Author Topic: Cash back rewards vs airline points  (Read 5462 times)

ETBen

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Cash back rewards vs airline points
« on: February 15, 2016, 07:41:25 AM »
Let's assume I don't want to churn cc's. Does this make sense?

1.  I have Chase SW and got the 50k points. $99 next year.
2.  I have Chase sapphire preferred, no first year fee, for 40k points. $99 next year.
3.  Close both of these before next year but what should my main card be???,

4.  I have three big purchases each year. $2500 HOA, $2k after care, $2k summer care.

5.  Groceries are about $300 per month for me and 2 kids. I go to Target once per month and stock up on store brand non perishables, frozen meat and fish, etc. Then I go to Wegmans once each week to get veggies and a few special items. If I drive 5 miles more, that Target location actually has all my grocery needs. I also get most of my household supplies at Target. Wouldn't it be better to use Redcard Debit for Target and make myself put the 5% I saved into my travel fund?  I keep a separate account for this as motivation. Because that's 5 cents on every dollar when CCpoints are around 1 cent per dollar. 

6.  Use whatever my main credit card is for all other purchases. But should it be a cash back (where I then manually move money to savings) or a travel card? 

It seems better to have a card with more than 1% cash back and no fee, if you have the discipline to save and aren't churning. Foreign transaction fees are the other factor I can think of.

GrOW

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Re: Cash back rewards vs airline points
« Reply #1 on: February 15, 2016, 07:49:06 AM »
Definitely avoid annual fees unless you have hard evidence that your benefit will exceed it.

How do you define churning? You may find that opening, charging, paying, using points, closing card to be something worthwhile if only done on 2 cards per year. Some call this Churning Lite.

If you desire a cash back card, you can do better than 1%. Cap1 Quicksilver offers 1.5% and Chase offers a 2% card but it is an immediate 1% and then a delayed 1% even when you pay it off monthly.

Do you have access to a Dependent Care Flexible Spending Account (FSA) through work? If so, really look into using it for your childcare costs. Summer camps often qualify. Tax free for $4k of childcare spending will beat any rewards points or cashback card offer.

Bucksandreds

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Re: Cash back rewards vs airline points
« Reply #2 on: February 15, 2016, 08:38:51 AM »
Definitely avoid annual fees unless you have hard evidence that your benefit will exceed it.

How do you define churning? You may find that opening, charging, paying, using points, closing card to be something worthwhile if only done on 2 cards per year. Some call this Churning Lite.

If you desire a cash back card, you can do better than 1%. Cap1 Quicksilver offers 1.5% and Chase offers a 2% card but it is an immediate 1% and then a delayed 1% even when you pay it off monthly.

Do you have access to a Dependent Care Flexible Spending Account (FSA) through work? If so, really look into using it for your childcare costs. Summer camps often qualify. Tax free for $4k of childcare spending will beat any rewards points or cashback card offer.

Open citi premier $500 in gift cards to offset other expenses.
Cap one venture $400 gift cards.
Citi preferred $250
Etc etc.
open one up, spend minimum, collect benefit and repeat. Most allow you to repeat every 2 years.

NoStacheOhio

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Re: Cash back rewards vs airline points
« Reply #3 on: February 15, 2016, 09:08:19 AM »
Do you have access to a Dependent Care Flexible Spending Account (FSA) through work? If so, really look into using it for your childcare costs. Summer camps often qualify. Tax free for $4k of childcare spending will beat any rewards points or cashback card offer.

^ This. Basically, as long as it isn't overnight, it qualifies as childcare. If you don't have FSA, you can still write it off on your taxes at the end of the year. Call your provider and ask for a year-end statement (you'd need this with an FSA anyway).

I'm a big fan of the AmEx Blue cards. The everyday has no fee and 3% groceries (2% on gas and some other stuff, 1% on "everything else"). The preferred has a $75 fee but 6% on groceries. At $300/mo you wouldn't max the benefit ($6,000 spend/yr), but you could probably buy Target gift cards at Wegmans to make up the difference.

The other one that seems intriguing is that Citi card that gives you 1% on spending and 1% on paying off the card.

ETBen

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Re: Cash back rewards vs airline points
« Reply #4 on: February 15, 2016, 10:35:44 AM »
Yes, I am fine with opening and closing one or two cards per year at most  when it's worth it. I don't want to keep track of a lot of cards and dates and purchase requirements.

 I have a dependent care FSA. I pay for care up front on my card, get points/cash back. Then submit to FSA for reimbursement


 Those are all things I understand, but I don't think that's quite what I'm asking. I'm asking if it makes more sense to do cashback and/or manually save from a consistent 5% like redcard, rather than earn airline points. Except when large bonuses are in play, doesn't thw math work out better?  Or am I forgetting something?

For example, if I get 5% on groceries through target (plus5% extra on store brand) and then 1-3% cashback on all other spending at other stores/bills via a cashback card I would be getting more than the basic return a cC card with travel rewards. Unless I was earning good bonuses.

 

NoStacheOhio

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Re: Cash back rewards vs airline points
« Reply #5 on: February 15, 2016, 10:51:15 AM »
I guess it would depend on how useful airline points are to you. Personally, I prefer cash back, but that's just me.

Rubic

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Re: Cash back rewards vs airline points
« Reply #6 on: February 15, 2016, 11:25:47 AM »
Let's assume I don't want to churn cc's. Does this make sense?

1.  I have Chase SW and got the 50k points. $99 next year.
2.  I have Chase sapphire preferred, no first year fee, for 40k points. $99 next year.
3.  Close both of these before next year but what should my main card be???,

Close your Chase card on the annual approval month, when the annual fee is due.  If you close too soon after you've collected your bonus points, it may piss off Chase.  Additionally, there's a possibility that they would waive the AF for the Southwest card (though not the CSP), or maybe give you a retainer offer.  Don't forget to transfer your UR points (e.g. to Southwest miles) before you close the CSP.

Quote
4.  I have three big purchases each year. $2500 HOA, $2k after care, $2k summer care.

Most HOA's charge a fee for payment by CC which negates the value, unless you're using it for minimal spend on a bonus offer.

Quote
I am fine with opening and closing one or two cards per year at most  when it's worth it.

This essentially is churning.

If you're churning, apply for the appropriate cards one month before your major expenses ($2k after care, $2k summer care) so it's easy to hit your minimum spend for the signup bonuses.

Quote
I don't want to keep track of a lot of cards and dates and purchase requirements.

It's your choice, but it's a simple matter to set up a Google Doc spreadsheet to track your CC application date, bonus minimum spend amount, annual fee, closing date, and re-application date.  You don't want to re-apply for a card before the sign-on bonus applies (Citi: 18 months, Chase: 24 months) or miss your minimum spend by even a few dollars  Either mistake could cost you over $500 in bonus miles.

« Last Edit: February 15, 2016, 11:51:26 AM by rubic »

peoria

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Re: Cash back rewards vs airline points
« Reply #7 on: February 15, 2016, 12:14:40 PM »

 Those are all things I understand, but I don't think that's quite what I'm asking. I'm asking if it makes more sense to do cashback and/or manually save from a consistent 5% like redcard, rather than earn airline points. Except when large bonuses are in play, doesn't thw math work out better?  Or am I forgetting something?

For example, if I get 5% on groceries through target (plus5% extra on store brand) and then 1-3% cashback on all other spending at other stores/bills via a cashback card I would be getting more than the basic return a cC card with travel rewards. Unless I was earning good bonuses.

If you travel anyway, travel miles can sometimes equate to higher than cash back.  If you would be using the travel points just to use them, then they are not necessarily a good deal.

If Target has decent prices on the foods you do/would buy, then 5% with no fees beats most other card deals I have seen for everyday purchases without the hassle of minimum spend.  In my case, I find that target groceries (at a supertarget) are more than 5% higher than most stores in my area.  They are definitely way higher for the items that I purchase at my Walmart with light price matching.

If you are not interested in trying to meet credit card minimum spends or other fuss, for everday purchases, I would suggest the Citibank 2% card. (not affiliate link)
http://creditcards.citicards.com/usc/doublecash/2015/Mar/PS/default.htm?BT_SC=J.PB.Bhf.vy.GwW.azb.iOX.A.H2x&BT_TRF=162066&m=2SGO111111W&cmp=KNC~01~110901~CRDACQXX~Google&BT_MKWD=stxleOr0s%7Cdc_pcrid_81070128245_pmt_e_pkw_citibank+2+cash+back+credit+card_slid_&ProspectID=FCAAF63DE586490192748677836E6986

You can still use the redcard for anything you choose to buy at target for the 5% also.





MasterStache

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Re: Cash back rewards vs airline points
« Reply #8 on: February 15, 2016, 12:54:13 PM »
My wife and I both have the CSP card. We both also have the Chase Freedom card. The Freedom has no annual fee and 5% CB on various spending categories every 3 months (gas, groceries, etc.). The Chase UR points are transferrable to so many other hotels, airlines, etc. We plan on keeping both cards. We also have the Hyatt card, with an annual fee. But we get a free Hyatt night every year, which is worth more than the annual fee (depending on where you stay). We'll be cancelling our Southwest cars before next annual fee and a couple other cards that aren't very valuable to us. 

ETBen

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Re: Cash back rewards vs airline points
« Reply #9 on: February 15, 2016, 02:01:46 PM »
Thanks for the insights. Good points!

Using the card for big purchases and hoa ($10 one time fee for year) yes tied to minimum purchase for a bonus. I forgot to mention that.

Target grocery prices, the store brand of pantry items is less than my grocery stores. Don't have a Walmart grocery.

Anything I save from target or fastback is going to my travel fund, so id be using it either way.

I think of churning as the people who have a lot of cards at once, managing all the reqmts.  I'm not sure how confident id feel about tracking all of it. Silly bc I manage a lot more at work!

seattlecyclone

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Re: Cash back rewards vs airline points
« Reply #10 on: February 15, 2016, 03:26:33 PM »
I tend to prefer the cash back rewards because I know exactly what they're worth. The airline points can be worth more if you were going to buy travel anyway and you happen to snag a flight at the lowest mileage tier, but it's always a bit of a gamble.

bridget

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Re: Cash back rewards vs airline points
« Reply #11 on: February 15, 2016, 03:53:52 PM »
Well, you have to do the math. Whether it's worth it or not will usually depend on which two cards you're comparing.

Generally, I use a 2% cash back on everything card, because it makes my life simpler and I usually don't need to optimize to get much more (and also don't fly incredibly often). But, this year was different: spouse and I would be spending a year in different locations, meaning that our living expenses would more than double (I was going to HCOL area, but he was still staying in our place in LCOL area). We would both be taking frequent weekend flights between the two cities (short flight, long drive).

My thought process goes like this:

BIG THRESHOLD QUESTION: Would you be taking these flights anyway, and paying in cash? If NO, stop right there. Cash will be more useful to you. That's why I've always not done miles before. But, my situation turned into YES this year, so I proceeded.

1. How much $ are these points worth?

After talking to a card-churning travel-hacking friend, we decided to each sign up for British Airways visa cards, because [reasons to do with partner airlines and our respective cities]. I signed up a couple weeks before husband did, so we got different deals.

Me: Minimum spend of $2000 gets me 50k avios.
Him: Minimum spend of $2000 gets him 50k, when he spends $10k he gets another 25k, and when he spends $20k he gets another 25k.

Total spent: $22,000*
Total miles: 172,000 [150k bonus +22k for each dollar]
Total round-trip flights: 19**
Cash value of those flights: $3420***

2. Opportunity cost - what would I have gotten with my 2% CB?

Total spent: $22,000
Cash back: $440

Answer: I'm $3k ahead with doing miles, not cash back.****

A TON of details could mean that it isn't a good deal, so you need to pick two cards (one cash back, one miles) and figure out whether the miles are better than the cash back. The most important consideration, IMO, is whether you'd actually be spending $3400 on plane tickets anyway. I probably would have, in my situation.



*People can hit this with manufactured spending, but unfortunately, we were going to spend this much anyway within the year. (Rent in HCOL can be paid with cc, husband's university tuition can as well, plus our everyday purchases).

** Shortly after we signed up, BA changed the rate for short-haul flights, making our points worth less. This is a danger of miles (the credit card company cannot unilaterally decide to devalue the purchasing power of cash). But, we booked almost all of our flights out ahead of the cutoff.

*** Assuming $180/flight, which is the usual price between our destinations. However, BA has the benefit of only charging points based on distance, not cash value of flight, which can obviously changed based on all sorts of factors. Twice now I've booked flights to visit my husband at the last minute, when the cash value of the flight was north of $300, so this estimated savings is probably on the low side. This is not true of all mileage systems--lots do it based on the actual cost of the plane ticket--and you have to take it into account when you do the math.

**** BUT, as soon as I hit the bonus max with $22,000 spending, I'm switching back to my CB card, because I've done the math to compare what happens when I'm just getting a measly 1 point per dollar spent, and it isn't worth it. I would get 1 flight home for every $9,000 spent. (That's ignoring the point devaluation mentioned above). That's $180 in benefit. If I spend that on my cash back card, I get the exact same benefit - $180. But this time it's in cash, which is significantly more useful to me than an equal amount of plane ticket purchasing power, because I could use it on that ticket OR some other thing that matters more at the moment. Now that the points have been devalued it's even more compelling: I have to spend $15,000 for one $180 flight - at the expense of $300 cash.

GrOW

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Re: Cash back rewards vs airline points
« Reply #12 on: February 15, 2016, 05:21:19 PM »
That is just awesome Bridget. I am just two months into my first year of hacking. Likely hacking lite but hey it is a start. Two month in and two spending targets reached. I love reading about year long plans. Very inspirational. 

VAR

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Re: Cash back rewards vs airline points
« Reply #13 on: February 15, 2016, 05:29:01 PM »
What do people think about the Orbitz card?

5% EXTRA on Orbitz bookings—that’s up to 10% back in rewards!
2% in Orbucks on all other purchases (Orbucks can be spent on hotels, cars, or flights through Orbitz.com)
$50 statement credit after you spend $200 in the first 90 days
No annual fee, no foreign transaction fee

http://www.orbitz.com/rewards/visacard


Cycling Stache

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Re: Cash back rewards vs airline points
« Reply #14 on: February 15, 2016, 05:58:52 PM »
I did this for a year, and then gave up.  It just wasn't worth it to me in the end. 

I had Chase Sapphire and Chase Rapid Rewards, and was able to use bonuses for both.  That was nice.  I cancelled before annual fees (actually, both cards were skimmed a couple months before the year end, and that was a perfect opportunity to cancel).  I'm now back to just the Chase Freedom card, getting 1% cash back plus the occasional 5% plus the very occasional couple extra percent for shop through Chase at places like Sears and Walmart.

One of the difficulties I have with following these forums is that there is always a way to get a slightly better deal, and doing that can be exhausting, plus adds to the stress of constantly feeling like you're missing out on the perfect deal.

For me, I decided one card, some bonus, and consistency worked out just fine.  But it is definitely at the cost of the sign-up bonuses.

That said, my much bigger wealth addition came from cutting down the credit card use significantly.  YMMV.

ETBen

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Re: Cash back rewards vs airline points
« Reply #15 on: February 15, 2016, 06:13:00 PM »
Thanks, seeing your scenario helps!  Yes I would use the flights. No matter how much I make, I don't travel unless I have a specific savings for it and/or rewards.

I also projected my monthly target grocery and home items for 10 months. (Sadly, I'm that predictable).

I'm going to work out the math for the following:

1. Already planned to get 40k pts from CSP with paying for child care in advance (and then reimbursing through FSA). Don't think I want another travel card this year.

2. Check out some of these cashback cards listed here and others. Calculate value over this year's expected total spend

3. Calculate the 5% Redcard savings on Target projected purchases (to put in savings acct), plus cashback credit card on remaining projected year spend.

4. Calculate #3 above with 15% savings Redcard sign up bonus and buy projected years worth of stuff. Put 15% saved  in savings. Yes, that ones a little crazy.

Compare scenarios 2, 3, 4, and current (points return if I keep using CSP for all).

ETBen

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Re: Cash back rewards vs airline points
« Reply #16 on: February 15, 2016, 06:17:33 PM »

That said, my much bigger wealth addition came from cutting down the credit card use significantly.  YMMV.

Very good point. Working on a set budget here. I imagine people well overspend if they aren't conscious of it.

seattlecyclone

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Re: Cash back rewards vs airline points
« Reply #17 on: February 15, 2016, 07:55:27 PM »
What do people think about the Orbitz card?

5% EXTRA on Orbitz bookings—that’s up to 10% back in rewards!
2% in Orbucks on all other purchases (Orbucks can be spent on hotels, cars, or flights through Orbitz.com)
$50 statement credit after you spend $200 in the first 90 days
No annual fee, no foreign transaction fee

http://www.orbitz.com/rewards/visacard

Looks reasonable to me, provided that the Orbucks you receive are less than the amount of money you would have spent through Orbitz without the card.

However, you could do even better by also getting the Citi Double Cash card, putting all of your non-travel purchases on there and pocketing the 2% cash back. This would mean you have to spend more actual money on your Orbitz purchases, which increases the amount of money you get 5% back on through the Orbitz card.

I know Amazon runs a similar thing with their card. You can spend your points directly at the store (which earns you zero points), but you're better off taking the points as cash and earning 3% back by putting your Amazon purchases on the card.
« Last Edit: February 15, 2016, 07:59:46 PM by seattlecyclone »

Rubic

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Re: Cash back rewards vs airline points
« Reply #18 on: February 16, 2016, 07:39:52 AM »
I like the Citi Double Cash card.  If I'm between card applications or waiting on a new card to arrive it might be useful just to collect cash, though while I'm still churning it probably won't amount to much.  I've obtained four Citi cards in the past 12 months, including one I've just cancelled, so I might downgrade my oldest AA Platinum to a Double Cash.  Too bad they no longer offer the $200 signup bonus for the card. 

On the subject of overspending with credit cards:  If anything, I find that I'm more conservative with CC spending since I started churning.  Yesterday I just finished my last minimum with $3015 total on a $3K min spend for a 50K AA miles bonus.  Since I can manufacture spend, I'm not compelled to buy stuff I don't need.  Rather I'm trying to minimize my "natural" spend because I need the float.  Also I'm more likely to notice any fraud, since I'm closely watching my balances.