Value of Travel Insurance/Why are Travel cards such a low return?

[Anonymous]

I have been running numbers for next year on my projected CC spend and, all things included (like the devaluation of my Freedom UR points) I come out ~$30 ahead if I swap my CSP for the AARP and put my flights on my Amex Fidelity.

Question 1: has anyone tried to value the insurance perks that travel cards try to offer? I don't know if it's worth the difference to me.

Question 2: Why are travel cards such a low return percentage rate? My UR points are worth about 1.7 cents with Southwest so I have to pay $95/year to get a 3.4% travel reward.

But for $75 I can get 6% on groceries, and for no annual fee I can get at least 3% (if not 5%) back in all my other major score categories (insurance, dining, gas, etc.).

Heck, I can get a few 2% no AF cards that apply to everything. So why is, say, the VentureOne at 1.25% so highly esteemed?

[longtimelurker]

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@Anonymous wrote:
I have been running numbers for next year on my projected CC spend and, all things included (like the devaluation of my Freedom UR points) I come out ~$30 ahead if I swap my CSP for the AARP and put my flights on my Amex Fidelity.

Question 1: has anyone tried to value the insurance perks that travel cards try to offer? I don't know if it's worth the difference to me.

Question 2: Why are travel cards such a low return percentage rate? My UR points are worth about 1.7 cents with Southwest so I have to pay $95/year to get a 3.4% travel reward.

But for $75 I can get 6% on groceries, and for no annual fee I can get at least 3% (if not 5%) back in all my other major score categories (insurance, dining, gas, etc.).

Heck, I can get a few 2% no AF cards that apply to everything. So why is, say, the VentureOne at 1.25% so highly esteemed?

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Dont think the Venture One is highly esteemed, it's earn rate is less than the QS.   Some people get it for the bonus and plan to combine the limit to another Cap One card when eligible.   Venture has more fans, although I still don't really understand why (except for the niche cases).

Some are getting much more than 1.7cpp so the travel cards make sense for them, but if the redemptions you need are lower value, your plan makes sense.

[NRB525]

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@Anonymous wrote:
I have been running numbers for next year on my projected CC spend and, all things included (like the devaluation of my Freedom UR points) I come out ~$30 ahead if I swap my CSP for the AARP and put my flights on my Amex Fidelity.

Question 1: has anyone tried to value the insurance perks that travel cards try to offer? I don't know if it's worth the difference to me.

Question 2: Why are travel cards such a low return percentage rate? My UR points are worth about 1.7 cents with Southwest so I have to pay $95/year to get a 3.4% travel reward.

But for $75 I can get 6% on groceries, and for no annual fee I can get at least 3% (if not 5%) back in all my other major score categories (insurance, dining, gas, etc.).

Heck, I can get a few 2% no AF cards that apply to everything. So why is, say, the VentureOne at 1.25% so highly esteemed?

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There is a difference between general trave points cards, like CSP, AMEX PRG, and Citi TY Premier. Those earn points that you transfer to other partners, usually a list of airlines and some hotels. So the annual fee is for some of the perks, and the flexibility to put your big spending habits to the programs that are available.

Specific travel cards for one program, like Delta AMEX, Citi AAdvantage, or Chase United, or Marriott, Hyatt, Hilton, put the points directly to that program, but you get direct perks with the airline or hotel as an offset to your annual fee. If one spends a lot with any one of these programs, the card makes a lot of sense to accelerate points earnings and get the perks.

However, you are on the right track that a low spend rate doesn't really earn a ton of points in any of the programs, so saving AF and routing the meager points / percentages to cover the cost of travel is a viable option.

Regarding getting 5% on grocery spend, if that is with AMEX, that spend will tend to be with grocery stores that charge a bit higher prices than the discount grocers, so whether it's really 5% earnings is up for debate, I think. Would you be ahead by spending 10% less at a discount grocer for the same food? As long as it's not too far out of your way, yes.

[csryang]

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@Anonymous wrote:
I have been running numbers for next year on my projected CC spend and, all things included (like the devaluation of my Freedom UR points) I come out ~$30 ahead if I swap my CSP for the AARP and put my flights on my Amex Fidelity.

Question 1: has anyone tried to value the insurance perks that travel cards try to offer? I don't know if it's worth the difference to me.

Question 2: Why are travel cards such a low return percentage rate? My UR points are worth about 1.7 cents with Southwest so I have to pay $95/year to get a 3.4% travel reward.

But for $75 I can get 6% on groceries, and for no annual fee I can get at least 3% (if not 5%) back in all my other major score categories (insurance, dining, gas, etc.).

Heck, I can get a few 2% no AF cards that apply to everything. So why is, say, the VentureOne at 1.25% so highly esteemed?

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You already have CSP... I thought you are supposed to research the benefit of the card before you apply?

Answer 1: 

1) CSP offers primary CDW for rental cars - this alone is more than $30 per rental

2) CSP offers flight/baggage delay compensation - worth more than $30 if you are "lucky"

Answer 2:

1) See Answer 1 - those two insurance perks are worth more than $95 each year if you travel at least once or twice a year with rental cars on CSP

2) No, VentureOne is not highly esteemed.

3) If you are comparing CSP with BCP for groceries, comparing it on other categories, or with 2% no AF cards, you are probably doing the wrong thing! Why not get them all? If you can only have 1 card, CSP probably is not the best choice but it's good to have in combination with Freedom. 

4) the inital promotional bonus on CSP is worth paying its annual fee for at least 5 years. Even if you factor in the annual fee and earning structure, CSP's bonus still wins over most other cards by at least the initial 2-3 years of having it.

5) CSP is both 3.4% cash back equivalent on DINING and TRAVEL  - let's not forget its 0 FTF if you travel internationally at least once or twice a year!!

If you really want to know accurately which card benefits you the most ---  do a more accurate logging on how much you spend on each catergory each year and calculate how much benefit you earn from each card to compare them. You may benefit from CSP or you may not!

[longtimelurker]

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@csryang wrote:

Answer 1: 

1) CSP offers primary CDW for rental cars - this alone is more than $30 per rental

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But that sort of begs the question: WHY is that worth $30+ per rental.   Yes, if you were going to buy it from elsewhere, but I have always made do with standard secondary credit card insurance and have been lucky/OK.    So I certainly wouldn't value that at $30,( although now I do use my CSP to rent cars!)

[Anonymous]

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@longtimelurker wrote:

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@csryang wrote:

Answer 1: 

1) CSP offers primary CDW for rental cars - this alone is more than $30 per rental

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But that sort of begs the question: WHY is that worth $30+ per rental.   Yes, if you were going to buy it from elsewhere, but I have always made do with standard secondary credit card insurance and have been lucky/OK.    So I certainly wouldn't value that at $30,( although now I do use my CSP to rent cars!)

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+1 

I tend to base "savings" off of money I would have spent either way.

I don't count Amex Offers, etc. either, though those do have perks.

Maybe I need to rephrase the questions:

1: Does anyone have any stories about the extra insurance the CSP offers? I understand valuation is subjective, but I could see one of our actuarial friends running the numbers on the actual dollar value added on things like trip cancelation insurance.

2: In the midst of so many 3-5% back no AF cards, why aren't there any 3% no AF travel cards out there? Is it a cultural thing? Mathematical? Contractual? Let's hear some speculation! I understand where NRB525 is going, but if you look at those programs you still won't find values much greater than 3% regardless of general or specific rewards program. If I'm not mistaken, all those cards have decent annual fees as well.

[takeshi74]

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@Anonymous wrote:
Why are travel cards such a low return percentage rate? My UR points are worth about 1.7 cents with Southwest so I have to pay $95/year to get a 3.4% travel reward.

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They're not.  Always be careful assuming broad trends based on a single data point.  They may be low for you but that doesn't mean that they're low for everyone.  It's up to you to find soluitions that maximize rewards on your spend.  If you're only able to get 1.7 CPP with UR then UR may not be the best fit for you.

Additionally, CPP are only part of the consideration.  Look at spend versus rewards, not just CPP.

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@Anonymous wrote:
So why is, say, the VentureOne at 1.25% so highly esteemed?

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Esteem is irrelevant.  What works best for you is what's relevant.  Everyone's spend, situation, preferences, priorities, etc are not all the same.  Don't rely on what others do or do not.  Run the numbers for your spend and carefully consider how redemtpion impacts reward value for you.

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@Anonymous wrote:

I tend to base "savings" off of money I would have spent either way.

I don't count Amex Offers, etc. either, though those do have perks.

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I only use AmEx offers for money I would have spent either way.

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@Anonymous wrote:
has anyone tried to value the insurance perks that travel cards try to offer? I don't know if it's worth the difference to me.

How would you calculate it?  Would you have paid for the coverage even if a card didn't offer it?  If it's something you'd never pay for can you actually use the $ value?  Either you think it's worth having the coverage as a precaution or you don't think it matters IMO.  I haven't needed anything and I don't worry over it.  The only coverage that usually concerns me is the car rental coverage and most of the free options don't meet my requirements and what the rental companies charge is more for less so I do pay for AmEx's premium coverage.