Travel benefits versus travel hacking benefits

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[For reasons I cannot begin to understand, I am camping far from civilization this week. I have a couple posts scheduled, but won't be participating as actively as usual in the comments or on Twitter.]

With the announced elimination, as of January 1, 2016, of the "First Friday" dining benefit of the overrated Chase Sapphire Preferred, we've seen the predictable surge of posts extolling all the non-points benefits of the card. This makes a certain amount of sense since the card is so useless on the earning side that writing about actually using the card for purchases requires heroic level of delusion, even from our affiliate blogger friends.

If you're feeling self-loathing, you can read:

  • Mommy Points drooling over trip delay and cancellation coverage;
  • a Thought Leader in Travel giddy over primary car rental insurance;

If you have some self respect left you can instead read Miles to Memories reminding you to product change to Freedom or Doctor of Credit gaming out bonused restaurant spend on other, better cards.

Glancing at my Feedly did get me thinking about an interesting distinction: the one between travel benefits and travel hacking benefits.

Travel benefits are nice and not worth paying for

It's trivial to game out situations which would make credit card travel benefits pay for themselves many times over:

  • Trip delay and baggage delay insurance. Chase will reimburse up to $500 per ticket for unreimbursed meals and hotel expenses if a delay forces you to stay overnight. With a $95 annual fee, using this benefit once could conceivably pay for 5 years of annual fees;
  • Trip cancellation insurance. In covered situations, Chase will reimburse up to $10,000 in non-refundable reservations. That is a large multiple of $95.
  • Primary car rental insurance. If you rent a car with your Chase Sapphire Preferred, the rental car is insured by Chase, so you don't need to make a report to your own insurance company.

If you have a Chase Sapphire Preferred, you should take advantage of those benefits. The last thing you want to do is pay for benefits and not use them.

But you also shouldn't pay for them. Here's why:

  • You may already have cards that offer baggage delay and trip delay insurance. The Barclaycard Arrival+ covers up to $100 per day for up to 3 days when your baggage is delayed by 12 hours or more. The Citi Executive / AAdvantage offers up to $500 for baggage delays of 3 hours and $500 for trip delays of 3 hours or more, as does the Citi Prestige.
  • You may already have cards that offer trip cancellation and interruption insurance — see above.
  • Primary car rental insurance is not worth paying for, and virtually all your cards offer secondary car rental insurance. There are three kinds of insurance that matter when you're renting a car: a collision damage waiver, medical insurance, and personal liability. Your personal car insurance policy will usually include a collision damage waiver and personal liability policy. "Secondary" collision damage waiver policies, like those offered by most credit cards, will cover your deductible when filing a claim with your insurance company. When bloggers promote the advantages of primary rental car policies, they're gesturing at the fact that your insurance premium may go up when filing a claim with your insurance company. But you'll have to file a claim anyway if another vehicle is involved in your accident. Now, to be fair, that won't always be the case. My dad once backed a rental car into a tree and totaled it — that's the ideal use case of collision damage waivers. But it radically narrows the range of cases where you won't have to file a claim with your own insurance company, which is supposedly the evil avoided by primary rental car insurance.

You should know the benefits of your cards, and have a rough idea of what card to use for what kind of purchase. Personally, I use my Arrival+ MasterCard for pretty much everything, but you should certainly find the right combination of cards that works for you. The point is that you don't need to pay an extra $95 per year for those benefits; you likely already have them.

Travel hacking benefits can be worth paying for

For me, the difference between a travel hacking benefit and a travel benefit is that travel hacking benefits are available to be consciously exploited by the cardholder. No one would say they "hacked" their trip by paying for it with a Sapphire Preferred card, even if the trip was delayed enough to trigger the card's trip delay benefit. But someone who's going to pay for Global Entry can affirmatively sign up for a card that reimburses that expense and effectively spend the same $100 twice: once for Global Entry and once for a potentially-lucrative super-premium credit card.

As an exercise, here's a roundup of some travel hacking benefits that may be worth paying for, under the right circumstances:

  • $100 Global Entry fee reimbursement. American Express Platinum and Business Platinum cards are supposed to reimburse this fee once every five years (the term of Global Entry enrollment), although I've heard reports that the reimbursement actually resets annually. Citi Prestige cards also provide this benefit once every five years, although the card is too new to know whether that limit is enforced in practice.
  • Airline reimbursements. While statement credits are worth (much) less than cash, these are still benefits that can be actively gamed. The American Express Platinum and Business Platinum cards give $200 airline fee credits, which can be used as intended (for airline fees) or used to purchase gift cards with some airlines (for example, American Airlines). The Citi Prestige gives an even more generous $250 credit which can explicitly be used for airfares — no gift cards required.
  • Lounge access. If you're going to pay for a lounge membership, it often costs the same amount to sign up for a credit card that gives lounge access, but may have auxiliary benefits as well. The American Express Delta Reserve card gives lounge access (but not the ability to bring in guests) when you fly on Delta-coded or Delta-operated flights and earns 1.5 SkyMiles per dollar when you spend exactly $30,000 or $60,000 in a calendar year. Its $450 annual fee is the same as an "Individual" Sky Club membership. The Citi Prestige and Executive / AAdvantage give Admiral's Club access for the cardholder and up to two guests, and at $450 each cost the same or less than an Admiral's Club membership for non-elites with AAdvantage. The Chase United Club card earns 1.5 United Mileage Plus miles per dollar spent, and has a $450 annual fee — $100 less than the annual membership fee for non-elites.
  • Golf. The Citi Prestige offers a phenomenally complicated "free golf" benefit, which gives you up to 3 free rounds of golf per calendar year at select courses. The key thing to know is that it gives you, the cardholder, 3 free rounds of golf per calendar year. In other words, if you typically play golf in foursomes, it's a 25% discount — the benefit can't be applied to any other golfers in your group, or indeed to anyone else at all. But if you like to golf alone at premium courses, this is a straightforward way to do so for free.
  • Fourth night free. The Citi Prestige offers an also-complicated-but-less-so fourth night free benefit when making reservations through their "Citi Concierge" (call 1-561-922-0158 to reach them). If you are in the habit of paying for 4-night hotel stays with cash, this benefit offers an almost unlimited upside to making such reservations through Citi Concierge. My suspicion is that the benefit isn't long for this world, but it might justify paying the card's annual fee if you have near-term plans to take advantage of it.

Conclusion

I don't pay $450 annual fees and I don't recommend my readers do, either. When you pay an annual fee, you're forced to pay it in cash. That's why the value you get from a card needs to be measured in cash, as well. The distinction I've tried to draw in this post is between benefits that have cash value and those that require you to assign speculative, emotional value to them.

When you read a blogger telling you how priceless peace of mind is, you know to keep at least one hand on your wallet.

That's not to say that the Chase Sapphire Preferred doesn't have generous flight delay benefits. Indeed, if you regularly fly United Airlines in and out of Chicago or Denver, you could face overnight flight delays on a weekly basis, and let Chase pick up the tab for your points-earning hotel stays.

But that's an extreme case. Virtually everyone will be better off looking to the travel benefits already offered by their credit cards, and if they have cash left in their budget for credit card annual fees they should spend it on cards that offer concrete, recurring, lucrative benefits.