How I'm thinking about money these days

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Personal finance and travel hacking in the United States are almost always linked through the intermediary of credit cards, which unlike in most civilized countries are allowed to charge lightly-regulated fees which they rebate to customers in the form of cash, cash-equivalents, or alternative loyalty currencies.

These schemes are usually devised with the concept of “stickiness” in mind: you can offer almost anything to customers in the short term if it’s so hard to switch financial providers that they continue to give you business for years or decades after the initial “acquisition cost” has vanished off your balance sheet.

What travel hackers know is that nothing is as sticky as people think it is, so in fact they don’t need to change their spending habits at all in order to trigger many of the benefits financial providers think will lock in their business in perpetuity.

With all that said, here’s how I’m thinking about investment options these days, keeping in mind just how low those barriers really are in practice.

Rewards checking accounts

Rewards checking accounts typically offer above-market interest rates on balances up to a certain limit, as long as direct deposit and monthly transaction requirements are met. I usually search for the highest-earning accounts on depositaccounts.com, but here are the three I’m currently using:

I primarily use Consumers Credit Union as a current account to manage payments and for ATM withdrawals, since it has a lower limit on the maximum interest rate but also rebates third-party ATM fees; I don’t mind if my balance falls below $10,000 on any given day, in other words.

Two other options I’ve looked at closely are the FitnessBank and Orion Federal Credit Union accounts, which offer 6% APY on up to $25,000 and $10,000, respectively. The FitnessBank requirement of linking a step-tracking device and walking an average of 10,000 steps per day feels too fidgety for me, although if you’re already tracking your steps and know you’ll easily meet the requirement then it seems like a fine option. The Orion FCU requirement for both $500 in deposits and $500 in debit card purchases would be easy to automate, but with such a low limit on the 6% APY balance it hasn’t been a priority for me to set up an account there yet.

Round-up savings

Blog subscribers knows about my long-standing affection for round-up savings accounts. Unfortunately, my 10% APY round-up savings account is no longer available to new members; in fact, the credit union that offered it no longer exists, although I was grandfathered into the old account structure during the aquisition.

I have experimented at length with this account, and as far as I can tell, I can make exactly 29 deposits per day in round-up transactions, which I plan to until the account reaches the $250,000 insurance limit or is closed for deliberate and flagrant abuse — whichever comes first.

Peer-to-peer installment lending

Peer-to-peer lending emerged in the 2000’s during the first wave of what today we’d call “distributed finance.” The idea was that instead of borrowing from the big banks you’d borrow from your fellow citizens; instead of putting your money in the anonymous stock market or a local savings account, you’d invest in individual home improvement projects or weddings or hospital bills. At the time, the two most prominent platforms were Lending Club and Prosper, joined by a few minor platforms like Fundrise and Kickfurther (and, I’m sure, many others I’ve forgotten or never heard about).

Lending Club and Fundrise have both pivoted into more straightforward banking and investment operations, but much to my surprise, Prosper is still chugging along letting you buy shares of individual promissory notes in increments as low as $25.

Unlike the high-interest accounts described above, lending through sites like Prosper comes with risk. Even worse, it comes with unknown risk. At the individual note level, there’s individual risk, but this is negligible: if you buy thousands of $25 loans, some of them will default simply because you’re exposed to the individual life histories of thousands of people, and shit happens even to healthy, employed, home-owning borrowers.

At the institutional level, Prosper’s credit-rating system might be fundamentally flawed: you might expect a 5% default rate from “AA” borrowers (Prosper’s highest rating), but the true number is 15% because some unaccounted-for variable skewed Prosper’s ratings too high.

Your borrowers may be also be exposed to an economy-wide risk, like a nationwide fall in housing prices, or a shooting war with a rival power, which eliminates the advantages of diversification: all of your borrowers might default at once if they’re drafted to go save Taiwan, whether they live in California or Oklahoma.

But these peer-to-peer platform loans have another risk, the financial solvency of the platform itself. In the case of Prosper, you are not actually lending any money to borrowers. You are buying a repayment-contingent note from Prosper, which originates and owns the actual loan to the borrower. As long as the borrower makes their payments, and Prosper pays its bills, then Prosper will transmit the borrower’s payments to the owners of those repayment-contingent notes. But if Prosper itself files for bankruptcy, the value of the loans will be assets of the bankruptcy estate, and lenders will be left with unsecured claims against that estate.

I personally used to consider this the main risk of lending through Prosper. I thought people would happily lend through them until the first economic calamity came along, then Prosper would be wiped out, the notes would be worthless, and the whole peer-to-peer lending experiment would come to an end.

That isn’t what ended up happening, and Prosper has survived and continued to both issue loans to borrowers and sell notes to investors. The website remains very primitive and it still takes me several clicks to find the simplest settings, so automating investments is essential.

I’ve found the easiest way to invest with the platform is not to use their “Auto Invest” feature, but the confusingly- and similarly-named “Recurring Order” function. The recurring order function allows you to specify loan characteristics to filter for (I chose “AA” and “A” graded loans, with yields above 10% APY) and then as those loans are added to the platform it will automatically buy them in the increment you specify (I chose the minimum, $25).

The platform seems to have a lot of loans, so the recurring order function hasn’t had any trouble finding qualifying loans for me to buy, but at some volume there presumably is a trade-off between loan quality, interest rate, and purchase size: if you are fixed on quality and rate, then you might have to buy more than $25 per loan in order to meet your demand for volume. I doubt I will ever hit that point and I don’t spend any time worrying about it.

Stocks, flows, risk, and compounding discipline

To the best of my knowledge, I coined the term “compounding discipline” to refer to the need to make sure that if you rely on your interest compounding over time, then you have to put in the work to make sure it actually is.

A $25,000 balance at Andrews FCU will earn about $120 per month at the Kasasa Cash rate of 6% APY. But a balance of $25,120 will also earn about $120 per month, because the last $120 earns only 0.5% APY. You can earn $120 per month forever, but if you want your savings to compound, then you have to exercise compounding discipline and move that $120 each month into the next vehicle you have available.

The way I’ve formalized this discipline is to split my savings into two broad categories: I invest bigger and faster in safe assets and lower and slower in risky assets; the returns generated by the safe assets pay for the investments in the risky assets. I’ve used the example of Prosper peer-to-peer lending, but I don’t think they’re better or worse or more or less risky than bitcoin or real estate or reselling on Amazon. If one of those is more attractive then you should do it instead. The point is simply to make sure you have somewhere to put the next interest payment so your assets keep compounding at the right mix of risk and return for your situation.

Conclusion

Sharp readers may have noticed I’ve left out the only savings vehicles most Americans have: their individual retirement accounts and workplace-based 401(k) and 403(b) savings accounts. I’ve also ignored the tax implications of the various investment vehicles available. The omission is deliberate: I don’t think about these at all.

If you maximize your annual contribution to your IRA and workplace retirement accounts, and select a low-cost, stock-heavy mutual fund, and make sure your dividends and capital gains are set to reinvest, then you’ll die a millionaire. There’s nothing to think about and it’s not especially interesting to talk about. Once you’ve got all the settings configured right in your payroll software (not always easy!) it shouldn’t take more than 15 minutes a year to make sure everything’s on track.

"How do we scale this?"

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One of my favorite questions travel hackers ask is “how do we scale this?” The implicit answer is, usually, “we don’t.” Contrary to what economists pretend to believe, the world is in fact chock-full of arbitrage opportunities. What is true is that most of those opportunities are difficult or impossible to scale.

Here’s my personal breakdown of techniques used to increase scale, and the obstacles to doing so.

Brute force and constant returns to scale

The most obvious scaling strategy is to multiply your own effort. If you have a technique that generates a known amount of value per hour you spend on it, then you can get twice as much value by spending twice as much time, usually up to some limit. In a simple example, if it takes you an hour to manufacture $10,000 in in-person spend at one grocery store, and you have identical access to five grocery stores, then you can spend 5 hours and manufacture $50,000.

Automation and transformations

A lot of high-volume travel hackers focus on automation as a way to scale their techniques, and automation is one of the many tools I put in the broad category of “transformations.” Transformations are when the design of programs can be understood differently by the customer than by the business in order to scale techniques, either to get a higher return from the same amount of time or money, or to reduce the time or money needed to get the maximum return.

To give a classic example from my own practice, for many years the US Bank Flexperks Travel Rewards Visa offered 3 points per dollar spent on charity, worth up to 6% when redeemed through their travel portal. They also coded Kiva, the microlending website, as charity. People were thus able to earn as much as 6% in travel on loans of as little as a few months, and many of us did, transforming a modest discount on charitable giving into an extremely high-yield investment vehicle.

A more contemporary example is the rewards (often branded as “Kasasa”) checking accounts that offer some of the highest-earning, most liquid savings vehicles. They typically require 12-15 debit card transactions along with a direct deposit in order to earn their advertised rates. Meeting these requirements as they intend would seem to require, as they intend, reorienting your entire financial life around doing so. But when you’ve broken down the requirements to their individual parts, you can transform meeting them into a matter of a few minutes per month.

American Express cards have acquired a reputation of being “coupon books,” but a lot of the pain of redeeming those coupons (and getting back the value of your annual fee) can be transformed into painless routines:

All these are transformations: the company wants them to dominate your thoughts, but a few simple calendar reminders can guarantee you maximize the value of each credit without having to keep track of any of them individually.

Teammates, comparative advantage, and the benefits of trade

I call teammates everyone you partner with in order to take advantage of different circumstances, what economists call your “comparative advantage.” These can take all sorts of forms: some people have access to grocery store manufactured spend while other people have access to gas stations. Some people have more Chase cards than they’ll ever be able to maximize the value of, while others pile into American Express cards and are blocked from signing up for new Chase cards.

A lot of bloggers have a kind of “view from nowhere,” where every person has access to every credit card and each can follow prescribed steps from scratch, but it takes almost no experience to know that’s absurd. Every individual travel hacker’s situation is different, and it takes only a little more experience to identify which parts of the game you’re interested in pursuing most intensively. Finding other people with complementary interests is a way to scale each of your efforts by getting the most value from the parts of the game you’re most interested in.

The most obvious candidates for teammates are family members, precisely because there’s usually not any need to “divide” effort or results at all: everyone gets to go on the family trip, regardless of whether they made a “fair” contribution to paying for it at all. Some bloggers have affected to call these teammates “Player 1,” “Player 2,” and so on.

Employees

One of the most common questions people ask when they find out about the existence of travel hacking is, “that sounds great, but I don’t want to do it, can I just pay you to do it for me?”

There are people and situations that make this possible, but fewer than people wish or expect. The main problem is that almost anything you can train people to do on your behalf, they can do on their own behalf. You are the middle man, and unless you have both knowledge and money that are impossible to steal, your employee will quickly get the drift and go to work for themself.

The Verge had a humorous story about this very phenomenon in my home state of Montana, where resellers would continuously set up drop-shipping warehouses only to find their employees, having mastered the skill of packing and unpacking Amazon shipments after a few months simply set up their own tax-free reselling businesses.

Readers as force-multipliers

Another way to scale a technique is simply to share it. This has all the advantages of the techniques above.

Brute force techniques will have more people applying more brute force and yielding more benefits.

If you know how to transform a technique from difficult to hard, then more people will save more time and effort.

If you know how to trade personal or regional advantages with other people, then telling them how will result in more benefits for everyone in those situations.

And if you tell people how to hire employees to solve their problems, then more people will have their problems solved and more people will be employed.

The problem, of course, is that you don’t get a cut. What’s up to you is how big of a problem that is.

The Tesla Protocol, Boeing, and the regression to the minimum viable product

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One of the most striking stories I’ve heard about Tesla vehicles had nothing to do with exploding cars, drowning shipping magnates, or spontaneous highway shutdowns. It was a simple tweet from a Tesla enthusiast and Elon Musk fan praising the third vehicle they’d been sent from the factory for having the “fewest defects so far,” and deciding to keep the car.

The context is that when you order a Tesla (at least back then), it shows up at your door a few months later and you have to decide whether to accept it or not. If you don’t accept it, you go back on the list and have to wait another few months for them to send you another one, when the process is repeated.

What made the tweet so memorable is the inversion of what I grew up considering the “normal” American shopping experience, and the mirroring of typical descriptions of the Soviet shopping experience. I’m a bit too young to have experienced Soviet shopping for myself, but the potted story handed down to students today is that goods in the Soviet Union were stamped with the date they were produced. Goods made at the beginning of the month could be expected to more or less meet the product standards, since at the beginning of the month factories had all the necessary materials and workers. As those ran out over the course of the month, factories relied more and more on improvised and makeshift replacements, so by the end of the month goods hardly worked and had to be put into working order by the customers themselves.

The minimum viable product

What our financier overlords call the “minimum viable product" is the earliest stage of a product that some consumer, somewhere, is willing to buy. The original iPhone is a classic example, in that it didn’t work very well for anything, but it turned on, you could check your e-mail if you were patient, browse text on the internet if you were very patient, and even make phone calls. The fact people were willing to pay money for such a tenuously-useful product gave Apple the information they needed to invest in the product line and give us the slightly-better-functioning smartphones we enjoy today.

The early Tesla models seemed to share this pattern: they turned on, they charged, they got you to work most days, and people were willing to pay money for them, giving Tesla the information they needed to raise more money and invest in additional electric vehicle lines.

The immiseration of the consumertariat

Marxist economics describes a process under capitalism known as the “tendency of the rate of profit to fall.” This is often confused with an empirical claim that the rate of profit is falling, but this is just a misunderstanding. The rate of profit can stay steady or rise under capitalism, as long as the tendency to fall is counteracted in some way.

One standard Marxist explanation for how the tendency is counteracted is through the intensification of labor. By intensifying the labor performed by workers (longer hours, lower wages, more erratic scheduling), more surplus value (value added by workers above and beyond that required for their own maintenance and reproduction) can be extracted per worker, which can offset or more than offset the underlying tendency.

The tendency of the rate of profit to fall is experienced most viscerally by capitalists and workers, because it is their respective jobs to fight for and against the intensification of labor. But both capitalists and workers of course have another role in the economy, which is as consumers, and it is also experienced there in what I call the immiseration of the consumertariat.

The regression to the minimum viable product

Remember our story about the iPhone, where early adopters of an admittedly crappy product paved the way for the cheaper, slightly-less-crappy products that are in wide use today. But finance capital is indifferent to both product quality and popularity: instead of using early consumer interest to improve products and services over time, the consumer product or experience can just as easily be made worse, as long as the cost savings exceed the lost in revenue.

The result of this process is a tendency to regress to the minimum viable product. That minimum product is different in different industries, of course, and is highest not where consumers are pickiest but where regulation is strictest. Gasoline, for example, is a consumer product that is so strictly regulated no one thinks twice about buying it from an unfamiliar station in a location far from home, and consequently the measures taken to combat the tendency are primarily taken out against workers in the trucking and retail sides of the industry rather than against consumers themselves.

Boeing’s past decade of aviation disasters illustrates the horrifying consequence of misjudging where the minimum viable product is. The developed world had allowed itself to be convinced that aircraft were as tightly regulated as gasoline, when they turned out to be as tightly regulated as electric cars.

Workers have an obvious role to play in countering this tendency through labor militancy. A good illustration comes from right here in Washington, DC: the housekeepers union at the Washington Hilton fought to bring back a daily housekeeping policy. Note that the housekeepers do not claim to be “protecting consumers” or anything like that. They’re protecting their members’ income by ensuring that as many housekeepers are scheduled to work as necessary to clean every occupied room every day. But as a mechanical consequence of that, customers experience more frequent and more thorough cleanings.

Making housekeeping a dignified job is not and should not be free. The higher quality customer experience will come from some combination of lower profits for finance capital and shareholders and higher prices for customers.

The duty to complain

Customers also have a role to play here that I call the duty to complain. Customers have a lot of power not because they’re the source of businesses’ income, but because they can make it expensive to cut costs.

The cliche people joke about online is the self-checkout machines where all your produce can be turned into iceberg lettuce with the push of a button, but you don’t need to steal from grocery stores to fight the regression to the minimum.

There was an affiliate blogger who got a bad reputation for finding everything wrong with every plane he got on in order to get miles in compensation for his inconvenience, but for all I dislike about them, I find no fault in this behavior. By making it expensive (or at least not cost-free) to shirk routine maintenance, they were unwittingly doing their part to counter the tendency to employ as few mechanics as possible and let the state of the fleet deteriorate back to the minimum viable product.

The duty to complain should be distinguished from mere nostalgia. I’ve heard the story about the olives in the airline salad countless times, but if you like olives in your salad that much I’d suggest bringing some from home rather than complaining to your flight attendant. If your seat doesn’t recline, on the other hand, then alerting the flight attendant and having it recorded for repair is a duty: one-off maintenance is expensive, and the more of it airlines are forced to do, the less cost savings they’ll realize by cutting routine maintenance.

Conclusion

I also want to be careful to distinguish what I’m describing from the consumerist, neoliberal exhortation to “vote with your dollar.”

Most people do not have the luxury of choosing between multiple internet providers or going without internet, but the more people complain to Comcast the more expensive it is to offer unacceptable service.

Most people don’t have more than one or two airlines to choose from on most of their trips, but by insisting on the maximum compensation for delays, lost bags, and faulty equipment, they can make it as expensive as possible to badly run the airline they’re forced to fly.

And, obviously, there’s a difference between complaining and being rude. The point of complaining is to impose costs on the owners and managers of businesses for mismanagement, not to make miserable the workers doing trying to implement those policies.

Robinhood Gold versus Bank of America Preferred Rewards Platinum Honors

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[To the reader: since I think a lot of people will be using affiliate links to sell this product, I’m not including any links, including my own referral links, in this post]

Robinhood, the online brokerage founded and aggressively marketed back when money was free, and which used that perch to make fee-free stock trading the new normal, recently announced a 3% cashback credit card, available only to its brokerage customers that pay for their “Gold” tier, which seems to currently cost $5.99 per month.

This is the rare product release which immediately had people in my real-world ambit asking, “have you seen this? What’s the catch?”

So I want to start by saying that there is no catch, and this is one of the best all-in-one financial products out there. Virtually everyone should sign up, once it’s widely available.

But that’s not especially interesting. What’s interesting is how it stacks up against the next-best product on the market: the Bank of America Preferred Rewards program, which has been the gold standard for cashback credit card rewards until now.

So, let’s take a look.

Robinhood Gold is a perfectly-designed all-in-one financial product

If you sign up for Robinhood Gold and get approved for their new credit card, then you earn 5% APY on your uninvested Robinhood balances and 3% cashback on all your credit card purchases.

Since Robinhood Gold is sold as a bundle, a lot of people are going to misunderstand that these are two entirely different products. The 5% APY offered on balances up to a million or so dollars of insured deposits (depending on how many FDIC partners they have any given week) is competitive, but it’s not best-in-class; Vanguard is paying 5.28% on uninvested cash in their own brokerage’s sweep account as of today.

Meanwhile, the 3% cashback offered by their new credit card, whenever it becomes available, is genuinely higher than any other product on the market.

So before we go further, let me repeat: most people are better off signing up for this bundle than they are doing anything else in the world of credit cards or banking.

Bank of America Preferred Rewards

It sounds funny to call such a bizarre program “simple,” but until the latest Robinhood announcement, the simplest, highest-earning cashback program has been Bank of America’s Preferred Rewards, which offers a 75% bonus on all the cashback earned on their own, non-co-branded credit cards. Since the highest unbonused earning on those cards is 1.5%, with Preferred Rewards those cards are usually said to earn 2.625% cashback on unbonused spend.

2.625% is lower than 3%, which means the new Robinhood product will earn higher rewards than one of the Bank of America cards on all unbonused spend.

Unlike paying for access to Robinhood Gold, qualifying for Preferred Rewards is an ordeal. I’m currently several months into the process of raising my average monthly balance until I qualify for their Platinum Preferred tier, upon which occasion I’ll transfer all the money back out until my next requalification period.

Breakeven points and resiliency

To calculate a breakeven point between Robinhood Gold and Bank of America Preferred Rewards, or any other cashback product, just divide the roughly $72 annual fee of Robinhood against the next best alternative.

A fee-free 2% cashback card, like the Citi Double Cash, is better for annual unbonused spend below $7,200: at that point the additional 1% paid by Robinhood matches the $72 cost of the membership.

Likewise, if you’re earning less than 5% APY on the funds held in your Bank of America accounts, or anywhere else, then you can consider the higher interest paid on your Robinhood balance to be “offsetting” the cost of the monthly fee.

This exercise is probably worth doing even if you don’t break even, for an unrelated reason: resiliency. I use resiliency to mean minimizing the downside when misfortune strikes. It’s much easier to shift between cards earning similar — although not identical! — rewards when one or more cards gets shut down. Shifting from a hotel card to an airline card to a cashback card is a much easier transition to make than shifting from rewards-earning credit cards to nothing.

Conclusion

For most people, under most circumstances, the Robinhood Gold proposition is airtight, for now. They should sign up, throw as much of their money as possible into their cash savings account, and use the card for all their purchases.

Whether an experienced travel hacker who has a range of similar cards earning similar value, or an experienced saver earning higher interest rates on the same balances, should do so is an exercise left for the reader.

How does Hilton price 5th-night-free awards?

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I manufacture a lot of Hilton Honors points with the American Express Surpass co-branded credit card, and I redeem almost as many. The Surpass earns a free night certificate that can be used worldwide after spending $15,000 per year and Diamond status after $40,000 in spend, but I am perfectly happy earning 6 points per dollar spent at grocery stores all year.

I try to redeem points for at least 0.5 cents each, and do not have any difficulty finding opportunities to do so, although as always you have to be careful that you’re comparing redemptions against the money you would spend instead, not the cash value of the room you redeem points for.

For example, I stayed at the Conrad Hilton Midtown last weekend for 95,000 points per night (plus two of those free night certificates), which translates to something like 0.7 cents in value, but of course I wouldn’t spend $675 to spend the night in New York City, so it would be absurd to say I earned 4.2% in value on my grocery store spend.

One way to maximize the value of that spend is by using the fifth-night-free benefit on award stays whenever possible. Fourth- and fifth-night-free offers are pretty common across the industry, and Hilton’s is one of the most straightforward: to trigger the benefit, all you have to do is book a standard room for 5 or more nights entirely with points.

That’s how the benefit is triggered. Understanding how it’s calculated is trickier.

There are lots of ways to calculate the value of a night

I mention that other programs have free-night benefits for stays of a certain length because they illustrate how a simple-sounding benefit can have both opportunities and perils. Most importantly, how does the value of a fifth-night-free benefit change when the nightly rate varies over the course of the stay?

Chase IHG Rewards credit cardholders get a “true” fourth-night-free: the point cost of the specific night which happens to be fourth is zeroed out. This creates opportunities to stage your reservations so that the most expensive nights of your stay are the fourth ones and increasing the potential value of the boost to your points’ value over 33%, and the risk of “wasting” the benefit on a cheap fourth night..

The Citi Prestige card offered what they called a fourth-night-free benefit, but it was calculated as just 25% off the (apparently-inflated) prepaid cash rates offered through their travel portal. This meant the maximum value of the benefit was capped at 33%, with higher portal rates grinding down the value of the benefit from that theoretical cap.

Marriott Rewards’ version stretches the concept to the breaking point: on 5-night stays, the lowest-priced night is deemed to be the “fifth,” so on stays with varying rates you will never capture the full 25% boost boost in value; only on five-night stays where each night is priced equally do you get the maximum value from the benefit.

Hilton seems to use a “trimmed” fifth-night-free calculation

Since I have a fair amount of experience redeeming Hilton points, I’ve had the chance to observe how Hilton handles this inevitable question: how many points should you expect to save when using a fifth-night-free benefit?

First, to trigger the benefit, the same room type has to be available for the entirety of your stay. That means you need to go further than the Hilton award calendar, since you might see lower rates for one-night stay in a room type that isn’t available for all five nights.

Second, if the room type you’re booking has no change in price over your stay, then it’s as irrelevant as you’d expect: you save 20%, getting a 25% boost to the value of your points.

When the points rate varies over the course of your stay, then things get interesting. On the checkout screen, you’ll see a rate listed for each of the first four nights and “5th Night Free” listed next to the last night. But those first four rates are not necessarily the rates you’d pay if you were booking each night individually. Instead, Hilton sometimes “trims” those, slightly increasing or decreasing the price of each night.

Usually, but not always, this is done in Hilton’s favor: the first four nights will cost more as part of a five-night reservation than as four one-night reservations.

At this point, I would like to be able to pull off the napkin and reveal that I’ve reverse-engineered the precise formula Hilton uses to make these trims, but that’s not true. I spent the morning poking around the website and running experiments, and concluded that sometimes Hilton does this, sometimes it doesn’t, and when they do it’s usually against the customer’s interests.

Here’s a screenshot of the basic principle at work:


To walk through what you’re seeing there, a five-night stay starting on May 4 costs 199,000 Honors points, while the same five nights priced individually cost 248,000 points. In this case, the night of the 6th is “trimmed down” to 48,000 points, so the reservation costs 1,000 points less than it would if Hilton offered a true fifth-night-free, like IHG.

Meanwhile, a five-night stay starting on the 5th costs 196,0000 Honors points, while the same five nights would cost 253,000 points on their own. In this case, the nights of the 5th, 7th, and 8th are “trimmed up” to 49,000 points each, so the stay costs 3,000 points more than it would if the nightly rates were used. But because the night of the 9th costs so much more, the total cost of the stay is still less than the previous example.

Why does Hilton use this hybrid model?

The truth is, I’m not sure why Hilton has adopted this pricing model. And in fact, I’m not even certain that they did it deliberately. It’s perfectly believable that they price five-night reservations this way for reasons totally unrelated to the fifth-night-free benefit. Perhaps another day I’ll try searching for five-night stays in a new account without elite status to see if the pricing change is function of stay length and not trying to nickle and dime points redemptions after all.

If I did have to guess (we’ve now entered the reckless speculation portion of the post) I’d say that this was probably not actually designed to rob a few thousand points from their most loyal customers here and there, but rather to “simplify” the pricing page. The main visual effect of Hilton’s “trims” is to bring each of the four remaining nights closer together in price.

Here’s another set of examples where rates are trimmed up (against the customer):

And here are some dates and room types where rates are left as is, giving the customer the “full” 60,000-point credit for the last night:

In other words, what looks to us like a pricing decision engineered to get one over on us may have been as simple as a developer trying to think of a kludge that would make all the numbers look more or less the same.

Why it matters

While I’m sure there are folks as interested in the minutiae of pricing decisions as I am, the concrete reason this practice matters is that Hilton frequently sells points for “a bit less” than 0.5 cents if you first click through an online shopping portal to Points.com.

This isn’t usually an especially good deal, since Hilton points are also worth about 0.5 cents, and it doesn’t make any sense to buy anything for what it’s worth; keep your money.

Buying points for an immediate fifth-night-free redemption is an obvious exception. If you can buy $1.25 for a dollar, then the proposition becomes a lot more interesting, but only if you know how many points to buy.

And this is, sure enough, exactly how I got interested: I bought points for a five-night reservation, and once the points had hit my account discovered I didn’t have enough, because the Hilton website will not show you the total cost of an award stay unless you have enough points to book it (the iPhone app will if you click on “rate details”). Hilton had “trimmed up” the cost of my stay, and I had to buy a few thousand more points at a penny each to get over the top.

Manufacturing transactions is harder than you think

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There are countless methods of manufacturing credit card spend, but the basic principles are simple: generate a credit card purchase (usually at some cost), liquidate the purchase back to cash (usually at some cost), and use the cash (plus any costs paid) to pay off the credit card balance. If you generate more in credit card rewards than you pay in costs, the technique is profitable.

In some cases these techniques are still profitable to the banks and merchants, and in others they’re unprofitable but travel hackers are too small a share of customers to be worth completely rooting out, so only half-hearted and incomplete efforts are made to remove the very hardest hitters.

A central feature of credit card manufactured spend is that it relies on spending as much as possible: more spend equals more profit. Debit card manufactured spend is often just the opposite: the goal is to generate transactions, not spend, and this creates surprising difficulties.

Why manufacture transactions?

There are a few main reasons you might want to manufacture debit card transactions. Some accounts charge fees for inactivity, and a $0.01 debit card transaction is enough to avoid the fee.

Other accounts, like the Consumers Credit Union Rewards Checking account that I use as my petty cash account, require a certain number of debit transactions to trigger their higher interest rates. Note that there are other, higher-interest-rate options available; I find DepositAccounts.com quite reliable for tracking them.

A product that, as far as I know, never took off in the travel hacking or personal finance community is the round-up savings account. These accounts have high interest rates but can only be funded by “rounding up” your change on debit card purchases. To achieve a meaningful balance in the account, it’s necessary to make an arbitrary number of debit card transactions with a cent value as close to 1 as possible, resulting in a 99-cent deposit.

Why is manufacturing transactions so hard?

I found it a bit counter-intuitive at first that manufacturing transactions profitably is as complicated in its own way as manufacturing spend. In both cases, the issues come from the fact that we’re using tools we don’t control for purposes they aren’t designed for. Here are some of the main problems I’ve encountered.

  • Per-transaction costs. While many financial services have lower fees for using debit cards than credit cards, that’s primarily by charging flat fees rather than lower percentage fees, and flat fees make manufacturing transactions more expensive.

  • Transaction minimums. A lot of options require transactions of at least $1. This is an obstacle to scaling, since even if you’re recuperating 100% of your transaction value, the larger each transaction must be, the more money you need to have tied up in the system at any one time.

  • Processing rules. If a service processes your transaction as "PINless debit,” instead of as a credit card, then it may not count towards monthly transaction requirements. For round-up transactions, there may be rules about how far apart transactions have to be spaced.

  • Closed loops. A lot of obvious options do work, but the money goes into a closed ecosystem where it has to be spent. Your Amazon gift balance can only be spent at Amazon, payments to your electric company have to be spent on electricity, etc.

  • Automation. Arbitrage opportunities are so persistent not because they’re particularly complicated. Most of them could be learned by a person of average intelligence over the course of a light lunch. The reason they last so long is that most people already have a job and don’t want another one. Automation is a solution, but researching ways to safely automate large numbers of financial transactions is yet another job.

These constraints can interact with each other as well. Your cable provider might allow you to automate payments with a minimum of $1, which looks like a tidy solution until you realize that your cable bill can only be spend on cable, which puts a soft ceiling on the number of transactions you can generate with that method each month.

Here’s a roundup of the options I’ve looked into and some thoughts on each.

Plastiq (grandfathered)

I’ve used the Plastiq bill payment service on and off for years now. It’s changed so much that instead of using it overwhelmingly to manufacture spend, I now use it primarily to manufacture transactions. Under their old pricing model, using debit cards had a low fixed fee, so I scheduled twelve $1 payments per month until sometime in mid-2026. If I fall into a coma, at least my money will still be earning 3% APY.

As far as I can tell it’s no longer possible to get access to the old pricing, but this highlights the kinds of feature you want to look for as these services continue to pop up: low per-transaction price (I pay $0.01 per transaction, so $0.12 per month), easy liquidation (the $1 “payment” gets deposited into another account a week or so later), and long-term automation.

Peer-to-peer payments

I’ve had great success manufacturing round-up savings transactions with Venmo. They have a $0.01 minimum transaction and no fees for debit cards. The $0.01 has to go somewhere, and I’m not comfortable running multiple accounts and risking losing access to the tool entirely, so I send it to another person. This does generate a lot of annoying e-mails, so you probably want to set up some filters so those e-mails don’t drove you or your teammate crazy.

Cash App works as well, but has a $1 minimum transaction, which makes it a cumbersome way to generate round-up transactions. It works well for manually generating monthly transactions, so I do use it to meet the 15-monthly-transactions requirement on my Andrews FCU Kasasa Cash Checking account to earn 6% APY on up to $25,000.

Neither option has built-in automation. There used to be a way to interact with the Cash App ecosystem by text message, which would be a convenient way to automate transactions, but I couldn’t easily find any current documentation of that feature so my guess is they retired it at some point.

Store credit

I reload my Amazon gift card balance $1 at a time to meet some of my monthly transaction requirements, and I was pleased to discover that my $7 monthly Prime membership is charged first against my gift card balance, so I don’t need to worry about storing up too much unused Amazon credit.

I say store credit instead of Amazon credit because a lot of people have several services that have this feature. If you can load your transit pass, Starbucks balance, or cell phone balance $1 or $0.01 at a time then you can meet transaction requirements without the risk of locking up money you’ll never end up spending.

Conclusion

I understand that people feel themselves at a constant shortage of time and attention, even for the things that give them great joy and satisfaction. They are not only uninterested, but often almost offended by the suggestion they’d waste those precious resources on the essentially meaningless task of pushing buttons on their phone for a few minutes a day.

Believe it or not, I don’t find it especially fun or meaningful to push buttons on my phone for a few minutes a day either. But that’s a pretty high bar to hold every minute of your day too. I don’t find it especially fun or meaningful to brush my teeth either, but I’d like to still be chewing with a few originals by the time I’m 80 so I do it anyway.

Whether it’s earning the highest interest rate possible on my liquid cash in high-yield checking accounts, or dumping as much money as possible into my best savings accounts, I just don’t mentally categorize it as something that’s supposed to be fun. You fill out your timesheet in order to get paid, not because it’s going to bring about world peace.

How much is World of Hyatt credit card spend towards Globalist status worth?

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It sounds like a cliche because it is, but World of Hyatt points are virtually the only loyalty currency to have retained a large part of their value in the years since I started travel hacking. This only sounds controversial because they have, in fact, lost so much value, especially at the very highest end: the most expensive stays at the top 10 or 15 properties have increased in price from 22,000 World of Hyatt points to 45,000 points during their “peak” booking windows.

That still consistently makes Hyatt stays the most valuable redemptions almost everywhere they operate, and I rarely see redemptions worth less than 3 or 4 cents per point.

This is, however, not a ringing endorsement of putting unbonused spend on Chase’s co-branded World of Hyatt credit cards, because those cards are not the best method of earning World of Hyatt points on unbonused spend.

Chase offers the same or higher Hyatt earning in all spending categories

The Chase World of Hyatt personal and business cards offer 2 World of Hyatt points per dollar spent on a range of categories:

  • Restaurants

  • Airline tickets

  • Transit and commuting

  • Fitness clubs and gym memberships

  • Shipping

  • Car rentals

  • Gas stations

  • Internet, cable, and phone bills

Unfortunately, Chase also offers cards that earn bonus Ultimate Rewards points in each of these categories, points that can be instantly transferred to Hyatt. In other words, no matter how highly you value World of Hyatt points, it’s extremely unlikely that one of their co-branded credit cards is worth carrying purely for the earning opportunities in any of the bonus categories.

Even on unbonused spend, the Chase Freedom Unlimited and Ink Unlimited cards earn 50% more points than the same spend put on a World of Hyatt credit card.

What is unbonused spend towards Hyatt milestones and status worth?

The World of Hyatt credit card comes with 5 qualifying night credits every year, and earns an additional 2 qualifying nights for each $5,000 spent on the card (regardless of category), and those qualifying nights count towards “Milestone Rewards.” Here’s a simplified breakdown of the results of your spending at different levels on the personal card (the business card has a slightly more generous status earning structure but does not offer the 5 free qualifying nights):

  • $40,000 (20 qualifying nights): 2,000 bonus points

  • $65,000 (30 nights): Category 1-4 award (up to 18,000 points) and 2,000 bonus points

  • $90,000 (40 nights): 5,000 bonus points

  • $115,000 (50 nights): 5,000 bonus points

  • $140,000 (60 nights): Category 1-7 award (up to 35,000 points)

  • $165,000 (70 nights): 10,000 bonus points

  • $190,000 (80 nights): 10,000 bonus points

  • $215,000 (90 nights): 10,000 bonus points

  • $240,000 (100 nights): Category 1-7 award and 10,000 bonus points

As you can see, there are basically only 2 relevant “hinge points" (in addition to the Category 1-4 award granted at $15,000 in annual spend): at $65,000 in spend you get a boost of up to 18,000 points, and at $140,000 in spend you get an additional boost of up to 35,000 points. Combined with the earlier milestone awards, at exactly $140,000 in unbonused spend you will earn a total of up to 207,000 points in value, or 1.48 points per dollar.

This is, of course, virtually identical to the 210,000 Ultimate Rewards points that you’d earn putting the same spend on a Freedom Unlimited or Ink Unlimited card, which could be transferred instantly to World of Hyatt, with the added caveat that the value of the 30-night and 60-night bonuses is contingent on redeeming the awards at the most expensive eligible properties.

Note that milestone rewards continue after 60 nights, all the way up to 150 nights. At $240,000 in spend, you’ll earn up to 417,000 points in value, or 1.74 points per dollar.

How valuable is Globalist status?

Even if the marginal unbonused dollar is better spent on a card earning 1.5 Ultimate Rewards points per dollar than 1 World of Hyatt point per dollar, it would still be possible to get enough value from reaching spend thresholds on the World of Hyatt card to justify allocating the spend there instead, if you valued Globalist status highly enough and were confident enough that you’d reach it, or wanted to use the goal of Globalist status as a kind of commitment device.

Like all elite status, Globalist status is more valuable the more you stay with Hyatt, and it also requires fewer shenanigans like this the more you stay with them. If you stayed 25 nights per year with Hyatt, then the 5 free nights that come with the personal card would get you to 30-night Explorist status, and the $15,000 in spend to trigger the annual free night certificate would get you to 36 nights. After that, just $60,000 in additional spend ($75,000 in total spend) would result in Globalist status, 10,000 bonus points, and a free night certificate worth up to 35,000 points, a total of roughly 1.75 points per dollar on unbonused spend.

The most frequently cited benefits of Globalist status are free breakfast or club access and suite upgrade awards, although the latter is no longer strictly a benefit for Globalists, since you can request them instead of points at the 40-night and 50-night milestones.

I’ve had some awe-inspiring buffets at Park Hyatts and some soggy eggs at Hyatt Regencies, so for simplicity I consider your average hotel breakfast to be worth about $15-20. Over the 25 nights our hypothetical travel hacker actually spends with Hyatt, I’d call that around $400, multiplied by the number of people you usually travel with.

Suite upgrade awards can be terrific, but only if you can use them, which is notoriously difficult. Part of that is the games properties play to restrict availability, but I don’t doubt that elites really are trying to use them at the same properties at the same times. I’ve used suite upgrade awards for wonderful suites at superb properties but I would still not put a speculative value on them. My usual advice is simply to try to use them on every stay, in case you get lucky and there’s space, instead of hanging on to them for the perfect situation. If that situation does come along and you’re out of awards, you can probably just buy, borrow, or beg for somebody else’s.

In other words, Globalist status itself, excluding the awards that are easily convertible into points values, is only worth $400-$1,600 to someone spending 25 nights a year at Hyatts.

Conclusion

The reason I started by talking about bonused spend is that I don’t want to give the impression that you should begin thinking about travel hacking with unbonused spend. On the contrary, I’m fond of saying that actual purchases, many of which will inevitably be unbonused, should be a rounding error in your miles and points earning strategy.

On the other hand, large unbonused spend opportunities do come along in everyday life: some schools and coaches accept credit cards for tuition and fees, car dealers may allow you to pay for part of your down payment with a credit card, etc. When it comes to a $2 cup of coffee I couldn’t care less what card I pay with. But a $60,000 tuition bill is a valuable enough situation to take seriously as an earning opportunity.

If it can get you most or all of the way to Globalist status, the World of Hyatt credit card might be competitive with a Freedom Unlimited or 2% cash back card. I tell most people the best choice for unbonused spend is a 2.625% cash back card with Bank of America Preferred Rewards Platinum Honors status, but the fact is that combination isn’t available to very many people, either because they don’t have $100,000 in liquid assets or they have a more valuable use for it than parking it at Bank of America for three months.

Delta and American Express: break-even changes to break-even cards

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If you have a Delta co-branded American Express card, then you might have gotten an e-mail or read elsewhere (Frequent Miler, Danny Deal Guru, Doctor of Credit) about increases to the annual fee and changes to some of the cards’ other benefits.

I’ve had the Platinum Business version for years now, and Delta is still my favorite domestic airline to fly, but I haven’t had any strong feelings about it since I drastically reduced my Delta flying and stopped pursuing their Medallion elite status. Since the card had a $250 annual fee, my only goal was to use the companion ticket for a flight that cost at least that much, so I wouldn’t just be throwing the money away.

Fortunately, Delta has nonstop flights from my preferred local airport to Madison, Wisconsin, and Lexington, KY, so I’m able to use the companion ticket almost every year to visit friends there.

The annual fee on the Platinum personal and business cards is going up to $350 per year, and the Reserve personal and business cards will cost $650, in both cases on your first cardmember anniversary after May 1, 2024 (the higher annual fees are already in effect for new applicants). Even taking the increased annual fee into account, the value proposition of the card after this month’s changes has actually moved slightly in my favor. Here are the major changes and my impressions of them.

Improved companion ticket

The most attention has rightly been paid to the improved companion ticket, which now can be used for flights from the continental United States to “Hawaii, Alaska, Mexico, the Caribbean, and Central America.” Platinum companion tickets can only be used for economy, while the Reserve tickets can be used to book first class (but not Delta One, the even fancier first class cabin).

As I mentioned, I’m not inclined to use a Delta companion ticket for domestic connections if a non-stop flight is available on another carrier. Since my preferred local airport doesn’t have international flights, when traveling abroad a connection or a worse airport is a given, so expanding the number of destinations makes me much more likely to successfully use the ticket each year.

Note that “success” in this case depends not just on your destination and the price of the ticket (at least $350 before taxes and fees), but on the eligible fare classes. While more destinations are eligible for the ticket, the same (L, U, T, X, and V) economy fare classes have to be available, which can deeply constrain your options, especially during more popular windows for air travel.

Rideshare credits

The updated Platinum and Reserve cards now have a $10 per calendar month rideshare credit. Ordinarily I’d consider this a distracting gimmick, but I happen to have a specific use for these credits: I have a $5 per month subscription to Lyft’s “community pass,” which gives me unlimited access to free 30-minute dockless scooter rides.

I switched my recurring payment over to my Delta Platinum card and can already confirm it triggers the rideshare credit. When I occasionally trigger small overage fees for rides over 30 minutes, the credits also pay for those, although that’s worth less than face value to me since I would be more vigilant about ending my rides on time if I didn’t have the credits to cover them.

Since this is a “real” expense I’m currently paying with cash, I consider this $60 per year to be worth a full $60 to me.

Who or what is an “eligible Resy purchase?”

Another statement credit added to the cards is a $10 (Platinum personal and business) or $20 (Reserve personal and business) monthly credit for “eligible Resy purchases.” Since I’d never heard of Resy, I hopped over to their website to see what they sold and whether I wanted any of it.

In case you’re as clueless as I was, it turns out to be a restaurant reservation management platform owned by American Express. Discovering this didn’t shed much light on the situation: I still needed to know what a “Resy purchase” was and what would make it “eligible.” Would I need to make a reservation? Is there such a thing as a prepaid restaurant reservation?

Fortunately, it turns out virtually every restaurant I could think of is on the Resy platform, so I headed to a cool café nearby to see what the deal was. They sell gift cards, so I bought $10 worth and waited. Two days later, I received an e-mail from American Express that I’d earned a Resy credit, and it has already posted to my account (the credit is backdated to the day of the purchase so I’m not sure when it actually appeared on my transaction record).

Given my experience, I believe the credit is applied by American Express based on their own record of participating Resy restaurants and not by the restaurant processing the transaction in a specifically “Resy way” (the payment terminal was “toast”-branded, a popular restaurant point-of-sale system in my city).

The gift card I bought is reloadable, so my current plan is simply to load another $10 to it on the first of each month. I don’t value the credit at a full $120 (since I have never and would never spend $10 a month at this café), but it’s certainly worth something.

Prepaid Delta Stays, large-transaction and high-spend bonuses

There are a few more odds and ends on the cards that you should be aware of but won’t be relevant to everyone.

All the Delta co-branded American Express cards cards have an annual Delta Stays credit of between $100 (Gold personal) and $250 (Reserve Business). Delta Stays is powered by Expedia and appears to have the same prices you’d find booking directly through Expedia or Hotels.com. I often use Hotels.com to book paid stays on non-chain properties, so I’m very likely to use my entire $200 credit each year.

The Platinum Business card is unique (Doctor of Credit incorrectly says that the Reserve Business has this feature as well) in offering 1.5 SkyMiles per dollar on otherwise-unbonused (i.e., excluding “transit,” “U.S. shipping,” “Delta flights,” and “hotels”) individual transactions over $5,000, on up to $100,000 in such purchases per year.

Finally, the Platinum and Reserve cards give you 2,500 Medallion Qualifying Dollars at the beginning of each year, and you can earn 1 Medallion Qualifying dollar for every $20 (Platinum) or $10 (Reserve) spent with the card.

The last two benefits create an interesting opportunity and tradeoff. The Platinum Business card alone allows you to spend $50,000 per year in transactions of $5,000 or more to earn 75,000 SkyMiles and Silver Medallion status, while the Reserve cards allow you to earn 25,000 Skymiles and Silver Medallion status with $25,000 in spend (in transactions of any size) or 75,000 SkyMiles and Gold Medallion status with $75,000 in spend.

I don’t think either of these are particularly good value propositions in a vacuum, since I don’t think either Medallion status or SkyMiles are very valuable anymore, but it’s worth mentioning if you need to top up your MQD’s to reach the next Medallion tier: doing so in $5,000 or larger transactions on the Platinum Business card improves the value by giving you 50% more redeemable SkyMiles.

Conclusion

You can see why I view these changes as modest improvements to a set of cards that were already pretty unremarkable. After deducting the $60 in cash-like rideshare credits, I’ll be paying $290 for:

  • a slightly-improved economy companion ticket;

  • $120 in café gift cards;

  • and $200 in prepaid hotel stays.

That’s not a card I’d move to the top of my applications pile on its own, but it’s a card I’m fine keeping for another year. There are currently signup bonuses of 100,000 SkyMiles for the Platinum Business and 110,000 SkyMiles for the Reserve Business, which might make one of those worth signing up for if you already have a valuable use for the miles in mind. Since the companion ticket is only awarded after the first anniversary, you do have to hold onto the card for at least a year to even begin to get value out of your annual fee, which is not waived for the first year on any of the cards.