$98.50 is more than $94. Ordinarily we would choose to spend $94 instead of $98.50. However if you have a bunch of Chase points that would otherwise sit there earning nothing for a very long time, you might find it a good plan to spend $98.50 worth of Chase points so that you can put that $94 of cash you could have spent on groceries into a productive investment instead.
...except it's not $98.50 worth of Chase points. It's $66 worth of Chase Points to pay off the $100 grocery bill (based on normal conversion rate of 1 point = 1 cent).
Right, but we are talking about opportunity costs. The options look like:
AMEX $100 grocery spend costs $100 and generates $6 in points
CSR $100 grocery spend costs $100 (6,667 points) and generates $1.5 in points
CSR $100 flight costs $100 in points (6,667 pats) and generates 0 points
CSR $100 flight costs $100 and generates $4.5 in points
AMEX $100 flight costs $100 and generates $5 in points
You want to use your chase points on the category with the least opportunity cost for you. For some that means grocery or home improvement (my opportunity cost for those is 7.5% using chase ink gift cards from staples). For some it’s flights Or restaurants (my opportunity cost there is only 4.5% using the CSR)
But for me, there’s no getting around the fact that using points gives up SOME opportunity to earn points. That’s just a cost of using points. Its unavoidable so I don’t sweat it too much (yeah in the future they might make an entirely new category that I have 2.25% opportunity cost with the freedom unlimited)
And I’m not planning to travel any time soon. If I buy a $500 gift card from grocery it costs me $506 in points minus $7.59 in earned points, plus $11.25 in lost opportunity to earn points on that $500 spend using my freedom unlimited. So around $10 to liquidate $500 in points. But that $500 can earn $50 (expected value not guaranteed) if I put it in VTSAX for a year. Points sitting in my account until I travel again don’t earn any interest.
