topic Thoughts on Points vs. Cash Back Programs in Credit Cards

Thoughts on Points vs. Cash Back Programs

afinch1992 — Tue, 30 Jun 2015 15:24:16 GMT

With the news a few weeks back of the impending nerf of BA and AMEX MR, my maximization of returns has again come into question.

I was initially all about cash back, but recently made the move into point earning through the AMEX EDP and some chase cards for UR with the thought that I would transfer most if not all points earned into BA Avios with the intention of using them for domestic flights. Now that the AMEX transfers are being nerfed I am at a crossroads again.

I have had a decent amount of Chase UR accumilating recently with my Freedom and Ink cards, so I considered jumping fully on the Chase ship after I cash out my MR in September (before the nerf). This makes me a bit warry given I would have all my eggs in a less than stable basket. I have also considered giving up on the point game other than the UR I already earn, then picking up gas, groceries, and Amazon with the Sallie Mae as I had done before.

What are everyones thoughts on this debate? Are any of you finding yourself in a similar situation with recent nerfs?

Re: Thoughts on Points vs. Cash Back Programs

Ghoshida — Tue, 30 Jun 2015 15:32:09 GMT

@afinch1992 wrote:
With the news a few weeks back of the impending nerf of BA and AMEX MR, my maximization of returns has again come into question.

I was initially all about cash back, but recently made the move into point earning through the AMEX EDP and some chase cards for UR with the thought that I would transfer most if not all points earned into BA Avios with the intention of using them for domestic flights. Now that the AMEX transfers are being nerfed I am at a crossroads again.

I have had a decent amount of Chase UR accumilating recently with my Freedom and Ink cards, so I considered jumping fully on the Chase ship after I cash out my MR in September (before the nerf). This makes me a bit warry given I would have all my eggs in a less than stable basket. I have also considered giving up on the point game other than the UR I already earn, then picking up gas, groceries, and Amazon with the Sallie Mae as I had done before.

What are everyones thoughts on this debate? Are any of you finding yourself in a similar situation with recent nerfs?

I value my reward points conservatively.

I don't deal with MR; SO does that. It mostly gets used up with Delta or SPG.

The thing about points transfer (and good valuation) is that trips must be planned pretty early to get the few good seats (business class etc) which takes up a lot of time and energy. So while I've been able to get say 3cpp on my last transfer to Singapore for a United itinerary, I might generally consider transfers to Southwest for an average 1.5cpp.

The other thing I consider for such systems are the worst case scenarios. Then, 1UR=1c but that's not the case with MR.

For regular spending I do use more of pure cash-back cards unless they tie with UR cards. So unless Freedom is offering 5% on groceries, it goes to my Sallie Mae. Car rentals go to Cash+. Restaurants will be going to CSP in general. Gas on Freedom for next quarter then Sallie. BCP for overflows on groceries. Almost everything else on Discover, after the spend bonus of Venture is met.

Re: Thoughts on Points vs. Cash Back Programs

Anonymous — Tue, 30 Jun 2015 15:32:30 GMT

Do you mean transfers strictly to BA are being killed, right?

Re: Thoughts on Points vs. Cash Back Programs

afinch1992 — Tue, 30 Jun 2015 15:34:51 GMT

@Anonymous wrote:
Do you mean transfers strictly to BA are being killed, right?

I'm not 100% if other programs are in the sights for nerf, just paid attention to BA

Re: Thoughts on Points vs. Cash Back Programs

Anonymous — Tue, 30 Jun 2015 15:37:54 GMT

@Anonymous wrote:
Do you mean transfers strictly to BA are being killed, right?

MR points transferred to British Airways are being nerfed come October 1st. Will take 250 MR points to equal 200 BA points instead of the current 1:1 ratio.

Re: Thoughts on Points vs. Cash Back Programs

kdm31091 — Tue, 30 Jun 2015 15:46:23 GMT

This is kinda being discussed already in the arrival+ thread but I prefer cash. Miles cards can be hard to justify unless you spend a lot and/or have time and inclination to travel often.

Cash is cash, and has no restrictions. Miles can be a total pain to actually use. Transferring points, getting the flights etc, it can be time consuming and complex. Those who do it well make out great. I just dont have the patience or interest.

Re: Thoughts on Points vs. Cash Back Programs

happypill — Tue, 30 Jun 2015 15:50:32 GMT

@Ghoshida wrote:
@afinch1992 wrote:
With the news a few weeks back of the impending nerf of BA and AMEX MR, my maximization of returns has again come into question.

I was initially all about cash back, but recently made the move into point earning through the AMEX EDP and some chase cards for UR with the thought that I would transfer most if not all points earned into BA Avios with the intention of using them for domestic flights. Now that the AMEX transfers are being nerfed I am at a crossroads again.

I have had a decent amount of Chase UR accumilating recently with my Freedom and Ink cards, so I considered jumping fully on the Chase ship after I cash out my MR in September (before the nerf). This makes me a bit warry given I would have all my eggs in a less than stable basket. I have also considered giving up on the point game other than the UR I already earn, then picking up gas, groceries, and Amazon with the Sallie Mae as I had done before.

What are everyones thoughts on this debate? Are any of you finding yourself in a similar situation with recent nerfs?
I value my reward points conservatively.

I don't deal with MR; SO does that. It mostly gets used up with Delta or SPG.

The thing about points transfer (and good valuation) is that trips must be planned pretty early to get the few good seats (business class etc) which takes up a lot of time and energy. So while I've been able to get say 3cpp on my last transfer to Singapore for a United itinerary, I might generally consider transfers to Southwest for an average 1.5cpp.

The other thing I consider for such systems are the worst case scenarios. Then, 1UR=1c but that's not the case with MR.

For regular spending I do use more of pure cash-back cards unless they tie with UR cards. So unless Freedom is offering 5% on groceries, it goes to my Sallie Mae. Car rentals go to Cash+. Restaurants will be going to CSP in general. Gas on Freedom for next quarter then Sallie. BCP for overflows on groceries. Almost everything else on Discover, after the spend bonus of Venture is met.

I agree 100% with Ghoshida and the bolded section above from his post. Some people get awesome value from their point transfers, but they have to book way in advance and often must be very flexible on when & even where they travel too. It's always funny to me when someone says something like "oh, those points are worth 6cpp because you can book a business class flight to Hong Kong on Singapore Airlines on a Wednesday"...well that's great if I was planning to go to Hong Kong and flying business class mid-week, but what if I'm trying to plan a weekend vacation to South America? Unless you have tons of flexibility in where, when & how you travel and can book way in advance, points need to be valued very conservatively. Also, the time and effort shouldn't be ignored. Some people enjoy the hunt in finding an awesome deal, but I just find it tedious.

Re: Thoughts on Points vs. Cash Back Programs

Anonymous — Tue, 30 Jun 2015 15:56:50 GMT

I think points-based programs are great. Ultimate Rewards is a great example of a program where you have points, but that doesn't keep you locked in to transferring miles if you don't want to. You can still redeem for cash back, which is just as good as a travel statement credit. You can also use the Chase ticket buying portal and get a discount. Of course, you may be missing out on deals by going through them, but it's another option. I think it is fair to say points aren't for everyone, especially if you don't want to deal with transfer complexity, but there's huge possible value if you put in the effort.

Re: Thoughts on Points vs. Cash Back Programs

Anonymous — Tue, 30 Jun 2015 16:05:27 GMT

As the OP mentioned nerfing, this is also a difference between points and cashback.

Obviously, cashback cards can been nerfed (and we've seen this with BCP and Cash + for example) in that the reward structure changes, and you either get capped, reward rate changes, or useful categories go away.

Points/Miles cards can be nerfed in exactly the same way, but there also (at least) 2 additional ways: transfer rates can change (as with MR-Avios) and, even more common, inflation within the partner programs, so your points, once transferred buy less.

The big difference is that once my cashback card becomes bad, I am probably stuck with at most $50 of unusable reward (min redemption, often less) whereas I can be stuck with say 50K miles (or more) that I really cant use, making it harder to move to another program as you want to salvage something!

That said, the constant truth is that if you want premium cabin international flights, cashback on normal levels of spend isn't going to get you there! Points/miles might not either, but cashback certainly won't.

Re: Thoughts on Points vs. Cash Back Programs

afinch1992 — Tue, 30 Jun 2015 16:12:05 GMT

@happypill wrote:
@Ghoshida wrote:
@afinch1992 wrote:
With the news a few weeks back of the impending nerf of BA and AMEX MR, my maximization of returns has again come into question.

I was initially all about cash back, but recently made the move into point earning through the AMEX EDP and some chase cards for UR with the thought that I would transfer most if not all points earned into BA Avios with the intention of using them for domestic flights. Now that the AMEX transfers are being nerfed I am at a crossroads again.

I have had a decent amount of Chase UR accumilating recently with my Freedom and Ink cards, so I considered jumping fully on the Chase ship after I cash out my MR in September (before the nerf). This makes me a bit warry given I would have all my eggs in a less than stable basket. I have also considered giving up on the point game other than the UR I already earn, then picking up gas, groceries, and Amazon with the Sallie Mae as I had done before.

What are everyones thoughts on this debate? Are any of you finding yourself in a similar situation with recent nerfs?
I value my reward points conservatively.

I don't deal with MR; SO does that. It mostly gets used up with Delta or SPG.

The thing about points transfer (and good valuation) is that trips must be planned pretty early to get the few good seats (business class etc) which takes up a lot of time and energy. So while I've been able to get say 3cpp on my last transfer to Singapore for a United itinerary, I might generally consider transfers to Southwest for an average 1.5cpp.

The other thing I consider for such systems are the worst case scenarios. Then, 1UR=1c but that's not the case with MR.

For regular spending I do use more of pure cash-back cards unless they tie with UR cards. So unless Freedom is offering 5% on groceries, it goes to my Sallie Mae. Car rentals go to Cash+. Restaurants will be going to CSP in general. Gas on Freedom for next quarter then Sallie. BCP for overflows on groceries. Almost everything else on Discover, after the spend bonus of Venture is met.
I agree 100% with Ghoshida and the bolded section above from his post. Some people get awesome value from their point transfers, but they have to book way in advance and often must be very flexible on when & even where they travel too. It's always funny to me when someone says something like "oh, those points are worth 6cpp because you can book a business class flight to Hong Kong on Singapore Airlines on a Wednesday"...well that's great if I was planning to go to Hong Kong and flying business class mid-week, but what if I'm trying to plan a weekend vacation to South America? Unless you have tons of flexibility in where, when & how you travel and can book way in advance, points need to be valued very conservatively. Also, the time and effort shouldn't be ignored. Some people enjoy the hunt in finding an awesome deal, but I just find it tedious.

I guess I should clarify that point. I have used BA transfers with great ease and within 48hrs of flights, so that is not as much of concern for me. I am 20 minutes from a major AA hub and generally get 2-3 ccp with transfers. More just the throwing all the eggs in one basket (Chase, CB, etc) or just other options in general. I do understand your underlying point that cash is king however. Just wanted to clear that part up.

Re: Thoughts on Points vs. Cash Back Programs

yfan — Tue, 30 Jun 2015 19:45:55 GMT

The way I see it, points/miles are only worth it if you want premium seats on international flights. Otherwise, cashback will almost always win out.

I have mentioned this before, and I think it bears repeating: the "cpp" evaluations are necessarily imprecise because they fail to account for opportunity costs of cash sales. To use an example, let's say you get a British Airways flight from New York to London, round-trip, for 50K points. You figure that if you were paying cash for the same exact itinerary, you would pay $1200. Nice, you think. I just got 2.4 cents per point!

Not necessarily. The above calculation assumes that you have no other vacation option except to take that specific set of flights on those specific dates. But that's not really true, is it? If you did not have those points as an option, it's not set in stone that you would pay cash for the flight, go on vacation at that time, or even pick London as your destination. I at least would be more likely to shop around for cash sales and use a different flight on a different date from a different airline to take a vacation in Costa Rica if American was offering a sale for a couple of round tickets for $400 or even $300 a piece on an off-season ticket.

Considering the above opportunity cost, I would say that I didn't at all save money - in fact, I spent 50K points when I could have spent $400 in cash, meaning I only got 0.8 cpp when the opportunity cost is taken into account. Sure, it's not BA, and it's not London - and it's comparing apples to oranges. But the thing is, when it comes to vacations, apples are often perfectly replaceable with oranges.

At the end, it all depends on what you want, and what makes you feel rewarded. Remember, these are your rewards - whether points or cashback. Hunting for off-season vacation spots and great cash sales makes me feel rewarded. Maybe flying first class on BA makes you feel rewarded. The value is entirely dependent on you.