Basic math for AMEX AF

[Anonymous]

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@Aim_High wrote:

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@Anonymous wrote:

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That being said, some people on these "finance channels" have like 7 to 10 cards with AFs and I was wondering what math they use.  I just don't get it.  Well, I guess it's that YouTube money but what a way to waste on the same perks from the same lenders.  

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There are people with multiple (10??)  travel cards that know what they are doing, optimize points carefully, and play the game well with discipline.  Some are on this forum.  It works for them, but not for everyone.  The most frequent flyers quickly accrue enough points and get enough experience to quickly learn how to optimize them.  I would say having 7 to 10 AF cards requires some pretty heavy spend, frequent travel, and probably a few years of playing the system to build up to that level of proficiency if they're managing it well.  And then there are people who get multiple travel cards thinking they can replicate what others are doing but are unsuccessful for different reasons.  They may or may not realize how much money they are losing.  Straight cash-back often pays less value but for many people it can be more suitable.  In particular, playing in more than one point system (MR, UR, TY etc) is a game some try but only works well for more frequent flyers.  Otherwise points become too diluted.   I am not a frequent flyer so I choose not to carry many cards; the math doesn't come close to working for me.  I selected a simple CSR with flexible travel rewards which allows me to focus on one system.   

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Agreed.  I know the people on YouTube ... they're playing the game well, have the spend and are most likely making a living off doing such things.  Does not translate over to the average Joe or Josephine. 

[Citylights18]

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@Aim_High wrote:

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@Citylights18 wrote:

I start with any AF and convert it into points. That mean $250 AF is the same as 25,000 points and $550 AF is the same as 55,000 points.  If the AMEX Gold is offering you 4x dining/grocery you would have to spend irrespective of the perks 6,250 to break even. For the AMEX Green with 3x dine/3x travel you would need to spend 5,000 across categories to break even.

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But as previously pointed out upthread, the goal when calculating annual fee is not to break even; it's to come out farther ahead than someone would with another point system or cashback.  So when making the comparison, don't forget to add in the "lost bonus" from the alternative rewards system.  For example, that $6250 or $5000 spend would net you $125 or $100 respectively on a flat 2% cash back no-AF card.  And if all that spending was at 3% cash back such as dining and travel on a Wells Fargo Propel or Citi Costco card, that would require another $187.50 to break even.   So the break-even point doesn't just pay for the fee; it also has to replace the rewards lost.

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Yeah well that is the pitfall of building up a high AF system.

If the example is 2% cash back the AMEX Gold then to be able to also cover that opportunity cost:

AMEX Gold spend/2% Cash Back

$6250/-125

$12,500/0

So you would have to double those spend numbers to clear more than a 2% cash back.

That is why deciding on what your next card will be starts with seeing if you can improve your earning categories appreciably enough to justify it.

[notmyrealname23]

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@Aim_High wrote:

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Very true.  Cash value for MRs (except for Schwab Platinum) is 0.6 ccp so much less than 1 ccp.  However, MR points CAN be redeemed for well over 1 ccp.  So an honest valuation can be very personal since it depends on how you will actually redeem.  And the value is often most accurately calculated in hindsight, since you can see the actual value.

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My usual way of pricing is "at this price, I would be indifferent if I had X much cash or X much Ultimate Rewards/Membership Rewards/Alaska miles/Hilton points... in fact I might buy at this price and convert cash to points because of a way I can get a good deal", and in some cases have actually bought points when I thought the purchase would give me leverage for something I wouldn't otherwise be able to afford. For instance, I've bought Avianca miles (an AMEX transfer partner) for 1.3-1.4 cents per mile as a transaction with Avianca, in order to fly a one way business class award ticket across the Pacific to Japan or Thailand for a net cost of about a thousand dollars, or Thailand to Europe for a similar cost.

Transferrable points currencies get a little bit of a boost in my thinking because you have multiple options to "cash them out" (and quite often if they are Membership Rewards, you can do so at a bonus, for instance there was recently a 50% bonus for Hilton transfers).... but it's still an arbitrary value. I've looked at their partners and how the travel blogosphere values them and thought "I'd say 1.7 cents per point seems about right". That means my recent 45k SUB for AMEX Green was around $500 in value to me minus the first annual fee... well worth diving back into the AMEX ecosystem aside from card benefits.

[Citylights18]

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@simplynoir wrote:

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@Citylights18 wrote:

I start with any AF and convert it into points. That mean $250 AF is the same as 25,000 points and $550 AF is the same as 55,000 points.

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That's a flawed way to look at it when the cash redemption value of MRs is a little better than half

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Who buys into the AMEX ecosystem with the goal of cashing out MRs a 0.6 ccp?

Its just an excepted limitation of the membership rewards program.

[notmyrealname23]

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@Citylights18 wrote:

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Who buys into the AMEX ecosystem with the goal of cashing out MRs a 0.6 ccp?

Its just an excepted limitation of the membership rewards program.

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Not me, that's for sure... quite demonstrably Capital One offers better cashout value for their $95 AF Venture premium travel card than AMEX Green/Gold/vanilla Platinum. Earn 2x on everything, cash out at 1 cent per point on travel expenses (very broad category that covers a LOT of stuff). You even get partner transfers if you want to go that way (though the transfer ratios suffer compared to AMEX, which is key to why AMEX can be a winner if you want to play that game). The card even goes clunk and it's shiny metal.

AMEX charge cards aren't for someone who wants minimal games, reasonable cashout value for your points without extra gyrations, basic math you can point to demonstrating the value, and low annual fee friction. Some people can get value out of those AMEX cards, some can't see the point... which is fine.

[simplynoir]

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@Citylights18 wrote:

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@simplynoir wrote:

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@Citylights18 wrote:

I start with any AF and convert it into points. That mean $250 AF is the same as 25,000 points and $550 AF is the same as 55,000 points.

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That's a flawed way to look at it when the cash redemption value of MRs is a little better than half

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Who buys into the AMEX ecosystem with the goal of cashing out MRs a 0.6 ccp?

Its just an excepted limitation of the membership rewards program.

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You'd be surprised how many people do this redeeming this way, as an example some do it to offset their AFs on cards which is horrible value. Why I had to point it out because some do this. I recall not too long ago where a person had a surplus of MRs and asked if it was okay for them to redeem some for the AF while they figure out what to do with the rest later. I told them AMEX would be escastic if someone ever did this because it's poop emoji value

In any case it's not a limitation of the program when the goal is travel for the best options but if the OP is trying to gauge the value of the points it's pointless for us to speculate for them. Their perceived value is on how they'll go about redeeming them as it has already been stated and if it's easier for them to see it as a cash value then you can't do it at 1 ccp like you would with URs or even TYPs. If they tie into the Schwab Plat for the 1.25 ccp redemptions then maybe that'll work but it's not the case here

[Anonymous]

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@simplynoir wrote:

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@Citylights18 wrote:

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@simplynoir wrote:

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@Citylights18 wrote:

I start with any AF and convert it into points. That mean $250 AF is the same as 25,000 points and $550 AF is the same as 55,000 points.

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That's a flawed way to look at it when the cash redemption value of MRs is a little better than half

---

Who buys into the AMEX ecosystem with the goal of cashing out MRs a 0.6 ccp?

Its just an excepted limitation of the membership rewards program.

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You'd be surprised how many people do this redeeming this way, as an example some do it to offset their AFs on cards which is horrible value. Why I had to point it out because some do this. I recall not too long ago where a person had a surplus of MRs and asked if it was okay for them to redeem some for the AF while they figure out what to do with the rest later. I told them AMEX would be escastic if someone ever did this because it's poop emoji value

In any case it's not a limitation of the program when the goal is travel for the best options but if the OP is trying to gauge the value of the points it's pointless for us to speculate for them. Their perceived value is on how they'll go about redeeming them as it has already been stated and if it's easier for them to see it as a cash value then you can't do it at 1 ccp like you would with URs or even TYPs. If they tie into the Schwab Plat for the 1.25 ccp redemptions then maybe that'll work but it's not the case here

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You know what would be sweet? The CAP AF credit on the Charles Schawab version. 

but, alas can't have it all. 

[Brian_Earl_Spilner]

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@Anonymous wrote:

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@Brian_Earl_Spilner wrote:

@notmyrealname23 he asked for basic amex math, not how to maximize his rewards to offset the fee. I posted the minimum spend to offset the AF at 1x, 4x, and if he used all of his dining credits.

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She. 

But yes, I wanted the min possible conversion / math.  Which you provided.  I appreciate it it's what I was looking for.  

I know there is ton of value based on usage and spend and all sorts of factors that are unique to every individual.  But basic math sometimes is how my brain works.  

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Sorry, normally I don't assume a gender. I had just woken up.

[simplynoir]

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@Anonymous wrote:

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@simplynoir wrote:

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@Citylights18 wrote:

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@simplynoir wrote:

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@Citylights18 wrote:

I start with any AF and convert it into points. That mean $250 AF is the same as 25,000 points and $550 AF is the same as 55,000 points.

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That's a flawed way to look at it when the cash redemption value of MRs is a little better than half

---

Who buys into the AMEX ecosystem with the goal of cashing out MRs a 0.6 ccp?

Its just an excepted limitation of the membership rewards program.

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You'd be surprised how many people do this redeeming this way, as an example some do it to offset their AFs on cards which is horrible value. Why I had to point it out because some do this. I recall not too long ago where a person had a surplus of MRs and asked if it was okay for them to redeem some for the AF while they figure out what to do with the rest later. I told them AMEX would be escastic if someone ever did this because it's poop emoji value

In any case it's not a limitation of the program when the goal is travel for the best options but if the OP is trying to gauge the value of the points it's pointless for us to speculate for them. Their perceived value is on how they'll go about redeeming them as it has already been stated and if it's easier for them to see it as a cash value then you can't do it at 1 ccp like you would with URs or even TYPs. If they tie into the Schwab Plat for the 1.25 ccp redemptions then maybe that'll work but it's not the case here

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You know what would be sweet? The CAP AF credit on the Charles Schawab version. 

but, alas can't have it all. 

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Can you give me your line of thinking for getting these two cards? Because it's becoming clear you're either trying to talk yourself into it or find justification for not applying for Gold and Plat. In the current climate I can see the reasoning for the Gold with the right restaurant/grocery spend but the Plat's value has gone down for the moment while travel is pretty much dead

[Anonymous]

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@simplynoir wrote:

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@Anonymous wrote:

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@simplynoir wrote:

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@Citylights18 wrote:

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@simplynoir wrote:

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@Citylights18 wrote:

I start with any AF and convert it into points. That mean $250 AF is the same as 25,000 points and $550 AF is the same as 55,000 points.

---

That's a flawed way to look at it when the cash redemption value of MRs is a little better than half

---

Who buys into the AMEX ecosystem with the goal of cashing out MRs a 0.6 ccp?

Its just an excepted limitation of the membership rewards program.

---

You'd be surprised how many people do this redeeming this way, as an example some do it to offset their AFs on cards which is horrible value. Why I had to point it out because some do this. I recall not too long ago where a person had a surplus of MRs and asked if it was okay for them to redeem some for the AF while they figure out what to do with the rest later. I told them AMEX would be escastic if someone ever did this because it's poop emoji value

In any case it's not a limitation of the program when the goal is travel for the best options but if the OP is trying to gauge the value of the points it's pointless for us to speculate for them. Their perceived value is on how they'll go about redeeming them as it has already been stated and if it's easier for them to see it as a cash value then you can't do it at 1 ccp like you would with URs or even TYPs. If they tie into the Schwab Plat for the 1.25 ccp redemptions then maybe that'll work but it's not the case here

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You know what would be sweet? The CAP AF credit on the Charles Schawab version. 

but, alas can't have it all. 

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Can you give me your line of thinking for getting these two cards? Because it's becoming clear you're either trying to talk yourself into it or find justification for not applying for Gold and Plat. In the current climate I can see the reasoning for the Gold with the right restaurant/grocery spend but the Plat's value has gone down for the moment while travel is pretty much dead

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Oh I would not get the platinum.   It's not a toss up between the two.  It's got no value to me as all my travel is work and it just blends with personal.  And I've got all the perks that come with that.   

Gold is my choice because of dine out and groceries.  

I was just curious just in case Platinum perks get revamped as Amex eluded to and started to including dining etc.  That would be a comparison. 

Right now it's not even on my mind.