Rewards Cards: Cash Back vs. Hotels & Flights

[Grande]

Looking for some input and direction about cash back vs. hotel/miles cards. Right now I use Amex Blue Cash Preferred (6% grocery, 3% gasoline, 1% other with $75 annual fee) and Citibank Double Cash Back (2% all purchases). We also use Target Card and Amazon Prime Card (both 5%). I have been always interested in the miles game. Two things keep me in the cash back cards: 1.The miles cards benefits were less straightforward    2. I wasn’t going on any vacation anyway with young kids (now age 3.5 and 1.5 years). Now the kids are getting older and we are starting to head out and use hotels. No flying yet.


Below is short summary of 2016 spending, cash back, and yield.

Amex 
Spending: $13973
Cash Back $500 ($425 after $75 annual fee)
Yield: 3.58%
Adjusted Yield after Annual Fee: 3.04%

Citi
Spending: $13073
Cash Back: $269
Yield: 2.06%

Total:
Spending: $27046
Cash Back: $694
Yield: 2.57%


My big question is how does this spending and cash back (~$700/year) stack up against hotel/miles cards. And to make things simple a straight forward miles scenario. I have seen some crazy gaming (MilesDividend site) but I’m not counting that yet. How far would $27,000 of annual spending get me with hotels? How many nights? $700 would get me 3.5 nights/year in a $200 room using the cash back to pay for hotel using realized cash back benefits.

School me.

[bacchi]

If you can put $24k/year on cards, you can easily get 30 nights of hotel rooms for free or very close to free. The first year, anyway.

If you have a spouse willing to play the game, he/she can get 30+ nights as well in year 2. Rinse and repeat.

Some cards are good to keep if you hotel a lot. The Chase IHG offers a free room/year for the annual fee; for $49, you get a voucher for any IHG hotel (Holiday Inn, Continental, etc.) That's well worth it.

The real game is in the sign-up bonuses except for a few such as the IHG and Hyatt cards.


Eta: I should add that you need to learn some basic rules before starting. Chase is very restrictive about how many new accounts you have. Start with those, such as the Chase Marriott.

[Catbert]

Let me paint a less rosy picture than Bacchi.  Yes, if you churn credit cards, meeting the sign up minimum spend, getting the bonus and then moving on to another cc you could get free hotel rooms and flights.  If you travel and don't mind the work, it can definitely be worth it even without doing manufactured spending.   30 hotel rooms a year is pushing it IME.  I'm not saying bacchi didn't do it, just that it would be work and probably not hotel rooms in big exotic cities.

For a simple life you've already picked the cards which have the best cash back.  Your choice.

 

[Brother Esau]

We are getting close to FIRE and have recently committed to start doing 1 or 2 decent vacations each year. We, therefore, chose to start with the Chase Sapphire and 100,000 bonus sign up points. The DW and I each obtained one. This equals $3,000 combined when booking travel through the Chase portal without even considering additional points from our own spending. We'll reevaluate our situation in a year or so and see what new offers pop up.

[BikeFanatic]

If you spouse and you get two credit cards say the american airlines cards from Barclay or citibank, that will net you two R/T tickets=$900-$1100 then you each get a Hyatt card or Amex Hilton and you get 500-750 dollars in value x 2 =and you have just doubled your take from the cash card on bonus points. The spend will be ten thousand. you end up with 2 R/T tickets and 4-6 nights stay somewhere.

The most flexable cards for beginners are the Chase saffire, the citibank thankyou, the barcalys arrival plus and the capitol one venture rewards. Theses card make it easy to transfer points to tickets or hotels without any black out dates. I think I would start there.

[seattlecyclone]

I generally have a bias toward cash back cards. You know exactly what your reward is worth, you can spend it on whatever you like, and you can redeem it in smaller increments than a full airplane flight or hotel stay. The vendor lock-in from many points programs turns me off as well. Suppose you earn enough points for a night in a hotel that charges $125, but you would have been perfectly happy staying in the competing hotel down the road that only charges $100. Do you then count that as $125 of value received from the points, or only $100?

[bacchi]

30 hotel rooms a year is pushing it IME.  I'm not saying bacchi didn't do it, just that it would be work and probably not hotel rooms in big exotic cities.

Yeah, that was off the cuff. It'd be mostly road trip hotels and it might not be quite 30 nights. Let's try.

** This is ad lib and may not be the optimal strategy given the limitations with Chase and Citi. As it's quick and dirty, it's as trustworthy as the time I've spent, which isn't much. **

Given $27k of annual spend,

Month 1:
Chase CSP -- 50k UR points transferred to Hyatt for 3 Category 4 nights (Grand Hyatt Seattle, ~downtown) -- $0 AF waived

Month 2:
Chase Marriott -- 80k points for 1 night at the Central Park JW Marriott and 2 nights at some interstate Residence Inn -- $99 AF

Month 3:
Barclay Choice -- 40k points for 2 interstate hotels (with breakfast) -- $0 AF

Month 4:
Chase Hyatt -- 2 nights at any fancypants Hyatt worldwide -- $25 AF the first year

Month 5:
Amex Hilton -- 80,000 points, worth 2 nights at several Manhattan Hiltons -- $0 AF

Month 6:
Chase IHG -- 60k points for 3 nights at any of the 100s of IHG hotels on the road -- $0 AF waived

Month 7:
Citi Hilton -- 75k points for 1 night at a SLC Hilton and 1 night at a Moab, UT Hilton -- $0 AF waived

Month 8:
Barclay Arrival+ -- $500 for 2 nights at $250 hotels -- $0 AF waived

Month 9:
FNBO Best Western -- 50k points for 1 night at West Yellowstone and 1 night on the road to Yellowstone -- $0 AF waived

Month 10:
FNBO La Quinta -- 1 night after 1 charge -- $0 AF

Month 11:
Citi TYP -- 30k points transferred to Hilton at 1.5x giving us 2 nights on the road (or 2 nights in a suburb of Seattle) -- $0 AF waived

Month 12:
CapOne Venture -- $400 for 2 nights at $200 each -- $0 AF waived

Total outlay: $124
Total nights: 25
--Total fancypants hotels: 5
--Total destination hotels: 5
--Total interstate/suburb/airport hotels: 15
Total spend: $25,000

Other costs:
-- applying for a card every month
-- swapping out the spend card every month
-- keeping track of annual fees and dates in a spreadsheet

You probably don't have 25 days of vacation a year anyway so modify as desired. It'll reduce the work.



Eta: Source is https://docs.google.com/spreadsheets/d/1UEWoLQ3JqVIwHPRuXYuGw13pI5bzQ1C6f37q6RU1idE/htmlview?sle=true

[GetItRight]

Flights and hotels means other extra expenses. I will only travel commercial air for work as I do not consent to waiving my constitutional rights and being sexually assaulted for a vacation. I also only stay in a hotel for my own purposes a few nights a year. I stick with the 2% Citibank card as it's a no brainer way to get a small discount on purchases I'd make anyway. I appreciate your breakdown of the Amex netting 3% cash back after annual fee, but I don't spend that much. Not worth my time to figure if it is a net gain with the fee when I'd only use it for gas and groceries.

TLDR: Cash back only, no annual fees. Keep it simple.

[nouveauRiche]

I will only travel commercial air for work as I do not consent to waiving my constitutional rights and being sexually assaulted for a vacation.

Hyperbole much?

[GetItRight]

Hyperbole much?

Nope.

[TomTX]

Yep, signup bonuses are where it's at. Typical to get more like 20% back.

[Hotstreak]

There is a discrepancy is using the current 2x cash back cards per year versus 10-12x travel rewards cards per year.  If OP used numerous cash back cards per year, they could get a lot of sign up bonuses and would be making many multiples of $700.  So that needs to be adjusted for.  The questions should be 1) if you choose a small number of cards and use only those cards over a multi-year period, is it better to use cash or travel cards and 2) if you churn through cards for sign up bonuses, is it better to use cash or travel cards.

[TomTX]

There is a discrepancy is using the current 2x cash back cards per year versus 10-12x travel rewards cards per year.  If OP used numerous cash back cards per year, they could get a lot of sign up bonuses and would be making many multiples of $700.  So that needs to be adjusted for.  The questions should be 1) if you choose a small number of cards and use only those cards over a multi-year period, is it better to use cash or travel cards and 2) if you churn through cards for sign up bonuses, is it better to use cash or travel cards.

While focusing on either cash or travel makes a lot of sense for your basic cash back (otherwise it takes forever to get a useful number of travel points) it doesn't seem to make sense for signup bonuses. Sure, you concentrate on whatever is more helpful for you personal circumstance, but don't make a firm decision that you are JUST doing cash or JUST doing travel. Example: I want a free flight to Tallahassee. So I skip the Southwest bonuses since they don't fly to that airport. Delta makes more sense. Once I've mined the direct signup bonuses for Delta, I may as well get cash rewards, or flexible point rewards that can be used for either cash or travel (usually travel is a better redemption)- focusing on points that convert easily/at a good rate to Delta.

[chasesfish]

I'm going to add to the thread...

My spending used to look like this for ten years.  I finally broke down and started "churning" credit cards.  I've kept my Amex, but have continued to sign up for new cards every 3-6 months to meet the spend minimum. 

Its surprisingly easy, just keep a spreadsheet with the card name, your signup date, when you get hit with an annual fee, and the name of the issuing bank.

Most of the issuing banks restrict your signup bonuses to once every two years.  If you get your wife on board, you can really earn points.

I'm way down this path and on a US Bank card, but getting essentially a 10% rebate for the first $2,000.

[BikeFanatic]

There is a discrepancy is using the current 2x cash back cards per year versus 10-12x travel rewards cards per year.  If OP used numerous cash back cards per year, they could get a lot of sign up bonuses and would be making many multiples of $700.  So that needs to be adjusted for.  The questions should be 1) if you choose a small number of cards and use only those cards over a multi-year period, is it better to use cash or travel cards and 2) if you churn through cards for sign up bonuses, is it better to use cash or travel cards.

This is an excellent question can You churn theses cash back cards are there enough of them?
As someone else said you could just churn cash back cards and pay for your own (cheaper) hotel instead of staying at the Hyatt. I feel the Barclay Arrivals plus card falls into this category, and still you do have to travel.
Is the cash back Taxable? That is another issue. Travel rewards are not Taxable.

[bacchi]

This is an excellent question can You churn theses cash back cards are there enough of them?
As someone else said you could just churn cash back cards and pay for your own (cheaper) hotel instead of staying at the Hyatt. I feel the Barclay Arrivals plus card falls into this category, and still you do have to travel.
Is the cash back Taxable? That is another issue. Travel rewards are not Taxable.

Cash back isn't taxable if it's a rebate on purchases. As long as it's "Spend $1000 and get $/miles/points back," you're ok.

I know you just picked it as an example but the Hyatt is not a good one because it allows 2 free nights anywhere in the world. Even the cheapest Hyatt is, what, $100/night? That's a spend of $10k at 2% back to get the cash you'd need.

I think it'd be difficult to find enough cash back cards to equal the miles and hotel bonuses. Points are just a better thing to offer for the card companies; points can be devalued and some are left over and some are forgotten. You'd probably have to start getting into bank bonuses, which are more hassle.

[nick663]

I generally have a bias toward cash back cards. You know exactly what your reward is worth, you can spend it on whatever you like, and you can redeem it in smaller increments than a full airplane flight or hotel stay. The vendor lock-in from many points programs turns me off as well. Suppose you earn enough points for a night in a hotel that charges $125, but you would have been perfectly happy staying in the competing hotel down the road that only charges $100. Do you then count that as $125 of value received from the points, or only $100?

I feel the same as this.

I have had situations in the past where I had miles or a voucher from an airline that would cover my airfare but not my wife's.  We always ended up paying more for her seat on the flight than we would have if we had flown a different airline... so the value of my points/voucher was getting hit twice for the cost difference from the option we would have chosen if we had just received cash.

That being said, I still try to churn bonus offers like the AAdvantage Citi card for 60k miles because it's such a huge difference when compared to the cash bonus offers on most cards.  I just don't use these cards after the bonus is awarded because I'd prefer cash back.

[Ocinfo]

I will only travel commercial air for work as I do not consent to waiving my constitutional rights and being sexually assaulted for a vacation.

So you're ok being sexually assaulted as long as you get paid?


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[MasterStache]

The hotel cards really come in handy if you have some pre-defined plans. For example the wifey and I went to Cancun last year (without the kids). Hadn't been anywhere since our honeymoon many years ago. We each opened up Hyatt cards and got 4 total free nights at a 5 star all inclusive adult only resort. We had enough Chase points to add another free night. So it was well worth the sign-up bonus on the hotel cards since we had our vacation picked before we signed up. Saved us thousands. Oh and our flights were free with Southwest sign up bonus points.

We do use the 6% and 3% cash back for groceries and some other things though. A bit of a mixed bag for us.

[Grande]

Thanks for the replies. I have a better understanding of it now. I read about this stuff elsewhere and consensus seems that Chase is a good place to start, Chase Sapphire in particular. I don't think we will be using points on flights (2 young kids) but travel by car and point for hotels instead. These days we prefer the extended stay style hotels/Business style with separate rooms (eg Marriott Residence Inn)

Thoughts on Chase Sapphire Preferred versus Chase Marriott Rewards Premier?

https://creditcards.chase.com/credit-cards/compare-cards?CELL=603Z&HT5N=VK0WN8&jp_ltg=chsecate_compare&list=4,12

Sapphire: 50K on $4000 spending for 3 months
Marriott: 100K  on $5000 spending for 3 months


?

[JoJo]

I have to admit, I feel like I'm hoarding points with my travel cards.  I find the reward flights use too many points and then I end up buying the tickets, defeating the purpose.  I hope to RE soon and maybe then will use them up.

[Goldielocks]

I will only travel commercial air for work as I do not consent to waiving my constitutional rights and being sexually assaulted for a vacation.

Hyperbole much?

He only lets work F* him.


Why not FIRE already?

[Viking Thor]

I would go back to the question of what is better if you don't churn cards and just keep one or two cards long term.

It seems pretty clear travel Reward cards are better for churning; there are fewer cash back cards and they typically have lesser sign-up bonuses.

Anyone have a take on what is better if you don't churn cards?

My gut feel is that it depends on your spend patterns, i.e cash back often reward certain categories more like like gas, drug stores, grocery stores for example, while travel cards are typically biased towards a particular travel spend category that gives more points.

[Grande]

I would go back to the question of what is better if you don't churn cards and just keep one or two cards long term.

It seems pretty clear travel Reward cards are better for churning; there are fewer cash back cards and they typically have lesser sign-up bonuses.

Anyone have a take on what is better if you don't churn cards?

My gut feel is that it depends on your spend patterns, i.e cash back often reward certain categories more like like gas, drug stores, grocery stores for example, while travel cards are typically biased towards a particular travel spend category that gives more points.

From my take it appears all the action is scoring the bonus points. After that these cards don't fare any better than cash back credit cards. That's why people are signing up, doing the minimum spend, realizing the bonus points, and then moving on the another cards. I think I'll give a try and see how it goes. Choosefi has a podcast and three articles on it that makes it pretty clear. Clear to me at least.

http://www.choosefi.com/all-articles/travel-rewards/

[TomTX]

Thanks for the replies. I have a better understanding of it now. I read about this stuff elsewhere and consensus seems that Chase is a good place to start, Chase Sapphire in particular. I don't think we will be using points on flights (2 young kids) but travel by car and point for hotels instead. These days we prefer the extended stay style hotels/Business style with separate rooms (eg Marriott Residence Inn)

Thoughts on Chase Sapphire Preferred versus Chase Marriott Rewards Premier?

https://creditcards.chase.com/credit-cards/compare-cards?CELL=603Z&HT5N=VK0WN8&jp_ltg=chsecate_compare&list=4,12

Sapphire: 50K on $4000 spending for 3 months
Marriott: 100K  on $5000 spending for 3 months


?

Unless you have a real preference for Marriott, the CSP points are a lot more flexible. But you can do both sequentially. There is a fair amount of speculation that the CSP offer will be reduced soon, because the CSR  bonus was already cut in half.

[Grande]

Thanks for the replies. I have a better understanding of it now. I read about this stuff elsewhere and consensus seems that Chase is a good place to start, Chase Sapphire in particular. I don't think we will be using points on flights (2 young kids) but travel by car and point for hotels instead. These days we prefer the extended stay style hotels/Business style with separate rooms (eg Marriott Residence Inn)

Thoughts on Chase Sapphire Preferred versus Chase Marriott Rewards Premier?

https://creditcards.chase.com/credit-cards/compare-cards?CELL=603Z&HT5N=VK0WN8&jp_ltg=chsecate_compare&list=4,12

Sapphire: 50K on $4000 spending for 3 months
Marriott: 100K  on $5000 spending for 3 months


?

Unless you have a real preference for Marriott, the CSP points are a lot more flexible. But you can do both sequentially. There is a fair amount of speculation that the CSP offer will be reduced soon, because the CSR  bonus was already cut in half.

My only preference with Marriott is just that I know I will use that hotel. I won't be flying anytime soon. The 100K bonus is 2x that of Sapphire. 

[chasesfish]

I have to admit, I feel like I'm hoarding points with my travel cards.  I find the reward flights use too many points and then I end up buying the tickets, defeating the purpose.  I hope to RE soon and maybe then will use them up.

The benefit of early retirement...you don't care about having to take a 6am on Tuesday flight with two connections for the cheapest route to Hawaii

[bacchi]

My only preference with Marriott is just that I know I will use that hotel. I won't be flying anytime soon. The 100K bonus is 2x that of Sapphire.

Go here and see if the Marriott cards works for you.

http://awardmapper.com/

[GetItRight]

I will only travel commercial air for work as I do not consent to waiving my constitutional rights and being sexually assaulted for a vacation.

So you're ok being sexually assaulted as long as you get paid?

No, violating people's rights is never ok. Unfortunately if I don't travel for work I cannot do my job and at the least would limit my income or be searching for other work. The goal is to be FI as soon as possible, once that occurs if the government is still sexually assaulting people and otherwise trampling our rights as a condition for commercial air travel I will no longer travel commercial air for any reason. It's not like my employer is sexually assaulting me. Also, if driving is feasible in the time I have to get there I'll generally do up to a 14-16 hour drive rather than submit to sexual assault and other violations of my rights. Unfortunately rail is not practical to travel long distances in this country.

[ketchup]

Generally hotel/flight points/miles are best, assuming you travel enough to burn them effectively and are willing to put in a little legwork to figure out decent redemption.

My strategy at the moment is that I put everything I can on a 5% back card (groceries from BCP, rotating categories on Chase Freedom/Citi Dividend/Discover), and everything else goes on whatever I'm currently churning.

[Grande]

From what I am gathering it seems points work better for airline tickets over hotel stays. Your points save more $ for airline travel over hotel rooms. Is this correct?

[ketchup]

From what I am gathering it seems points work better for airline tickets over hotel stays. Your points save more $ for airline travel over hotel rooms. Is this correct?

Definitely as a rule of thumb.  80K Alaksa Airlines points can get you a round trip ticket from the US to Australia with a week-long stopover in Fiji that would have a cash value of a few grand.  5K Hyatt points might get you a $99/night hotel, best case.

Some of the hotel redemption options are pretty bad.  From what I gather Hyatt and Marriot are usually pretty good, Hilton/Choice/Wyndham are pretty bad.  There are exceptions on both sides of course.

And lastly, it depends on what you'll actually use.  Many churning fanatics chase the mythical "cents per point" metric, but if it has you making trips you otherwise wouldn't you're not saving any money, you're just taking a cheaper vacation than you otherwise could (which isn't the end of the world by any means).

[TomTX]

Thanks for the replies. I have a better understanding of it now. I read about this stuff elsewhere and consensus seems that Chase is a good place to start, Chase Sapphire in particular. I don't think we will be using points on flights (2 young kids) but travel by car and point for hotels instead. These days we prefer the extended stay style hotels/Business style with separate rooms (eg Marriott Residence Inn)

Thoughts on Chase Sapphire Preferred versus Chase Marriott Rewards Premier?

https://creditcards.chase.com/credit-cards/compare-cards?CELL=603Z&HT5N=VK0WN8&jp_ltg=chsecate_compare&list=4,12

Sapphire: 50K on $4000 spending for 3 months
Marriott: 100K  on $5000 spending for 3 months


?

Unless you have a real preference for Marriott, the CSP points are a lot more flexible. But you can do both sequentially. There is a fair amount of speculation that the CSP offer will be reduced soon, because the CSR  bonus was already cut in half.

My only preference with Marriott is just that I know I will use that hotel. I won't be flying anytime soon. The 100K bonus is 2x that of Sapphire.

Sure, makes sense. Transferring Chase points to Marriott is a poor exchange rate anyway. Airline points are often better - for example, 25k to Korean Air is a round-trip to Hawaii from a fair number of places on the US mainland. Hard to get a ticket for less than $500, so the value is around 2 cents per point (cpp) - Marriott points are typically valued at about 0.8 cpp.

When the SPG 35k point bonus comes around again, that would be a good one for you as well. You can transfer SPG to Marriott at 1:3, so it's 105k Marriott points.