards airfare, or 1.6 cents each towards airfare on American Airlines-marketed flights.

That creates a theoretical cash value of the current 50,000 ThankYou-point signup bonus of $665-$800 in paid airfare.

But $800 in paid airfare manufactured with a Chase Ink Plus card at office supply stores costs $380 in purchase and liquidation fees ($665 in paid airfare costs just $316).

So don't tell me a 50,000 ThankYou-point signup bonus is worth $800; it's worth between $316 and $380, the money you'd spend manufacturing the same airfare with a much more versatile (and, obviously, much cheaper) Chase Ink Plus.

If you have access to manufactured spend at grocery stores, then you'll find a card like the US Bank Flexperks Travel Rewards Visa runs around the world before the Citi Prestige has even got its boots on.

Compare a 25% discount on paid hotel stays to real travel hacking

The "killer app" of the Citi Prestige is supposed to be its "4th-night-free" benefit, whereby reservations made through Citi's contract travel agency, and paid for with the Citi Prestige, earn a statement credit equal to the amount of the stay's fourth night, including taxes.

In other words, when used for stays of exactly 4 nights, the Citi Prestige offers a discount of 25% on average (the actual discount will vary depending on the distribution of room rates over the four nights; Frequent Miler provides some extreme examples here).

By contrast, using only the most commonly available manufactured spending techniques, the Barclaycard Arrival Plus produces $21.05 in hotel stays for just $11.50 — a 45.4% discount.

A Chase Freedom Unlimited, earning 1.5 Ultimate Rewards points per dollar spent (or 1,515 Ultimate Rewards points for the same $11.50 above), paired with a $95 Chase Sapphire Preferred or Chase Ink Plus, requires just 1.01 cents in value per Ultimate Rewards point transferred to Hyatt Gold Passport point to match the 25% discount offered by the Citi Prestige. You have to look pretty hard to get that little value from a Hyatt Gold Passport point.

Finally, using an American Express Hilton Surpass card, you'll earn 6 HHonors points per dollar spent at grocery stores. Given only the most widely available cost of $6.30 for 3,036 HHonors points, you'll need to get just 0.28 cents per HHonors points to beat the Citi Prestige's 25% average discount on four-night stays. And that doesn't account for the value of 5th-night-free award reservations for Hilton elites.

Which brings me to the most important drawback of the Citi Prestige's "killer app:" it's only useful on stays of 4 nights or more! While all the cards and techniques I described above are useful on stays as short as 1 night, to get even a 25% discount on your paid stays, you'll have to stay for exactly 4 nights: any less, and your stay isn't eligible; any more, and your discount shrinks as a percentage of your total stay.

How does the the Citi Prestige 4th-night-free differ from the Club Carlson last-night-free?

When the US Bank Club Carlson co-branded credit cards offered the last night free on award stays, I was one of their biggest enthusiasts. That's because the last-night-free benefit allowed you to leverage the already generous 5 Gold Points earned per dollar spent on all purchases. In other words, it made valuable manufactured spend more valuable.

The Citi Prestige 4th-night-free benefit is exactly the opposite: it requires you to pay cash out of pocket for your room, which violates one of the most important principles underlying a successful travel hacking strategy: spend cash last.

Value all the other Citi Prestige card benefits at what you're willing to pay for them: nothing

You can check out the remaining benefits of the Citi Prestige over at Miles to Memories. They include:

• airline fee credits (worth much less than cash);
• lounge access (you're not paying for it now, are you?);
• Global Entry fee credit ($100 every 5 years, so, $20 per year);
• and 3 rounds of golf (not 3 foursomes, just 3 rounds: your friends will have to pay their own way).

Reimbursed business travelers should ignore everything I've said

Travelers who are reimbursed for their out-of-pocket expenses have opportunities that are, from a normal person's perspective, stratospherically lucrative. If you're able to book Monday-Friday hotel reservations for a product launch, investment banking intervention, or Republican Party platform committee meeting with your own credit card for later reimbursement, you have no excuse not to earn thousands or tens of thousands of dollars per year in 4th-night-free reimbursements from a Citi Prestige card.

But when a rich weirdo like Ben Schlappig tells you how much money he's saved with the Citi Prestige 4th-night-free benefit, remember that you don't have to pay cash for your hotels, and when you do, you can get a much better discount than 25% by developing a credit card portfolio and manufactured spend strategy that meets your actual travel needs.