Author Topic: Understanding credit card points. Math question.  (Read 992 times)

fizzgig

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Understanding credit card points. Math question.
« on: March 30, 2018, 01:58:20 PM »
Without getting into the whole credit card churning lifestyle, I just started trying out paying my rent with a new credit card to get the 40K bonus points. In this case, the card is CapitalOne Venture.
Here are the numbers:
My rent is 1825 + $40 =1865. Using a credit card, there is a 40 dollar fee. Using the card for rent earned me 3700 points so far, a near 40 dollar value at least, I think?
Next month I will pay rent with it again, earning me the minimum spend required to earn the 40K bonus points, then I would start again with a new credit card to get some other bonus points.
So, while there is a 40 dollar credit card fee, it looks at if I'm mainly getting it back, am I understanding this right? I would then apply the points to hotel or airlines expenses which I intended to do anyway.
« Last Edit: March 30, 2018, 03:02:29 PM by fizzgig »

Catbert

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Re: Understanding credit card points. Math question.
« Reply #1 on: March 30, 2018, 02:42:23 PM »
Yes, you basically understand it.  If the points you're getting are worth 1 cent the $40 fee is netting you $37 in points.  So...only worth it when you are using your rent to meet a spending bonus.  For none bonus spending, not worth it.

What you need to understand/figure out if what a point is really worth to you.  If its a stricting cash back card then you know precisely what a point is worth.  But not all points are worth 1 cent.  Speaking very generally, hotel points are generally/often worth less than 1 cent while airline points may often be worth more than 1 cent.   

robartsd

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Re: Understanding credit card points. Math question.
« Reply #2 on: March 30, 2018, 03:35:18 PM »
If you're OK with manufactured spending you shouldn't need to charge items that add high fees for using a credit card to get bonuses.

The process is: 1) Buy VISA gift cards with credit cards. 2) Use VISA gift cards to buy money orders. 3) Deposit money orders in your bank account. 4) Pay off credit card balance.

Sometimes you can get a small cashback from merchant in step 1. Find the cheapest way to accomplish step 2. With the right combination, reward for step 1 can exceed costs from step 2. Steps 3 and 4 don't generally have fees. See https://forum.mrmoneymustache.com/journals/1-2million-miles-and-counting/.