By Dr. Kelly Wright, Guest WriterOver the past decade, I’ve redeemed 6.4 million points and miles for $380,000 worth of travel. Travel rewards earned through credit cards (and, to a smaller extent, actual travel) have allowed me to take vacations I’ve never dreamed I could, to see far-reaching corners of the planet, and to stay in luxurious places for next to nothing.
Travel influencers may hawk the idea of these luxury trips as “free.” But travel isn’t free; there is always an opportunity cost. In a world where the simplicity of 2% cash back credit cards exists, does the math of travel rewards really work in my favor? More importantly, does it help me build wealth? Let’s look at the numbers and evaluate whether the time and effort of managing credit card points and miles is worth it.
Why Credit Card Points Are Inherently Valuable
Understanding the world of credit card points and miles requires an understanding of the hospitality industry. In 2005, frequent flyer miles were worth more than all the US dollars in circulation. With a value more than four times the actual value of its company, American Airlines leveraged its loyalty program to secure $4.7 billion in funds from the federal government during the COVID-19 pandemic and avoid bankruptcy.
Today, airlines and hotels are points banks that provide hospitality services on the side. Because of the high value of travel rewards, airlines and hotels sell their points to credit card companies—which, in turn, give them as “rewards” to credit card customers. These rewards not only include points for using the card for regular everyday expenses but also welcome offers, category bonuses, referral bonuses, and additional points through engaging in shopping and portals.
Using credit cards to earn points only works if you have the mindset to pay your credit card in full every month. If you pay any interest on your cards, you completely negate the value of any points. Interest rates are so high on credit cards that no amount of return—cash or points—will ever beat an interest payment.
More information here:
Credit Card Hacking for Travel
Ways to Earn Credit Card Points and Miles
Understanding the world of points and miles also requires an understanding that earning is not just about the amount you spend. When it comes to earning credit card rewards, there are fast ways and slow ways. Most travel hackers use a combination of both, based on their earnings and travel goals each year.
Fast Ways to Earn Points
Credit card welcome offers: Also called “sign-up bonuses,” these are offers for new customers who open a card and spend a certain amount on it, usually within the first 3-6 months. Welcome offers on travel reward cards often range from 60,000-300,000 points, which can turn into thousands of dollars of travel.
Referral bonuses: Have friends or family who also want a travel rewards card? When you refer your card to someone else, you can be rewarded with 15,000-30,000 points for each referral. Referring cards to a spouse or adult child—who, in turn, gets a welcome offer—and combining points into a family pool can exponentially grow your points.
Medium Ways to Earn Points
Bonus categories: Most travel reward cards offer multipliers on every dollar you spend. An example is the American Express Platinum card, which offers 5x points on airfare, or the Chase Sapphire Reserve—which offers 3x points on all travel, transit, and dining. By using a card that gives you a multiplier on your biggest spend categories, points earning can go up quickly.
Shopping portals: Shopping portals can easily be added as extensions to your internet browser, so when you click through the portal or activate the extension, you earn an additional multiplier on your expenses. A popular shopping portal is Rakuten, which normally gives cash back. However, if you hold an American Express points earning card, it will return points instead. This gives you a multiplier on top of the credit card you are using, which is a process called “stacking.”
Slow Ways to Earn Points
Everyday spend: Everyday spend is what you spend money on that doesn’t fall into bonus categories. All of the things you need to be a physician—like licensing, board exams, etc.—are examples of everyday spend. Travel reward cards have options for 1.5-2x points per dollar on everyday spend.
Special Circumstances
Travel reward cards also allow traditionally off-limits expenses, like rent and student loans, to be paid with a credit card, opening up our biggest expenses to rewards earning. You can even pay your income taxes with these kinds of credit cards.
In comparison, cash back cards earn one way—slowly. Cash back cards rarely have lucrative welcome or referral offers, they don’t have bonus categories, and they don’t engage with other programs to increase earnings. The key is in their simplicity of earning a set value on every dollar you spend—most popularly, it's 2%. While airline and hotel loyalty programs want to aggressively distribute their points to increase their engagement and leverage, cash back rewards are limited by bank interchange fees or interest rates, so they will always be kept low.
The Staggering Number of Credit Card Points I Earned in 2024
Redemptions
I keep close track of my yearly spending, points earning, and redemptions. I am a W-2 employee, so my yearly spending and expenses are less than a typical practice or business owner.
2024 was a big year in international travel for me. I returned to mainland Europe for the first time in over a decade, took amazing trips to India for a tiger safari and South Africa for a traditional “Big 5” safari, and even found time to hike across Scotland. When I first started travel hacking in 2015, one international trip per year was the norm. As our incomes and expertise grew along with my PTO amount (which accumulates per pay period and caps at 320 hours that cannot be cashed out or rolled over), we started taking 2-4 international trips per year.
In 2024, I redeemed 2.211 million points for $98,417 in travel expenses, while paying $4,870 in airline taxes and fees. This resulted in a value of 4.23 cents per point, essentially what would be considered a 4.23% return on every point redeemed (travel expenses – taxes and fees/points). Since I book trips 6-18 months in advance, these points were accumulated sometime in 2022 and 2023.
What if these points were 2% cash back instead? That would have equaled $44,220 in cash.
Now, wouldn’t taking the cash result in more wealth? The problem is that it relies on the assumption that all points are only earned in slow ways. Since cash back can only be earned in slow ways, I would have to spend $2.211 million to earn $44,220 in cash. To cover my travel expenses of $98,417 with cash back alone, I would have to spend nearly $5 million on a 2% cash back card!
The secret here relies on the accumulation. Let’s look at a sample of what I accumulated in 2024 compared to the spend.
Earning
In 2024, I earned 1.87 million credit card rewards across multiple systems and even more airline and hotel rewards through actual travel. Of those rewards, 1.09 million were American Express Membership Rewards, the transferable points currency that allows the cardholder to transfer points to a myriad of airline and hotel programs.
Of that amount:
- 970,000 points were earned through welcome offers on four cards, requiring $70,000 in spend
- 50,000 points were earned through 5x points on $10,000 in airfare
- 48,000 points were earned through 4x points on $12,000 in dining and groceries
- 22,000 points were earned through 2x points on $11,000 in everyday spend
So, 1.09 million points were earned through $103,000 in spending, an earning of 9.4 points on every dollar spent. Since I know my average redemption is around 4.5 cents per point, I’ll expect to earn around $49,050 in travel from these points earned from $103,000 in spending. If I had spent $103,000 on a single cash back credit card, this would return a measly $2,060 in cash.
What about credit card annual fees and my time spent to maximize this process?
It’s true that credit card annual fees can add up; the banks aren’t offering these rewards for nothing. For the above scenario, I spent $2,950 in annual fees. Let’s subtract $2,950, and we have a net travel value of $46,100.
What about the time needed to search for cards and to use the right one for spending? It’s actually not that complicated. Welcome offers can be found with simple google searches, and most of the points blogs have “highest offer available” sections that can be easily found. Additionally, cycling through new cards to meet welcome offers adds some simplicity to your spending—you only use one card at a time until you meet a certain amount, and then you switch.
For argument’s sake, let’s say I spent 20 hours in 2024 managing credit cards (as an expert, I spend much less time than that, but let’s take a novice points hobbyist). That means 20 hours x $300 per hour would be $6,000. Subtract that, and now we’re down to a net travel value of $40,100.
What if I’m not getting 4.5 cents per point? This average is pretty modest for points hobbyists. But it’s true that redemptions can go from an absolute low of 1.25 cents per point all the way to 20 cents per point at the high end (usually long-haul first class on international carriers). Take the baseline redemption of 1.25 cents per point for a brand new points hobbyist. A 1.25 cents per point value usually represents booking through a travel portal, which is no different than doing a google flight search through your bank, and it requires no knowledge or skill to do. That 1.09 million points would equal $13,625 in travel. Subtract annual fees, and we're down to $10,675 in travel. This should take no time, but even if you accounted for $6,000 in time spent, we’re down to $4,675, which is still more than double the cash back rates you’d earn on the same spend.
Why does this work? It’s simple math. Earning over 9 points per dollar on your spending, even when accounting for the lowest value redemptions and all the time you spent optimizing earnings, will always have a higher return than 2% cash back.
Savings
My spouse and I invest 50% of our take-home pay. This would not be possible if we spent the cash value of our points. Take the $98,417 in travel expenses we offset with points in 2024. Subtract the annual fees (an average of $4,000 per year) and my time (20 hours at $300 per hour), and you’d get $88,417 in true offset expenses. This additional money invested in one year reduces my financial independence timeline by 1.8 years.
Comparison to the Early Days
You might be saying, “Doc, that’s an extreme example. Let’s be real. Most physicians take less than three weeks of PTO each year (despite an average of five weeks PTO in physician contracts, according to the 2024 Medscape physician survey), and they don’t want to manage multiple credit cards.” OK, let’s look at the numbers for a beginner. In my first year of tracking redemptions, I redeemed 452,000 points and $95 in taxes and fees for $12,925 in travel expenses, a value of 2.8 cents per point. This was for one week-long trip and a few weekend trips. At this time, my spouse and I only had three credit cards between us for a total of annual fees of $315. I spent less time managing cards then, and my time was much less valuable. But for argument’s sake, say I spent the same 20 hours but at a value of $100 per hour. That $12,925 minus the taxes, annual fees, and time would equal $10,610 in travel value. This amount, invested post-tax in the S&P 500 in December 2017, would now equal $21,015 in inflation-adjusted returns.
Our take-home pay that year was $174,000, and we invested 50%. If we had spent every remaining dollar brought home on credit card expenses on a 2% cash back card, we would have earned $1,740. Today, that would be worth $3,446 in inflation-adjusted returns from the S&P 500. That’s not much to move the needle.
Even as a beginner, with a lower-end physician income and only a few credit cards, offsetting travel costs always beats a cash back return.
More information here:
From Wedding Planning to Owning 16 Credit Cards
Travel Hacking for Students, Residents, and Those Entering the World of Credit Card Rewards
How Credit Card Points Earnings Can Grow with You Over Time
This is the great thing about credit card rewards—they can grow and change as your income grows and travel situation changes. As an early-career surgeon 10 years ago, I didn’t need to travel in business class. Now that I’m thousands of surgeries into my career with the overuse injuries to go with it, it’s painful for me to sit for eight hours in an economy seat. Using points to pay for premium seats allows me to start my vacation sooner in comfort, rather than spending two days “just getting there.” That’s more of my enjoyable time back, my greatest commodity.
During training, travel rewards can be used to offset costs completely by booking through travel portals. As income and skill grow, they can be used to pay for better and more comfortable experiences—and then experiences you could never otherwise afford. And when you reach proficient levels, credit card strategies allow you to earn rewards on even more of your expenses—from rent and HOA costs to taxes and student loan payments. They can take the opportunity costs of these expenses and turn them into something that can reduce burnout.
Protections of Travel Reward Cards and Points Bookings
Another overlooked benefit of travel reward cards and points bookings is the protections they offer.
Travel reward cards routinely come with no foreign transaction fees and robust travel delay, cancellation, medical evacuation insurance, and interruption insurance built into the card. This allows travelers to forego additional insurance offerings and to save money when things go wrong.
Premium travel reward cards come with credits that often offset 50%-200% of the cost of the annual fee, such as $300 in travel credits on a $395 per year annual fee card. The above calculations subtracting the full cost of annual fees do not account for any statement credits that would wipe out most of these.
Additionally, points bookings, especially for domestic airlines and hotels, are nearly completely refundable. That means if you need to cancel a trip or something goes wrong, you’ll get all your points, taxes, and fees refunded. That means that points redemptions are significantly undervalued. My redemption spreadsheet compares point values to the cash equivalent price on the day the booking was made. However, a better comparison would be the fully refundable cash price, which is always significantly higher.
As an example, I recently redeemed 12,000 American Airlines points and $11.20 for a round-trip ticket for my dad to fly from Austin to Los Angeles for a flight priced at $250, a value of 2 cents per point. However, when we needed to cancel this flight, it was fully refundable. American charges an extra $50 each way to make a cash ticket refundable, so the actual value was $350, which brings the point value to 2.9 cents per point.
Lastly, points bookings allow you to book one-way international tickets at no additional cost, compared to cash bookings. One-way international cash tickets are often highly inflated and the equivalent in price to a round-trip ticket, which means that cash buyers are locked into a specific airline’s round-trip offerings for the entire trip. By booking one-way points tickets, travelers have more flexibility to maximize their limited PTO by flying into one city and home from another, combining two trips into one.
Time Investment Required to Learn These Credit Card Rewards Techniques
Savvy white coat investors know that spending time on this website, listening to podcasts, or reading Dr. Jim Dahle’s books can return huge dividends on their financial future. When accounting for whether to fire your financial advisor, one may need to take into account the opportunity cost of their own time at $100-$500 per hour to learn the concepts needed to implement a financial plan.
Early in my career, I spent hours reading the WCI website and even attended WCICON later in my career. This investment in my time saved me from a 1% AUM advisor and taught me to automate investments according to a financial plan. Similarly, early in my points hobby, I spent many years reading points blogs, listening to podcasts, and reading airline terms and conditions, which resulted in six figures of value in return over a decade.
Today, just as there are condensed financial courses to take a wide swath of information and distill it into an optimized resource for physicians, there are also points courses available to take someone from novice to proficient in as little as 6-8 hours. Jumping from proficient to expert typically takes several points bookings, which can take several hours each. But once you are an expert, booking a trip with points takes no longer than booking a trip with cash.
An example is a trip I took to Mongolia in 2023. Mongolia has one international airline called MIAT Mongolian, which has a total of five planes that connect to nowhere near the US. This is not the kind of vacation where you’ll simply type your origin and destination into Google Flights and buy the first flight you see. These types of itineraries are equal in time and effort, whether you use points or cash.
Logistics
Many travel hackers will have multiple cards, but few stay in our wallets. Cards that earn big welcome offers may go into the drawer for the rest of the year and then be closed or downgraded (changed to a lower or no annual fee card) if the value is not present on an annual basis. In general, cards that are opened need to stay open for at least one year so that any welcome offers you receive are not reversed.
There’s a myth that opening lots of credit cards will ruin your credit score. However, the components of a credit score might actually surprise you. Credit scores are based on the following categories:
- Payment history: 35%
- Credit utilization: 30%
- Length of credit history: 15%
- New credit inquiries: 10%
- Credit mix: 10%
As you can see, your bill-paying track record is the single most important factor in your credit score. Credit utilization is the amount you owe vs. the amount of credit you have, which is why your score goes up when you have more cards. The length of your credit history is also important. This is why we may downgrade a card instead of cancelling—it preserves the credit history. New credit inquiries, or opening new credit cards, are only 10% of your score. When you open a card, your score may decrease briefly. Hard inquiries occur when a lender checks a copy of your credit report. Some banks only do soft inquiries when you already have a relationship with them. Hard inquiries appear on your credit report for 24 months, and soft inquiries do not appear at all.
It is important to understand your credit report, as your ability to open cards depends on maintaining a good score. Certain banks only allow you to open so many cards over a period of time, so checking your credit report is important each time you want to open a card. Opening five cards in two years is too many for some banks (any card, not just theirs), and some banks only allow you to open a card every 3-6 months.
When you open a card, make sure to screenshot the welcome offer, note the date the offer expires, set up autopay, and enroll in any benefits.
Mental Load
What about the mental load component? Does it take a lot of work and time to manage these cards and redemptions? I recommend keeping track of your redemptions in a simple spreadsheet, just like you might keep track of your finances. Keeping track over time allows you to see what kind of value you’re getting from travel reward cards. Additionally, there are several apps available that can help you manage your credit cards, show you the best offers and when annual fees are due, and show you which card to use to maximize each purchase. These free and low-cost tools take the guesswork out of managing cards.
More information here:
Should I Fly First Class? Is First Class Worth It?
How to Add Adventure to Your Life
Can Travel Reward Hacking Really Contribute to Financial Wealth?
The 2024 Medscape physician survey found that 95% of physicians thought that travel was important to their mental health and happiness. Unfortunately, a 2024 JAMA article showed that nearly 60% of physicians took three weeks of vacation or less per year. This was associated with higher rates of burnout.
The best investment you can make in your financial future is your ability to prevent burnout and keep earning a physician income. Burned-out and tired physicians have less empathy and even prescribe less pain medication for patients who are hurting. All the while, the literature shows that taking frequent vacations reduces the risk for metabolic syndrome, cardiovascular mortality, and depression and anxiety. If you don’t do it for your financial future, at least do it for your health and the care of your patients.
One of the reasons cited in the JAMA article for why physicians do not use all their PTO is due to financial stress. What if travel hacking offset these costs enough to reduce that stress?
Want a Cash Back Credit Card?
What if you don’t like to travel? That’s OK! At least get something from your cards. Credit cards are loaded with tons of consumer protections, including built-in insurance, purchase protection, price “rewinds,” cell phone coverage, and fraud protection. If someone fraudulently charges your credit card, the charges can be easily reversed. Conversely, once fraud has occurred to your bank account, that money is extremely difficult to recover, if it can be recovered at all. Use the inherent protections built in from the interchange fees to prevent direct access to your accounts.
If you’d like to earn cash back on all expenses, make sure to look for a baseline of 2%. You may find your local credit union offers a higher rate, and some banks will even offer 3% or 4% cash back if you have six figures of investments or savings with them. Additionally, make sure to get the credit limit you need. Many travel rewards cards are charge cards, so they have no credit limit. This can be particularly important for practice owners who need to charge six or seven figures in spend each year. Look for a cash back card that is a charge card if you’re in this situation.
The Bottom Line
If travel is important to you (and physicians say that it is), then travel rewards can offset the costs of travel and contribute to greater wealth, health, and longevity in your career. Learning the complexities of credit card rewards is no different than learning principles of good financial management, and it can set you up for a lifetime of success. This system can return an order of magnitude more value than cash back cards, so it’s worth the time and investment.
Do you use credit cards for travel hacking? How much money have you saved? How much time do you put into it? Do you feel less burned out because of your travels?
What are you favorite recommended credit cards
I like to save merchants especially smaller ones and eg my cleaner the 3% + it costs them to receive a credit card payment, or other fees with say PayPal. And support the places that charge a fee for credit card use or give a cash discount. Also not too big a traveler.
That said took the few bucks travel money from putting a deposit on a boat (guess we were splitting a discount on boat price with the credit card company) and as little as I travel lately (pandemic) end up taking most of my air travel (and just now that of relatives I’m bringing here to see grandkids) for <10% of ticket cost with Delta AMX gold. Now we've moved where Delta isn't the only airline, and the annual fee has risen (and the credit towards travel in equal amount), considering a different card but inertia. Your article may spur me to more aggressively pursue a different airline card or perhaps the Sapphire etc.
And wish transfer from a checking account – especially as my kids don't even have paper checks anymore – were as easy as it was from our German bank account back in the '90s (not clear if their system maintained that method). Maybe I really need to understand debit cards LOL.
I find this fascinating, but doesn’t it matter what city you live in?, If you don’t live near an airport with a lot of international flights this becomes increasingly difficult to pull off in my opinion. I’m a point novice so I could be wrong, but flying out of smaller cities that require Connection flights become difficult using points. Any thoughts on this?
Great question Mike!
Actually some of the smaller cities are better positioned to take advantage of points than large hubs. Many airlines use a system called “married-segment” award logic, meaning they will charge you less for an award out of a small airport than a reward out of a major hub. Air France is a good example of this, as nearly all of their connecting itineraries price less than a flight to Paris. American, Alaska, United, and Delta often follow this logic as well.
Additionally, there is a concept called a “positioning flight,” which is finding an award out of a nearby major hub and buying a cheap cash fare to get there. This applies to the up front flight, or even when you arrive – get to the continent you need to go to, then fill in the short cheap flights with cash fares.
Have you considered the carbon emissions you are generating from your frequent (and seemingly gratuitous) international travel? When will travelers and the travel industry wake up to the environmental hazards involved?
Hi Ben,
Well, I’m actually a sustainability in healthcare expert as well, as part of my job at work. Did you know that healthcare creates more than double the emissions of global aviation? Did you know that one day in the OR for me creates more emissions than two round-trip transcontinental flights? This is why I work hard to reduce emissions in healthcare, because we are supposed to be helping human health, not worsening it (a quick pub med search of my name will show you all my recent publications, including one last week in JAMA Surgery).
It’s not a zero sum game – I can work to improve my industry and spread the word, understanding that working in an OR is the most carbon intensive thing that I do, while also trying to travel in a slow way and putting my money toward sustainable tourism. Giving my points to airlines so I can spend on sustainable experiences on the ground is important to me.
Boom. Mic drop. And what have you published, Ben, to tangibly improve the environment? Or is it just this attempted attack on the writer in a buried comments section?
Nice. 😎
How about this one… I used credit card bonuses to shave $6,400 off of my solar install! That significantly reduced the “pay back time” of my solar array by several years. CrAzY! 🤪
Check out this blog post I wrote about that… https://theclimateadvisor.com/one-crazy-way-to-save-money-on-solar/
Also, another thing that can happen… after I had received a massive sign up reward on a card, that same card later had a sale on gift cards purchased with points, which I used to buy a $1,000 worth of Apple gift cards for about $500 worth of points, which further increased my return. The iPadAir I am typing on now was purchased with those gift cards. Woohoo!
Kelly- thank you for such a detailed and informative post. I’ve been waiting for this since you mentioned submitting a guest post a few months ago. You inspire me to learn more about points and I’m slowly getting there. Thank you!!!! (@Poppy_and_louie)
Thanks so much for your kind words! Glad the post was helpful! 🙂 And thanks for engaging with me on Insta.
You calculated an “annual” return of 4.23% based on the value of the points you redeemed in 2024, yet you also mentioned that it took 6-18 months for you to accumulate them. Shouldn’t you include the time it took to earn these points in calculating your true return?
Great point Jeff, I could call it less “annual” and more specific to that year of bookings.
I tend to book my trips about 10-12 months in advance or more, which means the earning has to come in before that. I calculate value per year in which the travel took place, as that is where I get the cash value of the flight/hotel and not a theoretical value. In aggregate over 10 years, my return is closer to 4.9%, it simply varies from year to year based on the redemptions.
One issue you did not address was the need to unfreeze and refreeze your credit report every time you apply for a new one.
It takes about one minute to thaw each of the three credit bureaus. They refreeze on their own when you set the thaw to last two days. (You can refreeze earlier, manually, if you wish.)
Great post. One thing I would encourage a newbie to remember is that the value of your points is highly dependent on what you would have spent in cash, anyway, and “cents per point” (CPP) can be misleading. As an extreme example, let’s say that an airline marks up their international business class seats to $30,000 per ticket. If it “only” took 100,000 points to book that ticket, you didn’t earn 30 CPP unless you would have normally been okay to spend $30,000 per ticket in cash. In addition, if the enticement of credit card points causes you to spend more up-front than you would have anyway (earning points) or causes you to spend more on the travel after-the-fact than you would have anyway (redeeming points), then the value-added is reduced, too. But in fairness, that’s also true of cash-back cards.
Not saying that award travel is bad – my family certainly does it, too. Just emphasizing that you have to be careful.
Very important point JT, that if any of this changes your behavior on spend, it’s something you need to be careful of.
There’s a lot of debate in the points world over how to value redemptions. Is it the cash value? Is it what you would have paid otherwise? Is it the price of the cheapest seat on the plane? There’s a lot of room for discussion here, as I believe the true value falls in between.
For me, I’m a high volume surgeon who does hundreds of cases per year and thousands over my career. My body hurts. When I fly a long haul flight, I really need a business class seat simply to avoid the pain of being confined for 10+ hours. So an economy flight for an international vacation won’t make sense for me. I could not value the flight at that level because I wouldn’t go!
At the same time, a flight is also not “what you would have paid.” It is worth what the price the airline says it is, which is always dynamic, and typically priced higher for one-ways than round-trips.
I value my international flights at the cash value of half of a round-trip flight. I think this is reasonable, though it probably undervalues the flight, as awards are (mostly) refundable, and cash tickets are not unless you pay a lot more for a refundable ticket.
Everyone should have a system for what they value and what the cash price is! Ultimately I think it’s important to track your redemptions.
Sadly, the Chase Sapphire Reserve has lost its 3x multiplier on travel just recently for new members in case anyone was looking at the card for this reason. 🙁
An immense THANK YOU for taking the time out of your incredibly busy career in academic medicine – from clinical care, operating, teaching and education work, research, administration, promoting sustainability through speaking engagements, and all the things we don’t see- to write this exceedingly thorough, well researched, and evidence based article. This is a worthwhile conversation, and I appreciate you stepping into this forum to educate us in medicine about the potential opportunities and value of points and miles.
Thank you for this post. If you’ve already owned the Chase Sapphire cards (now downgraded to no annual fee card), what card would you recommend next?
Kelly thank you so much for this comprehensive analysis with all the specificity and transparency you provided. This is just the kind of thoughtful quantitative and qualitative analysis I was hoping for when we communicated earlier this year.
I am so grateful you have taken the time to share your experience and expertise in this area that is of great interest to so many and potentially so valuable for those willing to take it on. I am much better educated as a result of your efforts and look forward to sharing this article with those who may benefit from it.
One area that I’d like to hear more about is what I will generally call “convenience”. With a family of five including three young kids we place high value on direct flights, short layovers when necessary, comfortable/convenient departure times, flights during school breaks, hotel suites with multiple bedrooms, hotel proximity to various activities, etc.
Our family, and many of my clients in similar circumstances, have found it challenging to navigate the points universe and make optimal use of points with these considerations in mind. It has been my personal and professional observation that to get the most value there is a tradeoff for “inconvenience” i.e flights that leave really early or really late, connections that otherwise would not be necessary if buying in cash, longer layovers than otherwise would not be required, inability to get 5 seats on the same flight or all together, hotels that don’t accommodate multiple bedrooms or adjoining rooms, etc.
I have encountered a number of people who say “This sounded great until I actually tried to use my points to fly the 6 of us out for spring break. I just wanted to go from Saturday to Saturday on a direct flight that leaves at 10:00 AM but it’s literally impossible. I wish I just had my 2% cash back and I could have bought the darn flights I actually wanted.”
In short, it seems the value proposition may most optimal for single/duel travels, highly flexible travelers, and/or those willing to accept myriad “inconveniences” in order to enjoy the other benefits you articulated so well.
Do you agree with that observation or is this just another area where further education is needed for those encountering these challenges ?
What recommendations do you have for those considering travel hacking that value family and/or “convenient” travel?
Thanks again for your wonderful contribution.
That’s no different than any other kind of travel though Tyler. Part of “value” is convenient non-stop flights. So the same amount of points might be able to buy a crappy time, 2 stop flight not around a holiday as half or a third of the flight you really want. Even something like private jet travel works the same way. You can do it cheaper if you’re willing to give more notice and not fly around holidays and Spring break. So whether it costs more money or more points is often irrelevant to whether to use the points or not. Now maybe there are some situations when you can’t buy it with points even if you’re willing to spend twice as much points, but I bet the airlines are quickly figuring out ways to make those situations go away.
That said, cash is the ultimate points system. We flew to Iceland on points earlier this month but the return flight was cancelled because the airplane broke. We were rebooked for the next day. Instead of doing that, we just got our points back and paid cash for flights home on a different airline on the day we originally intended to travel. They always take cash. So your real comparison when it comes to hacking is the ratio of how much do I have to spend on the card to how much benefit (in cash) do I get for that spending minus whatever hassle there is in dealing with any kind of a points system. There are clearly some types of users and some methods where you can get a much higher ratio than just spending cash or even using a 1-5% cash back on everything type rewards card. And some people just love chasing the deal and planning the trip. Hacking is literally their hobby and they might do it even if it didn’t make financial sense.
I’m kind of the opposite. I would almost rather not go on an international trip than plan it myself. Thankfully Katie doesn’t feel that way so we still get to go do some cool trips.
Tyler,
I think you bring up the key points. I have become very interested in points over the past few years and read The Points Guy everyday. I don’t churn credit card sign up bonuses, but instead rely on multiplier points earning (i.e. 4x for food on the AmEx gold, 5x for travel and AmEx Travel hotels with AmEx Plat) and using the credits the cards come with.
I think the key is that is is very difficult to use these points for maximal value for most people. TPG values these valuable transferable points as around 2 cents per point. Getting 4.23 cents/point is very good even though the author downplayed it and said she does better often with international first class flights. Its also hard to find these deals since it isn’t as easy when you want to fly in the summer or school vacation weeks and you want to fly direct and you don’t live in a major city like NY (I disagree with her comment that it is easier in a small city, but I agree it is cheaper if you are willing to connect in NY, haha). This makes it all seem easier than it is. I also became much more dubious once I realized she is trying to sell her course on how to use points more effectively, but as WCI says we all have a conflict of interest so I get it.
The $4600 number she cites when using 1.25 cents per point is a much more realistic number. My goal is 1.5, even though TPG says to shoot for 2. Similar to your post a few months ago, I think for most people the annual benefit is somewhere in the $2k-$10k range pending how much you travel and spend. Most are traveling less than this author. You also really have to enjoy it and love it. I do even though I admit there are more efficient uses of my time. This is also for someone who doesn’t open up ton of credit cards and doesn’t have to deal with tons of accounts which is a lot to do. Once you factor in that, I think it can definitely get overwhelming.
Is this common with surgeons “Now that I’m thousands of surgeries into my career with the overuse injuries to go with it”? Just curious as non-procedural physician. If so why isn’t more focus done on prevention?
When I did my surgery rotations it seemed that no one ever sat down except for certain surgical subspecialties like ophthalmology. Seems maybe part of the toughness culture in surgery that we can handle this instead of optimizing for comfort.
Glad you are having fun travelling. I got a lot of value out of frequent flyer programs when younger and single. My best was a round the world business class with American Airlines for 220k miles 15 years ago, an award no longer offered. It was something like 20 different business class flights on oneworld carriers. Now with a family of four and school vacation schedule limits I’m happy with a cash back card instead and paying cash for travel.
When I was still burning my stash of points when my kids were younger my 5 year old at the time got upset when one of the flights we were on didn’t turn into a bed. That’s another reason I decide to give up premium travel to not spoil kids. 🙂
Now I’m happy to travel as four in coach. It’s much easier to sit in coach next to some one you know instead of a stranger.
Great post, Kelly! I want to book a trip immediately!
I’ve long been a points enthusiast but am discouraged about the growing number of merchants charging 3% or more just to use a card.
I wrote a blog post recently about how I’m now avoiding those businesses or paying cash instead of credit.
Question for Kelly: How are you thinking about and handling these additional fees?
Thanks for the motivation to keep pursuing points!
Matt
I love my points. For me it is completely worth it!
I was surprised that there weren’t more comments about the downsides of these reward points.
There’s no such thing as a free lunch. That’s the oldest rule in the book. Who’s paying for these rewards? Poor people are, via the high interest rate that they pay to carry a balance from month to month. Rich people are, via the increased price they pay to use a credit card for high-ticket purchases. (If I put my kids’ tuition or my property taxes on a credit card, there’s a 3% surcharge. If I pay by electronic funds transfer or check, that charge is zero.) Merchants are paying: to some extent, they have to eat the credit cards’ swipe fees, reducing their profit margin. Actually, everyone is paying: the merchants don’t eat the full swipe fee, they pass some of them on to customers, contributing to inflation. It feels like you’re getting something valuable for free, but you know the banks and airlines are ultimately profiting from operating the points system, otherwise they wouldn’t bother.
The other old saw is that the house always wins. Companies love alternative currencies because they introduce friction into transactions, which they can swing to their advantage. Gift cards, in-game currency, prepaid plans, preloaded debit cards, rebates, scrip, frequent-flyer miles, bounceback rewards—these are all ways that a company can arrange to hold some of your money for a while, in the hope that you’ll be forget to spend some of it, let it expire, or end up spending more than you wanted to in order to “use it all up”. If the points can only be used in increments of, say, 40,000 or whatever the lowest reward tier is, any change is left unspent in the bank. The more complex the alternative currency ecosystem is, the more you can reckon it’s going to favor the house, and the frequent flyer ecosystem sure seems to be complex. The managers of the system know the rules better than any player does, AND they can change the rules whenever they want.
Humans are funny, they don’t always act in their own best interest. All the time I hear people joking about buying expensive stuff to get the credit-card miles, which are worth pennies on the dollar. My own dad justifies buying new Apple devices because it’ll make the company’s stock go up and he’s an investor. He’s only half-joking. It seems like people who play the miles game love doing it, and I can only assume they find it rewarding to win this game, and from there it’s a small jump to imagine they buy stuff they wouldn’t otherwise, or buy it in ways that don’t make the best financial sense, so that they can get more gold stars in the miles game.
Finally, something doesn’t add up for me, when people brag about redeeming two million miles, and other sources claim that signup bonuses are the richest source of points, but the signup bonus for even the richer cards, like Chase Sapphire, is only 60,000 points, and you can only do a couple of those in a year. It would take me a decade to spend a million dollars on credit cards, even if I tried.
I didn’t come up with this stuff. It’s been widely reported, for example in a recent mainstream media article (search for “The Dirty Little Secret of Credit Card Rewards Programs”). I don’t want to be trapped in a game with complex rules that are stacked against me, so I don’t play. I’ll take the points that I happen to accumulate on the airlines I use anyway, and if once in a while I can trade them for a free flight, that’s great. I feel the same way about points as I do about smoking–I don’t want to do it, but I can get why people would want to, and I wouldn’t stop them, but you should know the hidden side before you take this up as a great new hobby.
I agree with WCI. Cash is the ultimate points system.
Nothing new in your arguments, you are right.
If you don’t want to play, you don’t have to. Good for you.
There are clear rules… don’t get a card you won’t use, pay off your bill in full every month, keep track of things, don’t hold points without intent of using because they lose value over time, etc. Many of these points outlined in the article above.
The CSR business card, which is brand new, has a 200,000 sign up bonus. I got the consumer CSR card when it first came out not long ago with 100,000 points. I got the VentureX recently with a 75,000 bonus. Bonuses change over time for any given card. Keep an eye out for the big ones (for those inclined to play).
I agree with a few comments, I do use points to go in business class, But all points are consumend in 12 months for 3 international travels, applying for new cards has become difficult as big ones decline your application stating you applied for many cards, so I am thinking may be i use points to go on main cabin seats:((
Does any one have any better strategy?
As someone who earns even more points than the author, I feel qualified to say that most people should not become involved with this hobby. This article makes an effort to minimize the downsides, of which there are many. It is time consuming and takes mental bandwidth. It takes effort and knowledge to use your points, and finding award space is significantly more complicated than making a cash booking. Personally, I enjoy the challenge and it is a hobby. But it takes time and effort. I do not recommend that my friends or family get involved, as there are too many pitfalls and high earning busy people have better ways to spend their time and effort (unless they enjoy it). All of the trips that people like the author and myself take are paid for by vast majority of the people who sign up for these cards, who think they are going to make easy money but turn out to be profitable customers for the bank.
Interesting to see a heavy user of points advocate AGAINST their use. Not sure I’ve seen that before.
Great article! You said credit cards need to be open for a year. How do you avoid repaying the annual fee a year later if you don’t plan on keeping the card?
The key is to set a reminder to call the card issuer a few weeks before your card’s anniversary date (when the annual fee posts). At that point, you can ask to downgrade the card to a no-annual-fee version or even cancel it—as long as the fee hasn’t posted yet, or you’re still within their refund window (usually 30 days). This way, you keep the account open long enough to avoid hurting your credit and still avoid paying another annual fee. Always good to double-check the card’s terms and set that calendar alert!
Interesting and informative article. A couple of other responses have asked for which cards are “best” for rewards travel. I have an AMEX Platinum, CSP and United Quest (live at a United hub city). Is that “enough”? Should I have others?
I’m also curious how many of the total miles utilized for travel came from CC spend versus one-time sign-up bonuses.