Unbonused spend outlook for 2017

Earlier this month I wrote about the BankAmericard Travel Rewards credit card and Bank of America Preferred Rewards Platinum Honors, and favorably compared that combination to some of the best deals in travel hacking:

• A Chase Ink Plus and Sapphire Reserve, earning 7.5 cents per dollar towards paid travel on office supply store purchases;
• an Ink Plus and Southwest Companion Pass, earning up to roughly 16 cents per dollar on your office supply store spend;
• and an American Express Premier Rewards Gold card and Platinum Business card, earning 4 cents per dollar towards premium cabin airfare on supermarket purchases.

Those are great values. But if your appetite for manufactured spend is higher than your office supply store and supermarket purchase or liquidation bandwidth, you may be interested in manufacturing unbonused spend, as well.

With that in mind, here are some of the best current deals in unbonused manufactured spend.

Southwest Companion Pass

Earlier this month there was much hullabaloo about the impending loss of the ability to earn a Southwest Companion Pass through hotel transfers. But it's still possible to earn the Companion Pass through credit card spend (as well as signup bonuses).

The $99-annual-fee Southwest Rapid Rewards Premier card earns 6,000 Rapid Rewards points each account anniversary, while the $69-annual-fee Plus card earns 3,000 points. That works out to 1 cent per anniversary point, which is not a great value if you're already planning to manufacture large amounts of lower-cost spend on the card.

It's easy to overstate the case for earning the Companion Pass through unbonused spend, so let's be clear about the tradeoffs involved. For example, the Chase Freedom Unlimited earns 1.5 Ultimate Rewards points per dollar spent everywhere. On $104,000 in unbonused spend, which would earn 156,000 Ultimate Rewards points with a Chase Freedom Unlimited or (with the Companion Pass) the equivalent of 208,000 Rapid Rewards points redeemed for companion tickets, you're being paid $520 to "lock in" your preference for Southwest over Chase's other Ultimate Rewards transfer partners. That's the cash value of the 52,000 Ultimate Rewards points you don't have to earn to get the same value in Southwest flights.

The more highly you value the flexibility of Ultimate Rewards' transfer partners, the less willing you should be to lock in Southwest as your earning preference. In other words, paying twice as much for a Southwest ticket than you would if you'd earned a Companion Pass may still be worthwhile if you're getting three times more value from Hyatt or United transfers, which is not unreasonable at prestige properties or in premium cabins.

American Express Blue for Business

It's currently possible to sign up for a Blue for Business American Express card that earns 2.3 Membership Rewards points per dollar spent everywhere, on up to $50,000 in purchases during the first year of cardmembership. Mechanically speaking, you earn 1 bonus point per dollar spent, on up to $50,000 in spend, and then a 30% bonus on base (but not bonus) points earned at the end of the first year.

Since Membership Rewards points — even fixed-value, non-flexible Membership Rewards points like those earned by this card — are worth 1 cent each towards paid travel, if you book paid travel through the Membership Rewards portal you can treat this as a 2% cash back card that earns a bonus $150 in travel at the end of the first calendar year (if you reach the maximum of $50,000 in bonused spend).

Of course the real value of this card is unlocked when you combine it with a flexible Membership Rewards-earning card, allowing you to transfer your points to an American Express travel partner, or with a Platinum Business card, doubling the value of your Membership Rewards points when redeemed on one airline of your choice or when redeemed on any airline in a premium cabin.

Discover it Miles

The Discover it Miles offers 1.5 "miles" per dollar spent on all purchases, which can be redeemed against travel purchases made with the card or as an electronic deposit to your bank account. At the end of the first year of cardmembership, all the miles earned during that first year are doubled.

That means the Discover it Miles card earns 3% cash back on all purchases for the first year of cardmembership: 1.5% cash back on each statement, and another 1.5% cash back at the end of the year.

High Spend Bonuses

Finally, you may choose to manufacture unbonused spend on cards that don't offer a particularly high earning rate but give valuable benefits to cardholders who reach high spend thresholds:

• Delta SkyMiles Platinum and Reserve personal and business American Express cards offer bonus redeemable and elite-qualifying miles upon reaching certain spend thresholds;
• the Citi Hilton HHonors Reserve card offers an annual weekend night, redeemable at any Hilton property worldwide, to cardholders who spend $10,000 per year on the card;
• Club Carlson Premier and Business credits cards offer an annual free night certificate, redeemable only in the United States, at the end of each cardmember year you spend $10,000;
• The Chase Hyatt credit card, even after the transition to World of Hyatt on March 1, 2017, apparently will continue to offer up to 10 elite-qualifying night credits for $40,000 in spend per calendar year. Since that amount of spend will also earn 40,000 World of Hyatt points, you're sacrificing 20,000 World of Hyatt points compared to manufacturing the same spend with a Chase Freedom Unlimited card, or $20 in cash value per elite-qualifying night. If you expect you'll earn 45 elite-qualifying nights in 2017 through paid stays, those 10 bonus nights might be enough to earn you Globalist status through February, 2019.

Conclusion

Earning 2% cash back is a good baseline for unbonused spend, and one I use myself. Still, opportunities exist to get more value than that by taking advantage of card-specific bonuses. You can take advantage of the benefits most valuable to you, and then work your way down the ladder of value to that 2% baseline where you're confident you're not leaving any money on the table.

"Lombard Street" is a marvelous little book

This is a review of "Lombard Street: A Description of the Money Market" by Walter Bagehot. 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.

19th century Britain, like all capitalist economies before and since, suffered periodic banking panics, during which the entire banking system froze and the economy was thrown into deep recession as the population waited to see when, and indeed whether, confidence in the system would be restored.

Walter Bagehot's "Lombard Street" is a careful description of the mechanics and aftermath of these panics, written by someone who experienced several of them firsthand. It has, I think, two great virtues that make it useful to the modern reader: he was writing about an economy which was operating on the gold standard by default, rather than by intention; and most, if not all, of today's market phenomena already existed at the time of his writing, but operated at a much slower pace.

Bagehot treats the gold standard as a feature of nature, not a regulatory decision

Today any introductory economics textbook will explain to you the importance of banks in the process of "money creation." Banks create money by loaning out a majority of their deposits. When those loans are deposited in a bank (either the same bank or any other), that bank then loans out a majority of those deposits. In this way money is "created" (in excess of deposits) and entered into circulation. A bank's regulator can slow or speed the process of money creation by increasing or decreasing the proportion of each bank's deposits it is required to keep on hand.

Bagehot would reject this idea outright. Banks cannot create money. They accept deposits, and then they can loan out some portion of those deposits and accept, in exchange, some security. The total amount of "money" within the banking system cannot be increased or decreased through this process, because the total amount of gold reserves kept by the banks in reserve is fixed.

To Bagehot, cash is gold and gold is cash. He literally uses the words interchangeably.

Bagehot's panics were gold panics

The source of Bagehot's panics is obvious: the banks of 19th century England were engaged in money creation just as our fractional reserve banks are today, but unlike ours, his banks refused to admit it! So the amount of deposits redeemable on demand for gold was, in fact, far higher than the amount of gold available for redemption. If enough people suddenly sensed that the amount of gold available was inadequate to cover their deposits, they would rush to the banks and attempt to withdraw gold before everyone else beat them to it.

This happened with some regularity.

Bagehot's solution is our solution

Today the Bank of England and the Federal Reserve solve the problem of banking panics through the "discount window," where they offer liquidity to any bank in need of it to meet customer demands for cash.

This is precisely the solution that Bagehot describes, except Bagehot's Bank of England had an important limitation our modern system does not: the quantity of gold bullion held in its vaults. Thus the central banking problem of Bagehot's time was maintaining a high enough bullion reserve to meet demand in time of crisis.

In those times of crisis, Bagehot says the Bank of England should lend freely to any and all banks, accepting any "security considered good in normal times." This is, almost exactly, the legal restriction the Federal Reserve in the United States operates under, being forbidden by law from making loans to "insolvent" banks.

Economic crises used to be banking crises

One of the best chapters in "Lombard Street" is when Bagehot explains what happens when the price of a commodity increases:

"When the agriculture of the world is ill off, food is dear. And as the amount of absolute necessaries which a people consumes cannot be much diminished, the additional amount which has to be spent on them is so much subtracted from what used to be spent on other things. All the industries...are somewhat affected by an augmentation in the price of corn, and the most affected are the large ones, which produce the objects in ordinary times most consumed by the working classes. The clothing trades feel the difference at once, and in this country the liquor trade (a great source of English revenue) feels it almost equally soon. Especially when for two or three years harvests have been bad, and corn has long been dear, every industry is impoverished, and almost every one, by becoming poorer, makes every other poorer too. All tracks are slack from diminished custom, and the consequence is a vast stagnant capital, much idle labour, and a greatly retarded production." (p. 56)

This is what we would call today a "supply shock," with a sudden decrease in supply in one sector causing higher prices and a decrease in production economy-wide. But the important thing to remember here is that Bagehot is only able to describe an increase in the price of corn denominated in gold, or as he would call it, "money." Every change in supply and demand for a particular commodity is also moderated through the supply and demand for gold bullion.

That means a sudden shortage of corn, and resulting economic contraction, also results in a banking crisis as people realize their deposits were lent out to businesses who are suddenly unlikely to be able to repay them. Panic quickly sets in and each depositor is anxious to withdraw their cash before the bullion reserve is exhausted.

The only solution is a rapid increase in the interest rate to attract deposits of gold bullion from overseas, in order to meet the sudden demands on the Bank of England.

A fiat currency works on the everything standard

Developed economies today issue fiat currencies, which people sometimes claim means they are backed by "nothing." But of course dollars, pounds, and euros are backed by gold — they're backed by the amount of gold you can buy with them. They're also backed by the amount of land you can buy with them, the amount of beer you can buy with them, and the amount of refrigerator you can buy with them.

It's true that dollars and pounds used to backed by fixed amounts of gold, instead of market rate amounts of gold, but that just meant that everything else — all the stuff you actually wanted to buy — was mediated through the supply and demand for gold.

Now not just the exchange rate between euros, pounds, and dollars float based on market forces, but the exchange rate between gold, land, beer and refrigerators floats as well.

And best of all, there is not, and can never be, a shortage of the convenient, wallet-sized, digitally-accounted-for, currency units of value.

Conclusion

Bagehot's description of the money market is of a system that is based on the psychology, and whims, of a diverse group of market participants. It takes only the slightest rumor to send the bill brokers and private bankers dashing through the streets trying to shore up their balance sheets before complete panic sets in and the nation is ruined.

Basically, if you were alive in 2008, it will all be familiar to you. Bagehot's advantage over the chroniclers of the Great Recession is his fine prose and step-by-step analysis of the psychology and business practices of bankers of every sort, from the country banker to the Governor of the Bank of the England.

On Chase Hyatt stay credits

Last year I did a fair amount of waffling back and forth on whether to requalify as a Hyatt Diamond for 2017. After the new World of Hyatt program was announced, I ultimately decided to requalify for two main reasons:

• As a Hyatt Gold Passport Diamond transitioning to World of Hyatt Globalist status, I'd receive a free night certificate at any Category 1-7 Hyatt property in the world;
• After March 1 confirmed suite upgrades will be useable on free night awards, which means I'll actually use all 4 confirmed suite upgrade awards (I still have two left from 2016, and many people have all four).

Since I was within a few stays of requalifying, I decided that those two benefits would be worth the roughly $200 I spent on mattress runs in December.

My plan relied on earning 20 elite-qualifying stay credits, mainly by booking at least one night as a Points + Cash award whenever I stayed at a Hyatt, and sometimes by bouncing around between Hyatt properties when it wasn't too inconvenient (i.e. when I was traveling alone). Those 20 stay credits would be enough to requalify as Diamond once I spent $40,000 with my Chase Hyatt credit card, which I finished off before my December, 2016, statement closed.

Then I waited.

Chase Hyatt stay credits post automatically, sometimes

My 2 stay credits and 5 night credits posted in August, 2016, without any intervention on my part, so I practiced watchful waiting for the first few weeks after my December statement closed. As days became weeks, I called Hyatt and was told that it can take up to 10 business days for Chase to communicate with them. I waited some more, called back again, and the agent (helpfully?) suggested I call Chase instead.

If your stay credits don't post, go straight to Chase

This was an excellent suggestion. I had obviously called Chase before my statement closed to confirm that I had reached the $40,000 spend threshold, but when I called back in early January the agent insisted on going through each statement and adding up my net purchases to make sure I qualified. Then she asked if she could put me on hold to call Hyatt.

When she came back on the line, she had connected in someone from Hyatt's corporate office who said she understood the problem and promised to get it sorted out within a couple days.

Then keep watching

As I diligently continued to log into the Hyatt app each day, I noticed immediately when my stay and night credits posted about 4 business days later. The problem was that they posted in 2017, not 2016! In other words, I had 3 stay credits and 5 nights credits towards 2018 status, not 2017 status.

This time when I called Hyatt the frontline agent immediately saw that my account had been flagged in some way and connected me to "someone in corporate," who was handling my case. I explained the situation again, and she immediately understood what had happened and told me she'd take care of it.

And watching

A few days later I received an e-mail from Hyatt, which read in its entirety: "Current tier status is reflecting Diamond.  Spend bonus update from Chase posted Jan 14, 2017.  Please review your account and let us know if you are in need of further assistance."

Obviously I was in need of further assistance, so I replied to the e-mail explaining the situation again. The next morning I saw in my inbox another e-mail, subject line: "You've Achieved Diamond Status Again."

And sure enough, my account now reflects my Diamond elite status will be good through February 28, 2018.

Conclusion

I confess I'm a bit confused by this whole situation: there must be thousands of people who meet the $40,000 spend threshold in December each year. Does each one of them have to go through this rigmarole? If not, why me?

But the conclusion is unmistakeable: the Hyatt elite-qualifying stays and nights are a benefit offered by Chase, not Hyatt, and Chase phone agents are much better equipped to handle these problems than Hyatt front-line phone agents. So if you're still waiting on your 2016 elite-qualifying stays, or planning to storm 25 elite-qualifying stays before the February 28, 2017, changeover to World of Hyatt, Chase should be your first point of contact for these issues.

Quick hit: how American Express cards treat refunds towards annual spend thresholds

Late last year I tried to take advantage of an increased portal payout at an online merchant by buying a few thousand dollars of electronics which, if the portal had tracked and paid out properly, I planned to then resell.

The portal ultimately didn't track or pay out properly, so I returned the merchandise this month and found an interesting nuance to how American Express treats returns when calculating annual spend thresholds.

Returns count against your annual spend in the calendar year of the return, not the purchase

In many ways this should be obvious: your annual spend is calculated based on "net purchases," or purchases minus returns and credits (including OPEN small business savings and Amex Offers for You) during each calendar year. So, in my case, my roughly $8,000 in January, 2017, purchases were reduced by my roughly $2,000 in returns when American Express calculated my 2017 year-to-date net purchases.

On the other hand, this is noteworthy because this is not how spend towards signup bonuses is treated: if you make $3,000 in purchases in the first 90 days of card membership, then return $3,000 in merchandise on the 91st day, you may find that your signup bonus is "clawed back" by the credit card issuer, as this FlyerTalker found in May of last year.

This is lightly gameable

Under most circumstances this won't matter, since if you meet a high annual spend threshold each calendar year, any returned amount will simply have to be spent in the year of the return. For example, my $2,000 in returned purchases means I need to spend $52,000, not $50,000, in 2017 in order to earn my 20,000 Medallion Qualifying Miles with my Platinum Delta SkyMiles Business card.

On the other hand, if you are no longer getting enough value from an American Express card to justify paying the annual fee year after year, but want to maximize the card's value while you still have it, you could storm the spend threshold by the end of a calendar year, triggering any relevant bonus (waived Medallion Qualifying Dollar requirements and Hilton HHonors Diamond elite status, for instance), then return the merchandise the next calendar year before cancelling the credit card.

On booking channels

If you've been travel hacking for any length of time you likely have access to a range of points currencies and credit cards, each with its own strengths. Rewards programs typically are combined with a specific booking channel: you can only redeem Alaska Mileage Plan miles through the Mileage Plan website, and you can only redeem Chase Sapphire Reserve Ultimate Rewards points for 1.5 cents each through the Ultimate Rewards website.

Under many circumstances, however, it's possible to combine the benefits of multiple programs in order to get the best of multiple worlds.

Award tickets

The simplest example comes when booking an airline award ticket. In addition to the mile component of an award ticket, you'll typically pay a cash component ranging from $5.60 for the simplest domestic one-way flights to hundreds of dollars in fuel surcharges on many international flights.

That cash component gives you the opportunity to choose the right credit card for the job. On the simple end you might use a co-branded credit card in order to earn bonus points. If you have a Barclaycard Arrival+, Bank of America Travel Rewards, or other credit card that lets you redeem credit card rewards towards travel purchases, then such fees are an opportunity to extract value from those points.

Finally, if you have a credit card in the Chase Sapphire family, paying award ticket taxes and fees with a Sapphire, Sapphire Preferred, or Sapphire Reserve triggers their fairly generous trip delay insurance benefits. The Citi Prestige's similar trip delay insurance apparently does not cover award tickets, although it does cover tickets booked using Citi ThankYou points.

Revenue tickets

It's also possible, albeit trickier, to trigger credit card protections on revenue tickets.

When booking two or more tickets through the US Bank Flexperks Travel Rewards booking channel, you have to redeem Flexpoints towards at least one ticket in each order, while additional tickets on the same order can be paid for with a credit card. Booking a single ticket with Flexpoints and paying for your additional tickets with a Chase Sapphire card would extend insurance coverage to the entire reservation while only paying out of pocket for one ticket.

Flexible and refundable tickets offer another opportunity. Airlines like Southwest and Alaska allow the value of cancelled tickets to be returned to your account and used towards future flights. You could then "top up" the cost of your flights with a Chase Sapphire card and trigger trip delay protections.

This should work with any airline that sells refundable tickets, although you may have trouble finding refundable tickets that are cheaper than the flight you actually plan on reserving, which is necessary in order to have space "left over" to pay for with your Chase Sapphire, or any other, credit card.

Car rentals

One trip insurance benefit people seem to value especially highly is primary rental car collision insurance. Of course, this benefit is only valuable if you get in an accident. If you don't get in an accident, you might prefer to pay with another card, for example in order to redeem fixed-value points against the charge.

This classic post by The Mr. Pickles explains how you can do precisely that: reserve and collect your rental car with whichever card offers the best insurance protection, then upon returning the car change your payment method to whichever card has the highest earning rate or where you have fixed-value points stored up to cover the charge.

Conclusion

Knowing the particularities and peculiarities of each program you participate in, and the requirements for triggering statement credits, insurance coverage, and other credit card benefits, gives you added flexibility in deciding how to get the most value, at the lowest price, from each of your booking decisions.

 

Booking Virgin America to Hawaii: the bad, the good, and one weird old trick

While Virgin America doesn't have very many flights from where I live, I was still intrigued by the new, as of January 9, 2017, ability to book Virgin America flights using Alaska Airlines Mileage Plan miles, since I still have a slew of them left over from the days of the Bank of America Alaska Airlines debit card and Alaska's generous status match.

I don't need any help getting around the continental United States, but Virgin America flies to Hawaii and Mexico, so I decided to see what their award availability looked like.

As regular readers might expect, I took a brute force approach: for every date between January 10 and February 10, and between November 7 and December 7, 2017, I checked to see if there was at least one first class seat available from San Francisco to Honolulu and from San Francisco to Maui. I didn't check return flights.

In other words, I'm not trying to plan a trip, but just trying to get a sense of what kind of award space might be available for future reference.

Searching Alaska is the worst

Since Virgin America Elevate redemptions are revenue-based, it's not possible to search Virgin America's website for low-level award availability — you have to use Alaska's website instead.

The problem with this is two-fold. First, Alaska's award calendar doesn't allow you to filter by the number of stops you're willing to make, so the award calendar will show you the lowest award rate available across every possible itinerary.

That wouldn't be so bad except, additionally, Alaska doesn't allow you to filter by the cabin of service available for the entire trip. That means most dates will have at least one seat's worth of "low-level" first class award availability, since a combination of a short first class hop and long main cabin flight will price as a "low-level" award and appear on the award calendar.

To illustrate this, here's the November, 2017, calendar for first class flights between San Francisco and Honolulu:

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And here's the actual 40,000-mile first class itinerary that Alaska returns:

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The results

With that out of the way, let's see the results.

Here are the results of my search for a single first class award seat on the non-stop Virgin America flight between San Francisco and Honolulu:

• November 7-December 7, 2017: 1 date (December 7)
• January 10-February 10, 2017: 15 dates

And here are the results of my search for a single first class award seat between San Francisco and Maui:

• November 7-December 7, 2017: 1 date (December 7)
• January 10-February 10, 2017: 16 dates

I don't know anything about the flow of tourists between the Bay Area and Hawaii, so maybe late November is the high season and late January is the low season. Alternatively, Virgin America might open up a lot of first class award seats within 30 days of departure, which would be good to know if you have a flexible travel schedule.

One weird old trick to book Virgin America first class award seats

You may have noticed above I indicated the specific date, December 7, on which I was able to find a first class award seat to Hawaii. That date is significant because it's outside the Alaska calendar booking window (as of this writing; when you read this December 8 will serve the same function):

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Once you view flights available on December 6, however, the engine is suddenly able to show flights on the December 7 as well:

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I found this interesting enough that I searched for a number of other international destinations from San Francisco, and was able to find a first class award seat on every route I searched.

My tentative hypothesis is that people watching for the booking calendar to open up in order to book awards may not realize this extra day is available.

My alternate hypothesis is that Thursday, December 7, is some kind of holy day on which residents of the Bay Area are forbidden to travel, thus opening up more award seats than are otherwise available.

Conclusion

So, what have we learned?

• First class award availability on Virgin America between the West Coast and Hawaii is fairly easy to find either in late January, or within 30 days of departure.
• First class award availability between the West Coast and Hawaii and Mexico is fairly easy to find either one day after the Alaska "search" calendar ends, or on Thursday, December 7, 2017.

The world is full of nice people trying to give you advice

I'm lucky enough to have the opportunity to periodically get together with travel hackers around the country, whether it's at organized DO's, subscribers-only meetups, or spontaneous get-togethers while I'm traveling.

Almost invariably, the subject of affiliate bloggers comes up and someone will turn to me and say, "it was funny what you wrote about View from the Frugal Points Time, but when you meet him in person he's actually really nice."

I've heard this enough times now that it might be worth clearing some things up.

I'm not very nice (and I don't give advice)

I have met some nice people in my life, and I am somewhat in awe of them. You probably know the kind of person I'm talking about: people who always think before speaking, who are unfailingly polite, who seem to move through life leaving as small a wake as possible.

I'm not like that. I make snap judgments, I don't give people the benefit of the doubt, I take Donald Trump both literally and seriously. When readers offer to buy me a beer it doesn't occur to me to reciprocate.

I'm a jerk!

I also don't give advice. I go out every day and try to find ways to make myself and my readers miles, points, and cash. But all I know about my readers is that I don't know them well enough to give them, or anyone else, advice. So I don't.

I work for you

I suppose it must come across as corny to some readers, but when I say I work for you I'm not trying to be cute, I'm just explaining how this site works. I don't have affiliate managers breathing down my neck to get my conversions up. I don't have compliance managers telling me what I can and can't write and what font the terms and conditions have to be in. I get paid when people like my site enough to visit and subscribe.

The world is full of nice people trying to give you advice

Your Merrill Lynch stockbroker is a nice guy. He takes you and his other high-net-worth clients out for dinner (two entrée choices) a couple times a year to talk about market dynamics and the risks he sees in the year ahead. Then he churns your account and generates another commission.

Your insurance agent is definitely a nice guy. He listens very carefully to all your concerns about your health, your children's education, and your concerns about downsizing to a smaller house. Then he sells you a variable indexed annuity.

So it doesn't surprise me in the least that your affiliate blogger is a nice guy. He carefully responds to your questions and comments. He shakes your hand and looks you in the eye at Frequent Traveler University. Then he sells you a Chase Sapphire Preferred.

Being nice isn't enough

It may sound like I'm calling "being nice" some kind of stratagem or ruse people working on commission use to gain the trust of their clients in order to take advantage of them. But while there's some of that in the world, I don't profess to have any insight into the deepest recesses of either your stockbroker's or your affiliate blogger's soul.

The fact is that in the best case scenario your affiliate blogger is a nice guy who just happens to be in a line of work that requires him to put his interests before yours. Likewise there are coal mining engineers who got into coal extraction because they like being outdoors, not because they have anything against the ice caps.

I don't need to know anything about someone's heart of hearts to assess the impact of their choices on the world around them. 

Disclosure isn't enough

Your stockbroker, your insurance agent, and your affiliate blogger are all required to disclose their conflicts of interest, and do so dutifully. The problem is that disclosure of conflicts of interest does not have any impact on the quality of the advice provided, and may perversely lead you to trust the conflicted party more, not less.

Let me be clear: the logical response to "I may be compensated based on your choice of mutual fund/insurance product/credit card" is not to discount the advice given by 10%, or 20%, or 50%.

The logical response is to discount the advice given by 100%.

If you are not the customer, you're the product

It's tempting to say that some bloggers are "ethical" while others are "unethical," but I personally find the question of ethics orthogonal to this discussion, since the requirements of ethics may be satisfied by "full disclosure" without improving the observed result of too many readers signing up for credit cards that benefit the affiliate blogger rather than the reader.

No, the problem of affiliate bloggers pounding the drumbeat of constant, mounting urgency each time a particular card or issuer offers them an increased payout can't be solved by resorting to ethical considerations. It can only be solved by judgment.

So I'm judgmental. Which, along with being rash, brash, and cheap, is yet one more reason why, unlike your favorite affiliate blogger, I'm not a very nice guy.

Thoughts and feelings about BankAmericard Travel Rewards

The best deal in travel

In my opinion the best deal in travel hacking is likely the BankAmericard Travel Rewards credit card with Bank of America Preferred Rewards Platinum Honors. That combination turns every dollar in unbonused spend into 2.625 cents towards future travel redemptions.

That's not to say there isn't competition for best deal:

• A Chase Ink Plus and Sapphire Reserve combination allows you to earn 5 Ultimate Rewards points per dollar spent at office supply stores and redeem them for 1.5 cents each on paid travel.
• Likewise an Ink Plus combined with the Southwest Companion Pass allows you to redeem those 5 Ultimate Rewards points for (very roughly) 3.2 cents each on Wanna Get Away fares with Southwest when flying with your designated companion, the equivalent of earning 16% on your office supply store spend.
• An American Express Premier Rewards Gold card and Platinum Business card would let you earn 2 Membership Rewards points at supermarkets and redeem them for 2 cents each towards premium-cabin airfare, plus enjoy the flexibility of Membership Rewards points transfers.

That said, I don't personally have a Travel Rewards card, and suspect the vast majority of travel hackers either don't have or don't use one. Here's everything you need to know about the pros and cons of BankAmericard Travel Rewards and Preferred Rewards with Bank of America.

You need to have a lot of money (occasionally)

To qualify for Platinum Honors with Bank of America Preferred Rewards, you need to have $100,000 in combined balances with:

• Bank of America;
• Merrill Lynch, the bank's full-service brokerage business;
• and Merrill Edge, the bank's self-directed brokerage service.

Sound simple? Hang on tight.

To initially enroll in the program, you need to have an average daily balance over the preceding 3-month period of $20,000 or more (the minimum to qualify for the Gold tier in Preferred Rewards). Each month after that Bank of America checks to see if you're eligible for a higher tier: if you enroll with a 3-month daily average balance of $20,000, you'll be upgraded to the Platinum tier when your 3-month daily average balance reaches $50,000 and to the Platinum Honors tier when your 3-month daily average balance reaches $100,000. That "check" only happens once per month.

After you've reached a tier in Preferred Rewards you keep that status for 15 months. Technically you earn the status for 12 months and then have a 3-month grace period to requalify before being moved to a lower tier or removed from the program. [Edit 1/7/16: Please see Robert's comment for clarification on how the enrollment period and grace period work in practice.]

Three-month average daily balances are a funny thing. You could meet the $100,000 requirement over 3 months in any number of ways, including:

• Month 1: $100,000. Month 2: $100,000. Month 3: $100,000.
• Month 1: $0. Month 2: $150,000. Month 3: $150,000.
• Month 1: $0. Month 2: $0. Month 3: $300,000.

All three variants produce an average daily balance of $100,000 over a 3-month period, but you must have an account for 3 months to qualify. You can't just deposit $300,000 in a new account and enroll in the Platinum Honors tier the following month.

Most people don't have that kind of money in cash, but you might. If you just sold a house or inherited some money, for example, you might have $300,000, and if you aren't in a rush to spend it, parking it with Bank of America for a month would qualify you for the Platinum Honors tier for the next 15 months.

Investing with Merrill Edge

Obviously, most people don't meet the Platinum Honors tier requirements that way. Instead, they open up a Merrill Edge account and move $100,000 or more in cash or securities into their account, and leave them there.

Note: I'm a passive, indexed investor, so all of the following is going to be from the point of view of passive indexed investing.

In writing this post I scoured the ends of the internet to find as complete and accurate information as possible regarding how to transfer, buy and hold Vanguard mutual funds and ETFs with Merrill Edge. Here's what I found.

• Merrill Edge accountholders can buy shares of Vanguard ETF's and "Investor" shares of most if not all Vanguard mutual funds.
• As a Platinum Honors accountholder you receive 100 free stock and ETF trades per month, so there would be no cost to purchase Vanguard ETF's with cash. Purchasing new Investor shares of Vanguard mutual funds has a $19.95 fee.
• This creates an obvious chicken/egg problem: to get free ETF trades, you have to be Platinum Honors, but to be Platinum Honors, you have to have funds in your account.
• Unless you want to park $100,000 in cash in your account, the obvious solution is to transfer $100,000 (or more) in existing securities from their current custodian.
• Merrill Edge allows some, but not all, "Admiral" shares to be transferred in-kind from Vanguard. That means you are able to hold in a Merrill Edge account shares that cannot be purchased in a Merrill Edge account.
• Once you hold Admiral shares with Merrill Edge you can reinvest dividends and capital gains, but you still can't purchase new shares. Admiral shares have the advantage of being lower cost than Investor shares and, in some cases, ETF shares (VTIAX is cheaper than VXUS, for example). You can read way more about this issue here.
• If your Admiral shares can't be held by Merrill Edge, or if you intend to use Merrill Edge for ongoing contributions and don't want to hold two different share classes in your account, you can convert Admiral shares in all but four Vanguard mutual funds into ETF shares. You can also convert Admiral shares into Investor shares, but since Investor shares have higher fees than ETF's that's unlikely to be your lowest-cost move.
• ETF shares can be moved in-kind from Vanguard to Merrill Edge, although fractional shares will be sold, not transferred. This may produce a taxable capital gain if the transfer is between taxable accounts.
• [Edit 1/6/16: See reader EightBall's comment below for more on this issue, and this Boglehead forum post.]If you elect to reinvest dividends from an ETF, Merrill Edge will charge a 10% "fractional share liquidation fee" on any partial shares. In other words, they buy the whole number of shares your dividends can afford, then charge you 10% of the remainder as a convenience fee before depositing the rest in cash. To avoid that fee, you can elect to receive dividends in cash and manually purchase whole ETF shares, which sounds hellishly annoying. This is one reason I personally prefer Admiral shares to ETF's.

This may seem like a lot of trivia. But I'm laying it all out here for two reasons. First, it took me a couple hours of searching and reading to find the answers to all these questions, so hopefully putting it in one place saves somebody else the same trouble. Second, I truly believe the best way to build wealth is the long-term, automated, low-cost purchase of mutual funds tracking broad market indices.

Merrill Edge, like all brokerages, would like you to do as much short-term, manual, high-cost buying and selling of speculative securities as possible.

Merrill Edge new account bonuses

So you're a mid-career upper-middle-class professional, or early-career FIRE enthusiast, and you've got $100,000 sitting in your Vanguard account. You're intrigued by what your humble blogger earlier called "the best deal in travel hacking." The next step is to open a Merrill Edge account and transfer $100,000 in securities in-kind, right?

Not so fast.

Like many online brokerages, Merrill Edge offers signup bonuses for new customers who open accounts with qualifying balances. The standard Merrill Edge bonus is $100-$600 depending on the amount you deposit within 45 days of opening your account.

But that offer periodically goes as high as $1,000 for deposits of $200,000 or more. There's even a landing page for the higher offer, although it includes an expiration date of December 31, 2016.

If you're eager to get the process started of earning Preferred Rewards status and triggering the highest payout on the Travel Rewards credit card, then go ahead and get started. But if you're not in any hurry, then it may be worth waiting for that higher signup bonus to come around again. Even if you just deposit $100,000, the higher bonus pays out $250 more than the standard one, which it would certainly be nice to have in your retirement accounts happily compounding away.

Conclusion

I'm a long way from having $100,000 in my retirement account, so I won't personally be taking advantage of this deal any time particularly soon. But in this era of cheap and plentiful, but unbonused, manufactured spend I do believe earning 2.625% in travel rewards on all purchases is one of the best opportunities widely available — to those who can afford it.

Booking Southwest flights with Flexpoints and Ultimate Rewards

I previously wrote up my experience booking a Hyatt all-inclusive resort in Jamaica. That left the question of how to get there. While I'm not ready to be seduced by Southwest, I waited to pull the trigger a bit too long and the price difference between the nonstop Southwest flight and one-stop options on real airlines shrank enough to convince me to give them a shot, despite my reservations.

Chase Ultimate Rewards points and US Bank Flexpoints can be used to book Southwest flights

Southwest famously doesn't participate in the public Global Distribution System that real airlines use, which is why their fares don't show up on ITA Matrix, Google Flights, and online travel agencies (Google Flights will show you Southwest routes, but not fares).

But the Chase Ultimate Rewards travel center and US Bank Flexperks Travel Rewards travel contractor can book Southwest fares over the phone.

Redeeming Chase Ultimate Rewards points for travel on Southwest

To make an Ultimate Rewards redemption on Southwest call 866-951-6592.

Like all Ultimate Rewards travel redemptions, points are worth 1.25 cents each for travel on Southwest, and you can use any number of Ultimate Rewards points against the purchase price and pay the remainder in cash. After transferring points to Hyatt to pay for our stay in Jamaica, I didn't have quite enough Ultimate Rewards points left to pay for my partner's ticket, so I redeemed my entire Ultimate Rewards balance and paid the remaining amount with my Chase Ink Plus card, which should earn 2 Ultimate Rewards points per dollar if the purchase codes correctly as a Travel Center reservation.

Theoretically I could have redeemed my Ultimate Rewards balance for a cheaper Southwest fare, then cancelled that flight and used the value towards the ticket I really wanted while paying the difference with the card of my choice. Since this was my partner's ticket and as far as I know she doesn't even have a Rapid Rewards account, I decided to keep it simple and just book the tickets I really wanted.

After feeding the Ultimate Rewards agent the dates and flights I wanted, she came back with a price about $90 cheaper than the fare available online. I had heard of this happening before, so told her to go ahead and make the reservation. After giving her all of my partner's information and my credit card information, and waiting on hold for a while, she came back and told me that flight was not available.

After going back and forth a few times, it turned out what she really meant was that that fare wasn't available, which didn't surprise me, and she was ultimately able to book the fare I had found online.

The call took a total of 45 minutes.

Redeeming US Bank Flexpoints for travel on Southwest

To redeem Flexpoints for travel on Southwest call 888-229-8864. The "Rewards Center" US Bank uses is not open 24 hours a day, but has pretty reasonable hours, something like 7 am to 11 pm, Monday through Saturday (I didn't catch their Sunday hours, but they were closed at 10:50 pm Eastern on Sunday).

After taking down my trip details, the agent explained that in order to book international travel on Southwest he had to call them, get a fare quote, put the reservation on hold, and then return to confirm the fare and itinerary with me. He asked me if there was a particular fare I was expecting, which seemed like a common sense precaution to make sure we were looking at the same flights and dates. It was unclear to me whether the same procedure is required for domestic travel on Southwest.

While the Southwest Anytime fare I booked for my partner was still available for about $900, a Business Select fare was also available for $950. Since I was redeeming Flexpoints, I knew that either itinerary would cost 50,000 Flexpoints and I told the agent to look for the Business Select fare. He was happy to do so and, after putting me on hold for 25 minutes or so, returned with the same fare I had found online.

Since Southwest flights can't be booked online, he also waived the $25 phone booking fee.

The call took a total of 44 minutes. If it seems strange that the call took almost as long as my call with Chase did even though the agent was able to accurately find the correct fare on his first try, the reason is the two lengthy holds he placed me on while calling Southwest.

Adding your Rapid Rewards number

Neither agent asked for a Rapid Rewards number to add to the reservations, and I didn't ask since I was getting pretty bored of waiting on the phone. However, both agents provided the Southwest confirmation number, which made it easy to pull up the reservations on Southwest.com. The Flexperks Rewards Center also provided an "agency" confirmation number they use internally — be sure you get the Southwest confirmation number as well.

Strangely, I was unable to add my Rapid Rewards number to my reservation while logged into Southwest.com. After logging out, however, I was able to pull up my reservation and manually add my Rapid Rewards number, and the reservation immediately appeared in my account.

Fuel surcharges on Korean's SkyTeam partners

Last week I saw a flood of posts about Korean Air adding the ability to search and book SkyTeam partner awards online (for example). Since Korean Air SKYPASS is an Ultimate Rewards transfer partner, it's worth checking to see if there are any good values on their SkyTeam partners now that it can be done easily online.

The three most important things people know about Korean Air SKYPASS are:

1. You can only book awards for yourself and a very tightly defined group of family members;
2. SKYPASS awards pass along fuel surcharges;
3. Korean Air's award "zone" definitions are unusually generous, with Hawaii located in North America and South America being treated as a single zone.

Being a literal-minded sort of person, I decided to see how bad those fuel surcharges are on all of the SkyTeam carriers departing from the United States.

Here's what I found.

Not bookable online

While I was able to find award space on these SkyTeam airlines using Delta's search engine, I couldn't pull up the same flights using SKYPASS:

• Aeromexico to Latin America;
• Alitalia to Italy;
• Aerolineas Argentinas to Argentina.

The functionality may be added in the future, but for now I don't believe SkyTeam awards are bookable online using SKYPASS on those carriers.

Low fuel surcharges

Carriers that charge low fuel surcharges are the likeliest to be worth redeeming SKYPASS miles on, since you can take advantage of Korean's generous award chart without suffering the drawback of paying a high cash co-pay. On these low-fuel-surcharge routes you're likely to save money whether you choose to fly in economy, business, or first class.

For each airline I've given a sample route and the cost in SKYPASS miles for an economy ticket, and I've separated out the taxes and fees and the fuel surcharges. In all cases these prices are roundtrip, since Korean requires SkyTeam awards to be booked as roundtrips.

• Delta to Peru, ATL-LIM. 50,000 SKYPASS miles, $103.40 in taxes and fees, $0 in fuel surcharges.
• Delta to Japan, SEA-NRT. 80,000 SKYPASS miles, $80.04 in taxes and fees, $0 in fuel surcharges.
• Aeroflot to Russia, JFK-SVO. 50,000 SKYPASS miles, $252.12 in taxes and fees, $0 in fuel surcharges.
• China Eastern to China, LAX-PVG. 90,000 SKYPASS miles, $420.60 in taxes and fees, $8 in fuel surcharges.
• China Airlines to Taiwan, HNL-TPE. 90,000 SKYPASS miles, $73.15 in taxes and fees, $0 in fuel surcharges.

Medium fuel surcharges

These routes charge less than $500 in fuel surcharges, and might be worth considering in premium cabins or if you find award space on dates with particularly expensive cash fares.

• Delta to China, SEA-PEK. 90,000 SKYPASS miles, $70.60 in taxes and fees, $282 in fuel surcharges.
• Delta to South Africa, ATL-JNB. 80,000 SKYPASS miles, $99.95 in taxes and fees, $390 in fuel surcharges.
• China Southern to China, LAX-CAN. 90,000 SKYPASS miles, $70.60 in taxes and fees, $208 in fuel surcharges.

High fuel surcharges

These are the routes where high fuel surcharges mean economy award tickets are likely to cost the same or more than economy tickets, while premium cabin award tickets may cost the same as an economy ticket paid for with cash.

• Delta to Europe, JFK-BCN. 50,000 SKYPASS miles, $81.25 in taxes and fees, $556 in fuel surcharges.
• Air France to Europe, JFK-CDG. 50,000 SKYPASS miles, $113.16 in taxes and fees, $576 in fuel surcharges.
• KLM to Europe, JFK-AMS. 50,000 SKYPASS miles, $82.26 in taxes and fees, $576 in fuel surcharges.

Those flights would cost just 80,000 SKYPASS miles roundtrip in business class, for a total cost of $1437.25 - $1489.16 if you value transferred Ultimate Rewards points at their cash value of 1 cent each. Unfortunately business class space on SkyTeam across the Atlantic is very poor so you're unlikely to be able to take much advantage of these price points.

Routing rules

The basic routing rules for SkyTeam awards are pretty simple, although there are a host of exceptions: you can have three segments in each direction between your origin and destination, one stopover per itinerary, and one open jaw at your destination (which does not consume your stopover).

Drew at Travel is Free wrote a more detailed guide to Korean's routing rules, but I don't know if there's much point in trying to intellectualize their rules and restrictions. Basically, you can do a lot of things, within reason, and you can do some things beyond reason,  if you use Korean-operated flights. For example, a LAX-PVG-NRT-PVG-JFK itinerary will not price out entirely on China Eastern, but if you make it LAX-PVG-NRT/NRT-ICN-JFK with the return operated by Korean, it'll happily price out. This may also have to do with a Maximum Permitted Mileage restriction — the point is there's no substitute for getting in and playing around with the search engine to see if it'll accept your particular crazy idea.

For example, the engine happily priced out LAX-HNL(stopover)-NRT(destination)-HNL(transfer)-LAX for 80,000 SKYPASS miles and $87.84 total in taxes, fees, and surcharges. While a roundtrip to Hawaii for 25,000 miles is a good deal, a roundtrip to Japan with a stopover in Hawaii for 80,000 miles is a great deal.