topic Re: Why would anyone get points over cash back? in Credit Cards

Why would anyone get points over cash back?

Anonymous — Sun, 10 Apr 2016 08:01:30 GMT

Let's take Chase for an example. I have heard that a Chase Ultimate Rewards point is worth 1.25 cents when redeemed for travel. This is very good, however, why would anyone get a Chase Freedom Unlimited card with a 1.5x return (or 1.5 * 1.25 = 1.875%) instead of Citi Double Cash which gives 2% cash back. Couldn't one simply use the cash they get back from the 2% cash back card and put it towards travel? Or is there something that I am missing?

Re: Why would anyone get points over cash back?

Anonymous — Sun, 10 Apr 2016 08:34:40 GMT

idk about chase, but yes, you are missing something.

UR is higher than MR. I only can explain what MR does and that is with Amex.

Lets just say you have 200k points (MR) that would be equivalent to 2k dollars cash back if i used a card like BCP (cash back from Amex). Using the 4.5points per dollar on the EDP for groceries and etc to gain these points.

If I use these 200k points and transfer to Delta 1:1 (other airlines can be 1:1.25, I could get a 10k dollar round trip ticket for only what would be worth 2k dollars if I went the cash back way. Example, first class from Hawaii to Europe for 200k miles (equivalent to 2k dollar) and ticket worth 10k dollars. That is all first class travel. I could go for lower class flight tickets and get more travel that would still be worth more than cash back. I will let the pros chime in and tell you about Chase

Moral of this post, 2k dollar cash back can't buy a 10k dollar ticket, but if you go the points way, you can.

Re: Why would anyone get points over cash back?

Anonymous — Sun, 10 Apr 2016 08:24:06 GMT

@Anonymous wrote:
Let's take Chase for an example. I have heard that a Chase Ultimate Rewards point is worth 1.25 cents when redeemed for travel. This is very good, however, why would anyone get a Chase Freedom Unlimited card with a 1.5x return (or 1.5 * 1.25 = 1.875%) instead of Citi Double Cash which gives 2% cash back. Couldn't one simply use the cash they get back from the 2% cash back card and put it towards travel? Or is there something that I am missing?

lol good you posted this thread late because people would have eaten this all up earlier on the day. There has been a Chase fever lately.. not sure what all the hype is all about either with the FU card.

I think it comes down to preference - some people prefer cash back while others who have multiple products with Chase (Freedom, Ink, CSP, and FU) have ample opportunity to earn points and redeem for higher value towards travel. I think the FU alone wouldn't really be a game changer, but combined with other Chase cards it makes somewhat of a difference.

Also don't forget with Chase UR points you can redeem those points for Cashback too without losing face value - however you can get more value when you redeem the points for Travel.

I personally don't travel as much as I want to and I don't think all the hassle of combining 3-4 cards is worth it to me to save 10-25% off. I have been savvy enough to locate good deals by some googling and watching price trends. If I see myself travelling heavily then I can see how having these Chase cards would be beneficial. To each their own!

Re: Why would anyone get points over cash back?

PowerMan572 — Sun, 10 Apr 2016 08:25:32 GMT

LOL I often find myself asking "why would people choose cash back over points?" If I'm trying to book a First Class ticket round-trip to Europe, it usually costs around 125,000 points (depending on the airline.)

First Class tickets usually sell for $4k - $10k. In order to earn enough cash back on a measly Citi 2% card for a $5k ticket would take $250,000 in spending on a 2% cash back card! OMG! That's cRaZy!

Miles and points all the way! Cash back cards are useless in my opinion.

Re: Why would anyone get points over cash back?

Anonymous — Sun, 10 Apr 2016 10:29:35 GMT

Keep in mind as well that with a CSP, those UR points can be worth a lot more then 1.25 cents a point by using transfer partners. For first class tickets, they can be worth over $0.05 a point. 1.25 cents is the bare minimum you can get with your points, personally I wouldn't redeem my UR points for less the 2 cents or so.

In the end it's a personal call. Some people don't travel, want to manage points, or utilize a programs partners. For these people, a cash back card might be easier or more beneficial. Just like how a travel card might be better for someone who uses the partners and can redeem for greater value then the minimum.

Re: Why would anyone get points over cash back?

Anonymous — Sun, 10 Apr 2016 10:39:18 GMT

It's just that sometimes points can be redeemed for higher value that the usual 2% cash back. All depends on how you use your cards. Just have to make sure you balance out your CB cards and points cards evenly.

I can rake up SPG points very easily because they run soooooo many promos and I travel a lot. On top of that, they give you like 4x-5x points for being at their hotel and being an SPG member/using the SPG card. For my 1yr anniversary I'll be in San Fran and 6 days at the hotel I'm staying at is either $2,394 or I can just pay 80,000 SPG points. That puts the points value at about $0.03 a point. I've gotten some hotels for as much as $0.04 a point.

It all depends

Re: Why would anyone get points over cash back?

Anonymous — Sun, 10 Apr 2016 10:44:08 GMT

woah, 80k for 6days....Hilton is 50k just for 1d. Maybe I need to get the spg instead of planning to app for the citi hilton reserve...

Re: Why would anyone get points over cash back?

Anonymous — Sun, 10 Apr 2016 10:52:32 GMT

@Anonymous wrote:
woah, 80k for 6days....Hilton is 50k just for 1d. Maybe I need to get the spg instead of planning to app for the citi hilton reserve...

nvm, it's only 1 point for one dollar. I think it ends up being the same.

Re: Why would anyone get points over cash back?

redpat — Sun, 10 Apr 2016 11:06:28 GMT

@Anonymous wrote:
woah, 80k for 6days....Hilton is 50k just for 1d. Maybe I need to get the spg instead of planning to app for the citi hilton reserve...

SPG has greater value but remember 80k points is 80k spend. So with current 25k sign-up bonus that 55k additional spend.

if you are looking for free nights and travel you need heavy spend to get there. sure, sign-up bonuses give you a one time hit but most cannot sustain free travel through spend. I know if I didn't have heavy business travel and business spend my free travel would diminish greatly.

Re: Why would anyone get points over cash back?

kdm31091 — Sun, 10 Apr 2016 12:02:47 GMT

You have to look at how things get skewed, also. Many people (not all) generally collect the hotel/airline cards for the sign up bonus which often provides enough rewards for a free flight / some free nights / etc. Beyond that, though, earning 1 point per dollar on everyday spending just isn't worthwhile most of the time, so the cards end up SD. So people may have a lot of the point cards, but they often don't use them much after the bonus. It would appear by glancing at signatures that the IHG card is quite popular, and it is, but it's because it gives an annual free night and some other perks -- it's not as if people are really using it for spending.

So, if we're talking about long term use cards for spending, I think point cards that are tied to an airline or hotel are generally a poor choice. The more flexible point cards like a Chase Sapphire Preferred or Amex MR earning cards can give you points that you can do many things with, but the value is only going to be worthwhile for certain redemptions (otherwise, still could have earned more with using cash back). People who travel a lot, especially international, first class, will benefit the most. Otherwise, cash back may be a better choice.

Re: Why would anyone get points over cash back?

Anonymous — Sun, 10 Apr 2016 13:15:09 GMT

archange1 wrote:

Lets just say you have 200k points (MR) that would be equivalent to 2k dollars cash back if i used a card like BCP

humuhumunukunukuapua'a wrote:

Exactly how much do you have to spend to get 200,000 points? That would show the actual cost to the cardholder.

Re: Why would anyone get points over cash back?

Anonymous — Sun, 10 Apr 2016 13:19:27 GMT

@redpat wrote:
@Anonymous wrote:

SPG has greater value but remember 80k points is 80k spend. So with current 25k sign-up bonus that 55k additional spend.

if you are looking for free nights and travel you need heavy spend to get there. sure, sign-up bonuses give you a one time hit but most cannot sustain free travel through spend.

^ This. 80,000 points is $80,000 spend.

Re: Why would anyone get points over cash back?

Open123 — Sun, 10 Apr 2016 13:42:27 GMT

This question comes up quite a bit, but a few generalities:

1. If you travel (and know how to redeem properly and prudently) and spend < $20K per year ---> cycle sign-up bonuses. Once exhausted, keep cards if you travel with your preferred Airline/Hotel. If not, just go with 2% cashback & 5% rotating cards. Likely best to avoid fee cards, except for travel benefit based cards.

2. If you travel and spend > $20K per year ---> Travel cards, no brainer. Just choose prudently. May consider annual fee cards.

3. If you don't travel and spend < $20K per year ---> Cycle sign-up cash bonus and/or utilize 2% + 5% rotating. Stick with no fee cashback cards. Avoid travel points.

4. If you don't travel and spend > $20K per year ---> Cycle sign up cash bonsues and/or utilize 2% + 5% rotating. Annual fee cards such as Arrival Plus and Venture may begin to make sense. Avoid travel points.

That's it, really.

*Edited* Yes, mixed up the >< things!

Re: Why would anyone get points over cash back?

Anonymous — Sun, 10 Apr 2016 13:28:25 GMT

@Anonymous wrote:
@Anonymous wrote:

Lets just say you have 200k points (MR) that would be equivalent to 2k dollars cash back if i used a card like BCP

@humuhumunukunukuapua'a wrote:

Exactly how much do you have to spend to get 200,000 points? That would show the actual cost to the cardholder.

It obviously depends on the card and spending, but say with the EDP you would get 27K on $6k grocery spend and the remaining points would take $115K in spend, so about $121K. With bonuses and higher multiple spend on the PRG, could be less.

But Archange1 point was this gets a ticket that costs $10K, so with say a Double Cash, you would need to spend $500K to get the same ticket.

Re: Why would anyone get points over cash back?

Anonymous — Sun, 10 Apr 2016 13:30:42 GMT

@Open123 wrote:
This question comes up quite a bit, but a few generalities:

1. If you travel (and know how to redeem properly and prudently) and spend > $20K per year ---> cycle sign-up bonuses. Once exhausted, keep cards if you travel with your preferred Airline/Hotel. If not, just go with 2% cashback & 5% rotating cards. Likely best to avoid fee cards, except for travel benefit based cards.

2. If you travel and spend <$20K per year ---> Travel cards, no brainer. Just choose prudently. May consider annual fee cards.

3. If you don't travel and spend >$20K per year ---> Cycle sign-up cash bonus and/or utilize 2% + 5% rotating. Stick with no fee cards cashback. Avoid travel points.

4. If you don't travel and spend <$20K per year ---> Cycle sign up cash bonsues and/or utilize 2% + 5% rotating. Annual fee cards such as Arrival Plus and Venture may begin to make sense. Avoid travel points.

That's it, really.

Haven't you mixed up ">" and "<"?

Re: Why would anyone get points over cash back?

Open123 — Sun, 10 Apr 2016 13:46:53 GMT

longtimelurker wrote:It obviously depends on the card and spending, but say with the EDP you would get 27K on $6k grocery spend and the remaining points would take $115K in spend, so about $121K. With bonuses and higher multiple spend on the PRG, could be less.

But Archange1 point was this gets a ticket that costs $10K, so with say a Double Cash, you would need to spend $500K to get the same ticket.

BA F on A388 from London to SFO would cost about $15K? Before AA devaluation, could have redeemed for 62.5K miles + $395. Or, F transcon from SFO to NYC on AA costs around $1,500 - $2,500? Before deval, could have been redeemed for 32.5K miles and $5.95. Or, CX F from SFO to HK is priced at around $10K - $15K and could have been redeemd for around 60K AA miles before devaluation.

This is assuming the above are experiences important enough to forgo the equivalent 2% cash. If it is, travel points are an excellent value. If not, just take the cash.

Re: Why would anyone get points over cash back?

NRB525 — Sun, 10 Apr 2016 13:47:00 GMT

@Anonymous wrote:
@Anonymous wrote:
@Anonymous wrote:

Lets just say you have 200k points (MR) that would be equivalent to 2k dollars cash back if i used a card like BCP

@humuhumunukunukuapua'a wrote:

Exactly how much do you have to spend to get 200,000 points? That would show the actual cost to the cardholder.
It obviously depends on the card and spending, but say with the EDP you would get 27K on $6k grocery spend and the remaining points would take $115K in spend, so about $121K. With bonuses and higher multiple spend on the PRG, could be less.

But Archange1 point was this gets a ticket that costs $10K, so with say a Double Cash, you would need to spend $500K to get the same ticket.

Practically, however, this is not a fair comparison.

True statement: Someone can use 200k miles (throwing out a general range number) to get a first class ticket that costs $9,000. You might get the 200k miles from a combination of one-time sign up bonus points from a series of credit cards. So you end up with 1 (one) flight from point A to point B, and back again, in comfort. Nice! The thing is, all those folks in steerage? who paid $1,000 to $1,500 for the same flight? They got to point B at the same time as you did. So while it's not the same ticket, it's the same end result once the effects of the champagne wear off.

Those who use cashback strategies earn some cash on spend, which can be used to cover travel costs of any kind. Including the $1,000 point A to point B ticket in steerage. Some someone using cashback would spend $50,000 at a 2% rate to get the $1,000 cash back to cover the cost of the flight to point B. Still a lot of spend, no doubt, but along the way, the cashback is available to contribute to reducing the $1,000 when travel is planned. With miles, one must meet a specific large threshold to even consider a reward flight, and many of the lower miles rewards flights are not so appealing for redemption. Shopping the use of those miles is critical to a good redemption, which may or may not align with where you'd really like to go.

Having said all that, the best way to use miles and hotel points cards is as an add on to travel you are already doing, either for work or personal. Being able to top up that frequent flyer account to get to that necessary threshold, or to top up SPG for 48,000 points to get 5 nights in Hawaii, that becomes a more useful route for the spend. The rewards on the spend as a top up are the best, but that requires a foundation of travel to build from.

Re: Why would anyone get points over cash back?

Open123 — Sun, 10 Apr 2016 13:51:34 GMT

Also, cashback from business deducted expenditures for personal use is taxed as ordinary income, whereas points are tax free, even when used for personal consumption.

So, earn points from business spend and travel tax free. That alone is around a 35% bonus.

Re: Why would anyone get points over cash back?

Open123 — Sun, 10 Apr 2016 13:55:38 GMT

NRB525 wroteo you end up with 1 (one) flight from point A to point B, and back again, in comfort. Nice! The thing is, all those folks in steerage? who paid $1,000 to $1,500 for the same flight? They got to point B at the same time as you did. So while it's not the same ticket, it's the same end result once the effects of the champagne wear off.

For steerage, it's better to pay cash or use revenue fixed points, such as from Southwest, Virgin Elevate and JetBlue. Even for steerage, this will likely result in a better return than cashback for people who pay for these flights, even if occasionally.

Re: Why would anyone get points over cash back?

Open123 — Sun, 10 Apr 2016 14:04:16 GMT

Here's why I like points.

Several years ago, virtually anyone could have (and, easily met whatever spend requirment for free) churned the Citi AAs on a 2/3 browser App for 200K AA miles per round. Assuming, if successful again (Citi hadn't updated their systems to stop it), another 200K AA miles in another 90 days.

That's instantly 400K AA miles that could have been used for premium cabin seats to London, Hong Kong and New York. It was years before Citi stopped it and many have harvested over 1 Million miles.