Venti reads my blog and makes some big, immediate improvements

Back in February I wrote about Venti, a very-high-interest savings account with a gimmicky twist: the “interest” on your savings is credited to a separate “points” balance that can only be redeemed for travel through the Venti flight and hotel shopping portals.

Since I’m one of the biggest Venti deposit-holders, it’s perhaps unsurprising they stumbled over that blog post and held a few team meetings about solutions to some of the problems I identified (from an e-mail: “We understand that you’ve been quite critical of Venti in the past through your blog. However, it would be a mistake on our end not to learn from you how to improve”).

I politely disagree with them that I was “quite critical” (they should read what I say about Gary Leff) but I’m glad to see they’ve already annouced three big improvements for existing customers and a few unannounced changes for those who have not joined.

I’ll break down the three announced changes in the order they were listed in the announcement.

“Increased Points Redemption”

Here’s the first change:

“The number one request was to allow for more Points to be used per transaction. Venti is not currently supported by outside funding/venture capital (despite some assuming so). Thus, limitations are in place until we accomplish certain milestones. As of this email, any flight under $250 can be booked solely with Points. All other flights have a flat $250 off MSRP. Hotel orders under $120 remain fully bookable with Points. In the future, you can expect the redemption ratios to improve significantly as we grow and onboard more members.”

This is terrific. It means you can spend down your points balance (the part that’s locked into Venti’s reservation ecosystem) first, before having to spend any of your cash balance (the part that can be moved in and out of other banks).

Right now that only applies up to $250, but the point is, it’s the first $250 of each reservation. For airlines that price all flights as one-ways, you can book each leg as a separate ticket to spend down your point balance $250 at a time. This crystallizes the value proposition I identified in my original post: “Venti is a way to earn above-market interest on your savings if you sometimes pay cash for airfare.”

“Updated Points Disbursement Schedule”

Here’s the second announced change:

“The current model heavily favors wealthier members who often begin their Venti experience with thousands in deposit. For the average member, it takes too long to accumulate Points at a rate that unlocks free travel. Starting June 1, we're changing Points disbursement to weekly instead of Monthly. Our rewards APY will remain at 9% for all paid membership tiers for 2024. Buddy Pass holders cannot deposit funds.”

This is phrased a little confusingly but you can understand the general point: the more frequently they award points, the more likely smaller-deposit accounts will be to get redeemable quantities of points. Smaller, more frequent redemptions are more likely to keep smaller depositers invested in the program, since they won’t have to wait months or years to get enough points to redeem for a domestic flight or a single hotel night.

Since one of my primary concerns is with the viability of the company as a whole, my personal feeling is that this also gives larger depositors confidence that their weekly points disbursement reflects their running balance. If the number suddenly jumps or drops or skips a week, then it will be an early clue that all is not right in Venti-land.

“Allowing Credit Cards”

The third announced change is arguably a bigger deal than either of those:

“The greatest area of friction within our product was only allowing flights and hotels to be booked with cash savings (and Points) from your Boarding Pass. Our goal was to avoid credit card processing fees since Venti does not profit from the sale of flights. In June, we'll enable credit card payment options for all membership tiers, including Buddy Pass. You will be able to use Venti Points along with your favorite credit card at checkout for flights and hotels.”

In principle, if you pay your credit card balance in full each month, then you should be almost indifferent between paying with your Venti cash balance or a credit card. In reality, one of the things we pay for on many annual-fee credit cards is travel benefits that are triggered by paying for airline tickets (and rental cars) with that particular card. Most trips don’t have qualifying events (like missed connections or late or lost baggage), and most people who suffer qualifying events never claim the benefit, but being unable to pay for flights with credit cards meant that no Venti flights were eligible for them at all.

I believe as long as you keep good enough records to connect the Venti reservation to the credit card charge, you should now be eligible for those benefits as long as you charge at least $1 of your airfare to the credit card.

Unannounced positive changes

While I was fooling around on their website, I noticed Venti had made a few more changes I had not seen them previously announce.

The “Priority” tier, which was previously listed at $72 per year and earning 5% APY (in points) on up to $15,000 has been slimmed down: it now has no annual fee but earns 9% APY on up to $7,500 in cash deposits.

The “First Class” tier is still listed at $500 per year (remember that I signed up when the First Class price was just $9.99), but now offers 9% APY on up to $250,000 in deposits, up from $100,000.

These are both positive changes. Early adopters like me can decide next year whether to switch over to Priority and keep $7,500 in the account trundling along earning 9% APY (compounding discipline requires constantly finding new places to stash your compounded returns), while heavy hitters can stuff $250,000 into First Class accounts and earn (after the $500 annual fee) roughly 8.8% APY and cover $22,000 in paid travel per year.

The “Business Class” tier appears to never have been actually launched and isn’t available on the website for signup, so no great win or loss to report there.

Venti, the too-clever-by-half subscription savings account and travel booking platform

What if I told you there was a way to earn 9% APY on up to $100,000 of liquid and federally-insured cash deposits? I hope your first response would be “tell me more,” because by the end of this post you’ll be begging me to tell you less.

Introduction

The company is called Venti (my personal referral link; we both get either $10 or $20 in “points” after you make a deposit — the site gives conflicting information on this and much else), and at first glance, the conceit is simple: pay an initiation fee of $9.99, and then select one of two paid tiers (the website lists a third intermediate tier in some places but not in others, because the company and website are hilariously amateurish):

• The “Priority” tier costs $72 per year ($8.99 the first year) and earns 5% APY on up to $15,000;

• The “First Class” tier costs $504 per year ($9.99 the first year) and earns 9% APY on up to $100,000.

Obviously, since for the first year there’s only a $1 difference in price and a 4-percentage-point difference in APY, you should sign up for First Class for your first year.

The most important catch in this program is that the “interest” you earn is not credited to your cash balance, but instead to your “points” balance, which is recorded separately. Your cash balance never changes except when you make deposits, withdrawals, or purchases. However, your points balance is included in your total balance (“spending power”) when calculating each month’s interest, so you still enjoy the benefits of compound interest.

In fact, I believe in principle your total balance should continue to compound even after it exceeds $100,000, since that’s supposedly only the maximum cash balance, not total balance, in your account, but I can’t speak to that from experience.

Using points (spending your “interest”)

Of course, money is only worth what you can spend it on, so you’re not earning any interest at all until you redeem your points.

To this end, Venti has implemented the most primitive booking website in history. You can book two things with Venti: airplane tickets and hotel stays, and each has its own portal, interface, and backend. The airfare portal is better than the hotel portal, and I haven’t had any trouble finding results that match the routes and prices available on any normal travel portal.

Hotel bookings, which only became available this month, are still not working great. As far as I can tell they pulled a static list of hotel rates when the site when live, so a lot of the search “results” they return are no longer available. Presumably that will eventually get sorted out, but it’s hard to know since communications from Venti are pretty inscrutable, to the point where my guess is that English is not the first language of any of their marketing employees.

Once you find a flight or hotel you want to book, you’re given the option to pay with a combination of cash (from your cash balance) and points (from your points balance). Importantly, however, you are not given the option to pay with any combination of cash and points.

The catch

Venti limits the number of points you can redeem for reservations to a percentage of the total cost.

In some cases that percentage is almost 100%. For example, they are currently promoting that “For 2024, any hotel quote with a total order MSRP of $120 or less can be booked for under $1 with Points.” When they say “with Points” they’re trying to convey that they will allow you to spend up to $119 of your points balance, so that you’ll owe less than $1 out of your cash balance. But that $119 is your interest on your money: they’re pretending to do you a favor by letting you spend your own money!

You can click around the airline and hotel booking portals yourself to get a sense of what the maximum points component of various reservations is.

For airfares, I’ve seen maximum redemptions of 15% and 25%. Oddly, like the old US Bank Flexperks Travel Rewards card, the maximum redemption seems to be based on the price of the ticket, with 25% redemptions for flights in the lower hundreds and 15% redemptions on more expensive flights, meaning you could redeem $100 in points and $300 in cash for a $400 flight, or $150 in points and $850 in cash for a $1,000 flight.

For hotel stays, there also appear to be price bands, starting at 20% for stays under $500, and then further bands of 17.5%, 15%, and so on down to 5% for the most expensive stay I found: just $1,724 in points for a $34,472, 7-night stay at The Dominick Hotel in New York City. Note that these bands are applied to stays, not nights, so you have the option to get a higher usage rate if you stay under a band threshold by breaking longer stays into shorter, cheaper ones.

The way I think about this is that you are not “saving money” when you redeem points. Instead, you are trying to maximize the amount of interest you are spending and minimize the amount of capital you are spending, since you can withdraw your capital at any time but your interest is locked in their ecosystem and subject to their rules.

What’s really going on here?

It took me a while to figure out what was going through their minds when the Venti gang concocted this scheme, but I think I finally wrapped my head around it: Venti is selling access to commission-free rates, and taking your interest instead.

Consider a normal commissioned transaction. It could be an insurance policy instead of a hotel room, but let’s stick with travel for simplicity: a hotel is selling rooms for $100. But hotels are in the hospitality business, not the marketing business, so they announce they’ll pay $20 to anyone who sells one of their hotel rooms. Not wanting to undercut their own feeble marketing efforts, they further insist that they’ll only pay the $20 to people who sell their rooms for $100.

This gives every tout a $20 budget to spend on marketing hotel rooms, and as professionals, they can make $20 go a lot further than a harried hotel manager can. What a lot of them ended up doing was creating loyalty and rebate programs. In this stylized story, Hotels.com takes that $20 per night and gives $5 of it to their own members, or at least the ones who accumulate enough rewards to ever redeem them for anything. They give another $1 to cash back portals to drive more traffic to their site so they can collect more of those $20 bills. The cash back portals give $0.25 of their dollar to bloggers when people sign up with their affiliate links.

Consider another, parallel ecosystem in the banking industry: brokered accounts. Ordinary people, if they encounter these at all, see them in the form of mortgage brokers and those ads in the back pages of the newspaper for brokered CD’s. You can think of a brokered CD as having some “true” rate of interest the bank is willing to pay to brokers for collecting deposits, such that they’ll make the profit they expect when lending the money out. The broker can then pay depositors whatever interest rate they’re willing to accept, and collect the difference as their “commission.”

At Venti, they seem to have looked at these two ecosystems, added a weekend of cocaine and ecstasy, and finally had the audacity to ask, “why not both?”

Here’s my crude version of their business model.

• Venti’s custodian, Veridian Credit Union, has some “true” underlying rate of interest they will pay anyone who collects money for them. If I had to guess, that rate is somewhere between 4% and 6%, but there are doubtless different tiers and bonuses that affect it as well. It is, in any case, nowhere near the 9% APY Venti promotes.

• As indicated above, Venti also charges customers account initiation and annual fees.

• Finally, Venti is paid a commission for selling flights and hotels through their crude booking portals. Remember, you can book flights and hotels using only your cash balance, without using any points at all, and on those transactions you pay full price and Venti collects the merchant’s full commission. Together, I think these three sources make up virtually all the company’s hypothetical revenue.

• Next, Venti credits customers’ points balance with whatever interest rate they’ve paid for, while capping the number of points you can use at their commission rate, or a formula more or less approximating it. Since the commission is not a main or even important source of income, they can afford to be generous with these redemptions, like the $119 redemptions for $120 hotel stays. Even if $119 is slightly more than the commission they earn on the stay, they’ve still been earning interest on your money for all the months it took you to accumulate $119 in points.

We can quibble about the details later, but take as given for a moment that this is an extremely profitable business model: they are selling something that costs them nothing, while collecting interest on other people’s money. It’s a kind of charming inversion of the free money dynamic that powered the careers of so many idiots during the last decade. Now that money is expensive again, they’ve changed gears from spending to collecting as much of it as possible!

The problem with airfare

There’s an obvious reason why cashback portals don’t pay out on flight reservations: there’s no money in the commissions. Airlines aren’t like hotels or car rental agencies that are desperate to get the word out: they can afford marketing departments and they go to a lot of trouble to differentiate themselves. Whether you think airfare is or should be treated as an interchangeable commodity is beside the point: I do not believe airlines are going around paying 25% sales commissions on $500 flights.

I am sure that Venti is aware of this problem, and I am sure that they consider selling airline tickets as well as hotel rooms to be a necessary cost of doing business. No one would buy into this crazy ecosystem just to get very slightly discounted hotel rooms (eventually, maybe, if they leave their money long enough without Venti going bankrupt).

Their survival as a going concern, therefore, relies on a favorable balance between airline and hotel points redemptions: enough customers have to redeem their points for hotel stays, which cost Venti nothing, to make up for customers redeeming for flights, which Venti has to pay near-market rates for.

But Venti has no control over that ratio, and any heavy-handed attempt to push customers away from flights towards hotels will simply drive them and their money away.

And this is, indeed, the story of so many companies that blip into existence, trundle along uneventfully until travel hackers discover them, and are then wiped out in a few weeks or months of extreme usage.

Conclusion

I do not think Venti is long for this world, at least in its current form, but once you understand how it works, it does offer a pretty clear value proposition: you can earn 9% APY in value that can be redeemed for up to 25% of the cost of paid airfare.

That’s not earth-shattering, but earth-shattering is a high bar to hold a 21st century travel or finance start-up to. Notwithstanding the enthusiasm of affiliate bloggers, most of what we do isn’t earth-shattering. Venti is a way to earn above-market interest on your savings if you sometimes pay cash for airfare.

If all of your travel needs are already met with points and miles, then you certainly shouldn’t lock any money into their system, but a lot of us pay cash from time to time, particularly for the cheap domestic flights where Venti lets you spend down your points balance most aggressively. Since I have a First Class membership (these were free back in December, although I still had to pay the $8.99 initiation fee), I’ll probably leave a few thousand dollars in my account earning 9% APY and clean out my points balance every few months when I book domestic travel.

Can Hyatt promo codes override seasonal cancellation policies?

Over the New Year holiday I braved the madness that is flying Southwest Airlines and took a weeklong trip down to Playa Del Carmen, Mexico. While putting the trip together, I noticed something curious as I sifted through the hundreds of hotels lining Quintana Roo’s coast: using a Hyatt promo code seemed to remove the restrictive cancellation policy at the hotel I ultimately chose. Since I didn’t need to cancel the stay, I’m not certain this is replicable or even useful, but I wanted to put the possibility on readers’ radars.

Planning my stay

Sparing the details of how I narrowed down the options, I finally settled on the Thompson Playa Del Carmen Main House, which had a nice combination of being both “in town” as opposed to the isolated beachfront resort hotels and a Hyatt property which at 15,000 points per night was an order of magnitude cheaper than any other hotel I was seriously considering.

The plan was complicated, in a good way, by the fact that I had two stackable American Express Offers, one for $60 off $300 spent at any Thompson in the world, and the second for $100 off $400 spent at any Hyatt property in Latin America. I also had over $1,000 in Hotels.com gift cards I got from Cardcash in an earlier gift card exchange.

This meant I wanted to break my weeklong stay into three pieces: paying for the most expensive nights with Hyatt points and a free night award certificate, paying for the cheapest night with my American Express card in order to trigger $160 off $400 (I used room charges to “top up” my bill to $400, since the cheapest of the 7 nights was only $379.90 after tax), and paying for the remaining nights using my Hotels.com gift card.

Cancellation policies, promo codes, and “Pay Your Way”

Since I was looking for the cheapest night to pay with my American Express card, I started on my irregularly-updated Hotel Promotions page and saw that the promo code “GOJALIN15” was offering up to 15% off paid stays. When I plugged that code into Hyatt’s “Special Offer Code” field, the rate popped right up.

This Thompson property, at least between Christmas and Epiphany (apparently a big deal in Quintana Roo), had a 30-day cancellation policy on award reservations and on all the normal paid rates I found. Inside of that 30-day window, no changes or cancellations were permitted without forfeiting the entire price of the stay.

The GOJALIN15 rate did not have that restriction. Instead, it had the standard 3-day cancellation policy you’ll find on stays if you go searching right now. This wasn’t particularly interesting on its own: I only wanted to book one night with cash, and the 30-day cancellation rate was much cheaper than the GOJALIN15 rate.

What got my attention was that when I clicked through the GOJALIN15 rate, I was offered the ability to “PAY MY WAY,” Hyatt’s booking feature that allows you to combine paid nights and award nights on a single stay. And using that option, the favorable cancellation policy passed through to the PAY MY WAY booking page.

Two observations follow from this, one actionable, the other merely interesting. The interesting point is that some (or all!) coupon codes generate PAY MY WAY-eligible rates; typically only "standard” and “member” rates are eligible for PAY MY WAY, so it’s nice to be able to identify potential future exceptions.

The more practical consideration is that if you plan to redeem points for a stay with unfavorable cancellation conditions, but can use a coupon code that applies more generous terms to the whole stay, then you might be able to “buy” a more flexible cancellation policy by paying for one night of the stay with cash.

Additional considerations

That’s the potential play, as far as it goes, but there are two more wrinkles.

First, it seems that even if you use PAY MY WAY on a coupon code with favorable cancellation terms, if you pay entirely with points or award certificates, then the stay is treated entirely as an award stay and the cancellation terms revert to the standard ones after making the reservation. In other words, you can’t change the cancellation policy on an award reservation merely by clicking the PAY MY WAY button.

I say “after” making the reservation because all through the booking process the more generous coupon code terms were shown. It was only after making my reservation and receiving the confirmation e-mail that I saw the 30-day cancellation policy on my reservation. I think this gives you a pretty airtight case for having the more favorable terms manually applied, as long as you are sure to take plenty of screenshots during the booking process.

Second, because I didn’t ultimately make a “mixed” PAY MY WAY reservation, I don’t know if the same thing would have happened in that case. If so, I still think the case for invoking the “original” more generous terms would be ironclad, but it’s never ideal to get into a position where the score is up to the ref.

Conclusion

I’m aware that what I’m describing is a fairly advanced corner case. You need to have a working coupon code that is set up with favorable cancellation terms (GOJALIN15 expires February 28, 2024), a property with unfavorable cancellation terms during your stay, and a stay with at least one paid night cheap enough to justify paying in cash to swap the cancellation policies — plus the willingness to fight for your points back if you do need to cancel the reservation in the window between the favorable and unfavorable policies.

And if you don’t ultimately cancel the reservation, then you’ll never know whether it “worked” or not!

Why do card counters sleep in their cars?

For the last few months I’ve been casually following up on my long-time interest in learning to play blackjack. I’ve now sunk about 100 hours into learning more about blackjack and casino “advantage play” in general, including listening to podcasts, reading forums, and yes, playing for real money in one of our local casinos. While it’s safe to say the casino still has a healthy advantage over me, what has struck me the most dipping my toes into the advantage play community is just how much it resembles the one I’ve been immersed in for well over a decade now: travel hacking.

Introduction to card counting

For those unfamiliar with blackjack advantage play, it consists of three largely unrelated components:

1. The ability to master “basic strategy.” For every set of blackjack rules, each hand of blackjack has a corresponding ideal move that offer the highest expected value to the player. This move does not always increase your chances of winning the hand; sometimes the move with the highest expected value is to surrender your hand and half your bet, guaranteeing your defeat! Playing perfect basic strategy reduces the house edge in most blackjack rulesets to 1% or less.

2. The ability to accurately count cards. There are a number of different card counting techniques with various advantages and disadvantages, but they all share the requirement that you update a running count as the dealer reveals each card. The ability to count cards has no effect on your odds of winning any given hand.

3. The ability to make the necessary moves to take advantage of perfect card counting. The most important of these is changing the size and number of your bets depending on your running count.

Note that these three skills are essentially unrelated. Learning basic strategy is a form of pattern recognition. While there are technically 310 different combinations of dealer and player hands that must be memorized to play perfect basic strategy, these fall into just 6-12 “patterns” (depending on how you find it easiest to memorize them). It probably took me 10-15 hours practicing with the “Blackjack101” iPhone app to be able to consistently play perfect basic strategy. If you practice using an app, note that you should find out the most common ruleset at your local casinos in order to make sure you’re getting the most practice on the ruleset you use the most. Different tables at the same casino can also have different rulesets.

Counting cards is a completely different skill, since there are no patterns in the order of cards dealt from a well-shuffled deck. The only way to learn to count cards is through hundreds or thousands of hours of practice. Depending on how you’re wired, you may find it easy or hard, relaxing or irritating, but if you cannot count cards perfectly every time then you cannot play blackjack with an advantage.

Finally, you must be able to adhere to a system of play that maximizes the amount of money at stake when the deck is rich with cards that benefit the player and minimizes the player’s losses when the odds are in the casino’s favor. This is not a matter of math or intellect at all: the knowledge of the correct bet flows mechanically from the method of card counting employed. But the ability to act on that knowledge is a matter of character and circumstance.

Advantage play and travel hacking

Using this framework, the parallels to travel hacking are obvious.

1. Travel hacking requires you to learn and access with relative ease the details of, if not the entire loyalty universe, then at least the programs that are or might be relevant to you. For a casual US travel hacker, that means at least 4 or 5 airline loyalty programs, one or two hotel programs, and a bank rewards program. Serious travel hackers learn much more, including about obscure and foreign loyalty programs.

2. A completely unrelated skill is learning and monitoring the current state of travel hacking techniques. Here, just as in card counting, accuracy is absolutely essential, since older techniques are constantly dying while new ones emerge. There’s no point applying for a signup bonus that expired last week, or expecting bonus grocery store rewards for a promotion that starts next Friday. Just as the skill of card counting atrophies without constant practice, returning to travel hacking after a long break requires refamiliarizing yourself with the current state of play.

3. Finally, perfect knowledge of loyalty programs and travel hacking techniques is useless without the ability to make the moves necessary to take advantage of them.

Most people cannot play blackjack with an advantage or succeed at travel hacking

A common lie, the motives behind which I’ll return to shortly, is that “anyone can win at blackjack” or that “anyone can be a travel hacker” (the latter claim normally safely couched by affiliate bloggers as “anyone can save money on travel” or something equally mealy-mouthed).

This is, of course, false.

Most people can’t play perfect basic strategy or memorize a dozen airline sweet spots because it is boring and has no meaningful connection to their everyday life.

Most people can’t count cards or decide whether a potential manufactured spend technique is worthwhile because it requires tedious and unfamiliar calculations.

Most people can’t make large bets when the deck is stacked in their favor or go big when a one-of-a-kind travel hacking opportunity presents itself because they are loss-averse, bet too low and forego lucrative plays, locking in their losses while passing up the chance to win correspondingly big.

Successful card counters and travel hackers don’t last long

What struck me most while learning about the card counting community and the available resources is that the biggest voices for card counting don’t seem to actually do it very much.

The typical progression is that someone discovers card counting, has a rough introductory period full of endearing anecdotes, then goes on a winning streak of 6-48 months (the length is immaterial). After that, they start Youtube channels, record podcasts, write books, and launch websites to sell card counting content and merchandise.

This is the same progression we see in travel hacking. Someone discovers travel hacking, has a few big scores, gets involved in the community, then they launch a blog, a podcast, a Youtube channel, and an affiliate relationship with the credit card companies.

There are two major reasons for this. First, the money is better, certainly on an hourly basis. Most travel hacking techniques require at least some time and attention to implement on an ongoing basis. Even simple online techniques require you to sit down at your computer and actually click the necessary buttons to trigger your payout each time. Writing a blog post full of credit card affiliate links, on the other hand, creates a kind of passive, semi-permanent money-generating asset as new readers discover the post and click through to your payday.

The second reason is that most people, even skilled, experienced people, don’t seem to enjoy it very much. For a lot of card counters and travel hackers, actually putting their knowledge to work seems like an unfortunate chore at worst or a dead-end job at best. “Running a business” packaging bite-sized tips on Tik Tok while burnishing your reputation as a Respected Elder must seem like bliss by comparison.

Why do card counters sleep in their cars?

One of the questions posed in the original “Freakonomics” book was “Why do drug dealers still live with their mothers?” The answer they arrive at is that despite handling enormous amounts of money, most individual drug dealers make poverty wages, so they live with their mothers, like many people who don’t make any money and are on speaking terms with their parents do.

What you realize listening to professional card counters is that they live in a kind of self-inflicted misery, driven in large part by the fear of “giving away their edge.” This often takes the ironic form of ascetisism. A common boast is that during a gambling trip a player will play for 20 hours straight every day. When they travel in teams, advantage players will bunk up in a single hotel room like a high school marching band to save on rooms. One player described sleeping in his (heated and air -conditioned) Tesla over the summer as he drove from casino to casino counting cards.

Importantly, this behavior is not driven by anything inherent to the principles of blackjack advantage play. In blackjack (if the dealer is using a “shoe,” or box of cards that are shuffled only once and then dealt out in order), each shoe is a new randomly ordered sample of cards, so the player’s result from the current shoe cannot have any effect on the probability of winning the next one. That means the player’s advantage, if any, is the same regardless of the number of shoes played. In other words, the player can stop at any time without affecting in any way the expected value of the hours they do play.

And yet, people who claim they have an expected advantage over the house of $100 per hour are willing to work for 20 hours in a row before falling asleep in their cars, all in order to save a few hundred dollars on a hotel room.

Conclusion

Lest anyone suggest I’m being snobby when suggesting most people can neither play blackjack with an advantage nor travel hack successfully, nothing could be further from the truth. Neither requires any special aptitude or gift.

Most people cannot do it because most people do not want to do it. If you try to talk to them about it, they may pay attention for a longer or shorter period of time out of politeness, and then they will lose interest and seek to change the subject to something that interests them instead of something they find tedious.

This is good and proper, not because it “preserves the opportunities for longer” or any hogwash like that, but because people should go through their lives seeking out things they find interesting and rewarding, not be lectured to by pedants about how they’re leaving money on the table by not doing whatever that particular pedant happens to believe is best for them.

The flip side is that when a nice online personality tells you something is easy, fun, and profitable, there’s a good chance that it is: for the person trying to get you to participate, against your better judgment.

Reminder: restrictions do differ between different shopping portals

Starting online purchases at a shopping portal is one of the simplest techniques travel hackers use, and it’s also one of the most reminiscent of extreme couponing: click through an online portal (be sure to clear your browser’s cookies first), make a purchase, and you’ll earn some miles, points, or cashback from the portal in addition to your credit card rewards.

While there are dozens, if not hundreds, of different online shopping portals, with a little bit of experience they can come to seem more or less interchangeable (they’re mostly operated by the same firm on the backend), which can be both a good and bad thing. It’s a good thing when it means the same technique will work on multiple portals, like the Wall Street Journal/Barron’s subscription deal; it’s a bad thing when the same restrictions are imposed on each portal, or even across portals.

It’s worth keeping an eye out for differences between portal restrictions

For my sins, I’ve had to book a couple upcoming hotel stays with cash, and decided to see what the current situation was on my online shopping portal accounts. The problem, in general, is that merchants got wise to people double-dipping through both shopping portals and their proprietary rewards programs, and so began to limit portal payouts when you log into your rewards account before completing a reservation. To give a simple example, if you click through to Hotels.com through TopCashBack, you’ll receive 8% cashback if you make your reservation without logging in, but only 2% cashback if you log in first:

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BeFrugal is slightly more competitive, at 10% and 2.5%, respectively:

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While this may seem like a cheap move for Hotels.com (because it is), the logic is obvious: they already operate a loyalty program offering a rebate of “about” 10% on hotel stays (every ten nights booked through the site earns a free night of equal or lesser average value). Giving people an additional discount just for knowing about it must give their director of marketing enough heartburn as it is.

This compromise at least makes shoppers stop and think: it’s true 12.5% (through BeFrugal) is higher than 10%(logged into Hotels.com), but a 10% cash payout might be more valuable than a 10% in-kind payout with a 2.5% cash bonus. In fact, I think under virtually all circumstances it would be.

But not all shopping portals have identical restrictions

Ideally, what you’d like is a shopping portal with a competitive payout rate that still works on rewards-earning transactions, and that’s why it’s worth checking the restrictions on each portal, instead of just assuming they’re all identical.

Lemoney, for example, offers 5.5% cashback at Hotels.com without restriction on whether you’re also collecting Hotels.com free night credits:

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To be clear: while my full cashback amount has already tracked properly, it won’t be payable for months so there’s no way of telling whether I’ll actually receive the full amount.

I found the same was true at Hilton, where BeFrugal offers 6% cashback to non-members and non-elite members, but just 1.5% to Silver, Gold, and Diamond elites:

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While Lemoney offers 4% cashback to everyone:

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Conclusion

Shopping portals have never played a particularly large role in my travel hacking game, simply because I’ve always been fortunate enough to have access to adequate manufactured spend to meet my travel needs, so this isn’t meant to be a comprehensive look into shopping portals, let alone a recommendation to use one over another (although feel free to find my own personal referral links on my Support the Site! page).

But it is meant as a reminder that while shopping portal terms are often similar, they aren’t always identical, and the differences between them can end up being more lucrative than you expect, particularly when you do end up needing to pay cash for travel expenses.

Lifecycle effects, Thanksgiving car rental edition

I often talk about lifecycle effects when it comes to travel hacking. That's what I call the phenomenon of people believing that travel hacking has become objectively more difficult when in fact it's their own lifecycle progression that has made them subjectively experience travel hacking as more time-consuming, laborious, or downright boring than when they had more time and fewer responsibilities.

This is a totally normal and indeed ubiquitous phenomenon in all fields of human endeavor, but it's important to keep in mind when you hear a retiree explain how much better everything used to be: sure, travel hacking might have been easier, but he also had more hair, better joints, and fewer kids.

I had my own lifecycle effect moment the other day while renting a car for a Thanksgiving trip.

How I think you're supposed to rent cars

Travel hackers have a lot of options when it comes to minimizing the cost and maximizing the value of car rentals:

• Redeem Discover cash back for car rental certificates. You can redeem $20 in Discover cash back for a $40 certificate with National, Alamo, and Enterprise.
• Earn frequent flyer miles by using airline promo codes when booking. I often see Frequent Miler posting these codes, for example here and here, but you can also earn miles by booking through airline car rental portals, e.g. Delta's.
• Use Autoslash to track car rental prices. Autoslash has changed quite a bit through the years but you can still use it to track your car rental reservation and alert you when the price drops, so you can make a new reservation at the lower price.

Five years ago I probably would have done all that, and made sure to minimize the price I paid and maximized the rewards I earned on our 4-day rental.

How I actually rented a car for Thanksgiving

I logged onto Chase Ultimate Rewards and redeemed 15,840 Ultimate Rewards points for a rental that priced out at $198, which seemed in line with the prices I saw glancing at Kayak.

I did create a Hertz account and earned 275 points for the rental (worth approximately $0), but I didn't bother searching for referral codes or promo codes to apply to the reservation.

Coming to terms with lifecycle effects

There are still lots of marginal travel hacking techniques I pursue. I still credit all my paid flights to a frequent flyer program, even if it's a program like United's that doesn't offer me much if any value. I still try my best to keep my Delta SkyBonus small business account active in order to gradually earn points towards redemptions like drink coupons and domestic flights. I use shopping portals when I buy stuff online, even if the rewards end up being just a few thousand points per year.

But when it comes to renting a car once a year, I can't bring myself to care the way a younger me probably would have.

Travel hacking without manufactured spend

I was having lunch with a travel hacker in my area the other day and we got to talking about different approaches to the game.

My personal approach depends almost entirely on manufactured spend. I think it's fair to say that if every manufactured spend avenue died tomorrow, I'd close all my travel credit cards and put all my regular purchases on a 2% cash back card (or a 2.625% cash back card if I ever had $100,000 in assets). I don't have any reimbursed business travel, either to generate real credit card spend or to take advantage of the benefits of elite status. And I'm poor, so I don't have enough monthly expenses to meet even a "modest" minimum spend requirement of $3,000 or more. Remember, we're imagining a world without any manufactured spend opportunities, including whatever you're thinking of right now.

That's one extreme, but obviously it doesn't apply to most or all of my readers, especially the well-heeled ones! The fact is, travel hacking is and would be possible without any manufactured spend at all. But the benefits would still depend on the discipline you applied to it. With that in mind, here are a few approaches you could take.

Target individual expenses

The most intuitive way to travel hack without manufactured spend is to target individual expenses on upcoming trips. As I often say, at least for economy travel, your hotel expenses can quickly outstrip your flight expenses, so that's a natural place to start. Once you have a destination in mind, it's easy to find the credit card or cards with signup bonuses that will save you the most money on hotel stays — emphasis on you. I truly do not care what a point is "worth" in the abstract; I care what it's worth to you, and what it's worth to you depends on how much money it's going to save you.

If you are planning a trip with stays at Marriott properties, the Marriott Rewards Premier card can earn you 80,000 points after spending $3,000. That's a minimum of 2 nights at all but their top-tier Category 9 properties, and at least 3 nights at Category 5 properties and below. Category 5 properties are an endangered species these days, which is one reason I cancelled my card; the annual free night certificate is only redeemable at Category 1-5 properties. But if you have upcoming Marriott expenses it's easy to calculate the precise value to you of the 80,000-point signup bonus.

Likewise with the current 100,000-point Hilton Honors Surpass American Express signup offer (you can find my personal referral link on my Support the Site! page), and the Chase Hyatt Visa Signature offer of 40,000 points. If you don't have the ability to manufacture spend, then those one-time points hauls can save you a lot of money on trips involving stays at Hilton or Hyatt.

The point is that this exercise doesn't require figuring out how much points are worth in the abstract. Instead, you can ground the value you're getting from a signup bonus directly in your own experience: the amount of money you would otherwise spend on nights you're able to pay for with a credit card's signup bonus.

Targeting airfare is somewhat more difficult, and should be done cautiously. For example, there's a big difference between cards which only allow you to redeem points for the entire cost of a flight (like US Bank Flexpoints) and cards which allow you to redeem points against the partial cost of a flight (like Chase Sapphire and Ink cards, Barclaycard Arrival cards, BankAmericard Travel Rewards, and others).

Likewise, there's a difference between airlines that allow you to pay for your flights with miles (Delta), airlines that offer last-seat availability at much higher rates (Alaska and American), and airlines that offer last-seat availability only to certain customers (United). This difference matters less in a world with manufactured spend, since with plentiful points you are always free to use the right points for the right job. In a world without manufactured spend you have much less room for error in earning and redeeming precisely the points you need. United miles simply won't get you where you need to go, if where you need to go is served only by American.

Build trips around the signup bonuses you're eligible for

A totally different approach to travel hacking without manufactured spend is to build your travel around the signup bonuses you have available to you. It often feels like this is the approach implicitly endorsed by affiliate bloggers who, in promoting a given credit card, explain exactly how and where they think you should use the card's signup bonus.

The advantage of this strategy is that you may be able to reduce your out-of-pocket expenses much more than you would with the strategy of targeting individual expenses, since each part of the trip will be designed around a particular points balance.

The disadvantage is that you have much less control over where you go. While to a travel hacker this may sound like a commonsense trade-off, it's worth pointing out how unusual it would seem to a civilian who plans trips around places they actually want or need to visit.

Even reimbursed business travelers need to think carefully

I often hold up reimbursed business travelers as a sort of platonic ideal of a travel hacker, one who is able to spend her employer's money, accrue elite-qualifying miles with the airline of her choice, and earn top-tier hotel status on someone else's dime.

But that's no excuse for reimbursed business travelers to relax: they still have to make decisions about the cards they use to pay for their reimbursed travel, and to a lesser extent which airline and hotel programs to pursue loyalty with. I say "to a lesser extent" because the various loyalty programs have become extremely adept at making the value proposition of their programs closely track each other. In other words, for actual paid hotel stays and for actual paid flights, the rebate you receive will be similar regardless of the program you select, as long as you direct all your paid business to a single program.

When it comes to credit cards, however, slacking off can be expensive. For example, a reimbursed business traveler who spends $1,000 at a Marriott property could earn 5,000 Marriott Rewards points by paying with a Chase Marriott Rewards Premier card, or 2,000 Starpoints with an American Express Starwood Preferred Guest card — which can be instantly transferred to 6,000 Marriott Rewards points. If you aren't aware of that, you're simply leaving points on the table.

Likewise, a reimbursed business traveler who is able to pay for their own flights still has to decide whether to concentrate or diversify. Should a reimbursed Delta flight be paid for with a Delta American Express card in order to earn as many Delta SkyMiles as quickly as possible, or with another card that bonuses airline purchases in order to diversify their points balances, even if that means lower balances across multiple accounts?

Conclusion

At the end of the day, travel hacking means different things to different people. For some people it means manufacturing spend, for others it means earning points cheaply and redeeming them dearly, and for others it just means occasionally signing up for a new round of credit cards in order to chop off a chunk of the cost of their travel expenses.

The thing I think it can't mean, or rather the thing travel hacking is in contrast to, is applying, spending, and traveling without thinking. So: don't do that.

Washtubs, not teaspoons

A few years back, reclusive travel hacking personality Mr. Pickles started tweeting pictures of a gas pump dispensing hundreds of gallons of gas for free and asking "what am I filling up?" Twitter's an elusive medium and I can't dredge up the actual thread (send me a link and I'll update this post!), but as I recall it ended up being a large wheeled diesel generator of some kind. There's nothing special about a travel hacker being able to buy gas for next to nothing, if they have access to the right stores during the right promotions, but Mr. Pickles didn't just have free gas: he had a plan.

In Warren Buffett's latest shareholder letter he wrote:

"Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons. And that we will do."

Many people in the country today are in the midst of such a downpour, which has got me thinking about the ways a travel hacker can equip herself with washtubs, not teaspoons.

Maintain a diverse collection of credit cards

I've been taking advantage of the current promotion with my Hilton Surpass American Express and US Bank Flexperks Travel Rewards cards, which I consider worth manufacturing spend on even in the absence of a promotion. But reasonable people disagree, and might instead manufacture spend primarily at unbonused merchants using cards like the Starwood Preferred Guest American Express or Chase Freedom Unlimited. Most of the time, that's a perfectly defensible decision. But when an opportunity like the current one comes along, it leaves those people at a disadvantage compared to people who keep one or more credit cards bonusing grocery store spend.

Manage credit lines

Like most travel hackers I have a general awareness of my reported credit card utilization rate, but unlike many travel hackers I don't really care about that rate, since my practice focuses mainly on manufacturing spend, not accumulating signup bonuses. However, being sure that you have the credit lines available to maximize an opportunity while it exists is a totally separate question. It's absolutely worth thinking in advance about how you'll open up credit limits suddenly when a unique opportunity emerges. How fast can you liquidate your spend in order to create additional headroom? Even if you manufacture relatively little spend, you might consider having a plan in place when a particularly lucrative opportunity comes along.

Come up with a plan

The benefits of the current promotion expire on April 6, which means there are two different timelines: the deadline to earn additional benefits and the deadline to redeem them. There's no point earning benefits that won't be used, or using benefits for things you don't want. That means I've been spending a lot of time looking around my apartment thinking, "what can I buy today that I'm certain to use eventually?" If you're hitting this opportunity hard, you may need to think further outside the box than usual. A few suggestions:

• Paper goods: Paper towels, toilet paper, facial tissue, coffee filters.
• Occasionally used products: batteries, lightbulbs.
• Toiletries: toothbrushes, toothpaste, soap, feminine hygiene products, razors, deodorant, shampoo.
• Canned goods.

Of course, the best time to come up with a plan is in advance, which is what Mr. Pickles did. I'm not saying you should buy a diesel generator just in case an unlimited free gas opportunity arises. But I am saying Mr. Pickles did and was able to hit that opportunity as hard as humanly possible.

Give stuff away

Once you've stocked up on everything you can possibly imagine needing, it's as good a time as any to think about folks who have unmet needs. I don't particularly care if you think of this as "charity" or as "paying it forward" or as "sticking it to the man," but if you have the ability to make somebody's day by giving them free gas, free groceries, or whatever else your travel hacking practice gives you free or cheap access to, then I think it's worth considering.

Conclusion

I happen to be in a position to take advantage of the current promotion fairly aggressively, but it should be obvious that I'm trying to frame this discussion in more general terms. If you don't have a plan in place in advance of a promotion, you're more likely to waste valuable time coming up with one while the promotion is ongoing.

The advantages of prepaying for travel at a discount

I have never belonged to the "travel is free" school of travel hackers, not because I don't think there are free or negative-cost methods of manufacturing spend (there are) or because I think my time has intrinsic value (it doesn't), but for the much simpler reason that most techniques that can be used to generate travel rewards can also be used to generate cash back. No matter how cheap or profitable your travel hacking is, the same techniques can often be used to generate some amount of cash back; that cash is the price of your "free" trips.

Now, there are a few exceptions. The IHG Priceless Surprises promotion didn't have a "cash back" option (although I did make some money when I sold the Bose speaker system I won). Likewise if you had 24 paid stays or 49 paid nights at Hyatt in 2016, you could pay for one additional stay and get a free night at any Hyatt in the world when Hyatt Gold Passport switched over to World of Hyatt. That's good old-fashioned travel hacking, with no obvious cash back equivalent.

But if you earn most of your loyalty rewards from manufactured spend, fulfillment by Amazon, or reselling private label products, you can almost always choose to earn cash instead of travel rewards. That's the simple reason I think travel is almost never free.

Instead, I prefer to think of my travel hacking practice as prepaying for travel at a — sometimes very steep — discount.

Prepaying for travel can save you money

This is obviously the most attractive reason you might choose to earn rewards currencies instead of cash back. If you need to choose between earning 1.5 Ultimate Rewards points with a Chase Freedom Unlimited card or 2.625% cash back on a BankAmericard Travel Rewards card, the obvious reason to do so is if you expect to get more than 1.75 cents per Ultimate Rewards point, for example on a premium cabin United redemption, expensive Hyatt stay, or Wanna Get Away fare on Southwest.

While I mentioned manufacturing cash versus rewards currencies, there are other ways to prepay for travel at a discount: Hyatt gift cards, for instance, are often on sale for 10% or more off face value, allowing you to "lock in" savings by purchasing gift cards on sale and redeeming them over time as needed.

It's more convenient to spread travel spending throughout the year

The other day I was chatting with a travel hacker who consults with businesses to use rewards to lower their travel costs and started thinking about the way a firm could use rewards earned throughout the year on business expenses to avoid month-to-month fluctuations in travel costs. After all, if you absolutely have to go to Louisville for business in May during the Kentucky Derby, you don't have the choice of paying the October cash rate — but you do have the option of paying the year-round points rate if, of course, you can find a standard room available.

This is more or less how I think about my Delta SkyMiles. I earn a block of SkyMiles each year with my Platinum Delta SkyMiles American Express card at a fixed cost, and then redeem them for my Delta flights whenever appropriate. Sometimes (hopefully more often than not) I save money compared to a cash back or fixed-value points card and sometimes I don't, but I don't have sudden Delta flight expenses as long as I have enough points to cover my flights.

This is partly what Frequent Miler calls "the joy of free:"

"When you book travel using miles & points, it may feel like your trip is free (or nearly free), regardless of how many miles and points you spend. If so, the pleasure you get from spending points and miles may greatly outweigh the pleasure you’d get from paying for the same trip with cash. In this case, miles & points are arguably (and ironically) worth more to you because you do not value them like cash."

But there's a more serious side to it as well. Travel expenses that can't be covered by existing points balances and have to be charged to a credit card require you to have cash available to pay off those new charges, lest you be stuck paying interest charges that quickly devour any profit or savings from your travel hacking practice. If you aggressively invest as much of your monthly cash flow as possible (have I mentioned my new blog, Independently Financed?), then having additional cash on hand to cover credit card payments necessarily disrupts the pace of your investments.

In other words, there are potential advantages to steadily building up and redeeming an inventory of travel rewards currencies even if you save relatively little in out-of-pocket expenses.

Some people need a permission structure to travel as much or as well as they'd like

Reader ed commented the other day:

"once a certain cache of points is retained, a freedom opens up to divert efforts toward cash back while still retaining flexibility for award-based travel. It would seem perfectly OK to me to pay for that increased flexibility even if I didn't use it. Therefore, I'm not sure that points that go unredeemed are without value. The value may simply be to clarify what my priorities are in the present moment, while retaining the means to travel on very short notice."

I think this is an interesting point that I don't always fully take into account. It's not just that traveling for "free" is more joyful, as I quoted Frequent Miler writing above, but that some people need the permission that paying little or nothing out of pocket provides in order to travel at all. A person who's both frugal and wants to see the world may need the impetus of high or even excessive points balances, hopefully cheaply acquired, in order to give herself permission to take the trips she's always dreamed of.

In this spirit, the constant drumbeat of devaluations may actually be a positive for the reluctant traveler! A trip that's affordable today might not be tomorrow, which may be enough to get someone out the door.

Conclusion

I love earning cash back, and try to earn as much of it as possible each month. But I admit that each of these different motivations drives me in part to earn rewards currencies in lieu of cash back: there are rewards currencies that I know will invariably save me money compared to cash back, there are rewards currencies like Hilton HHonors points that are so easy to earn and redeem that I'm able to spread my hotel spending evenly throughout the year, and there are currencies I accumulate just to give myself permission to book trips I might otherwise consider too expensive.

While the three rationales may differ in the degree of their economic "rationality," hopefully there's more to life than maximizing a utility function.

Doubt, skepticism, and risk management

Late last week there was a widely-publicized deal allowing you to earn 150 Avios per dollar spent at Match.com (with follow-up here). I had an exchange on Twitter with Ralph at PointsCentric that got me thinking about an issue that comes up fairly regularly in any travel hacking practice: the intersection of doubt, skepticism, and risk aversion.

I doubt nothing

Every travel hacker knows the feeling early on when they say to themself, "there is no possible way this will work," only to discover that it does. Doubt gets pounded out of you fast when you're regularly being paid by banks and merchants to shuffle money in, around and through them.

That's why I doubt nothing, and am willing to evaluate any deal at face value: what's the out-of-pocket cost, how much will I earn in rewards, what's the potential upside of the deal compared to other opportunities?

I'm skeptical of everything

In this case, the best case scenario was purchasing roughly 82,000 British Airways Avios for roughly $550, or 0.67 cents each, a 33% discount compared to transferring Ultimate Rewards points (worth one cent each) to British Airways.

Next, you can start considering the risks:

• The purchase won't track properly;
• The purchase won't track at all;
• The deal will be retroactively changed or revoked;
• Your account will be closed for abuse.

It turns out that what appears to have happened so far is that points were only awarded for "base" subscription amounts, not any additional features added to the subscription, meaning people who "maxed out" the deal earned 30,500 Avios for $550, paying roughly 1.8 cents per Avios.

Let me be clear: I did not predict this in any way, and am not taking credit for being prescient. I stated clearly in the Twitter exchange I linked to that I expected they would honor the deal (as they partially did). What I did say was that "you can buy Avios for one cent each year-round. The extent of the discount is the extent of your confidence." While I thought they would honor the deal, my level of confidence was extremely low, far too low to commit $550 to finding out whether my prediction was right or not.

It does sound like people are being refunded their Match.com subscription fees upon request, so those folks who jumped on the deal will, fortunately, be made whole.

Risk management is the intersection of belief and skepticism

There are two rules that are as true in travel hacking as they are in virtually any other field of human endeavor:

• The majority of gains accrue to those willing to take the most risk, and;
• The majority of losses accrue to those willing to take the most risk.

While I'm willing to take unlimited risk in my investment portfolio, I'm willing to take virtually no risk in my travel hacking portfolio. For me, travel hacking is about easy, consistent wins: I can calculate my profit on manufactured spend down to the penny, and I can fully comprehend the (not inconsiderable) risks.

I wrote back in January about a relatively speculative play I made, counting on an increased portal payout that never arrived. For that play I managed my risk in several ways:

• I made the purchase on a card the statement closing date of which had just passed, giving me the benefit of a full statement cycle and grace period to determine if the purchase would track and post properly;
• I made the purchase from a merchant with a generous, extended return period, ensuring that if the purchase failed to track properly (as it ultimately didn't) I wouldn't have to resell the merchandise at a loss.

As I explained in a recent subscribers-only Newsletter, I ended up making a small profit on the deal anyway, but I was only willing to pursue the deal in the first place due to the risk-management I had available.

Conclusion

When these time-limited deals come along, the fear of missing out that is the object of much popular fascination swings into action.

My basic view is that people should have a perfectly rational fear of missing out on the experiences they want to have, while trying to assuage that fear with respect to a particular deal or particular opportunity is far more likely to lead to expensive (or at least time-consuming) errors.

It's perfectly reasonable to relentlessly chase every deal that helps you achieve your goals, while only pursuing the fashionable deal of the moment after the most careful consideration.