Question on Credit Cards (And Making Money)

Here's a question I had emailed to me a couple weeks ago:

I just read your recent credit card post. I was wondering if you considered the 1.7% cash back to be better than an airline/hotel card. I've had an amazon.com credit card since I was in high school, which works out fine, as I love books, but I'm quite aware that I could be doing better. My parents have two cards each. One gives hotel points and the other airline miles. All of the vacations I took growing up were essentially free do to these cards. I've been thinking about getting the same cards now that I'm about to graduate college.

Have you ever considered these kind?

Here's how I responded:

I used to have a miles card, but after I did the math, I found it was better for me to simply get the cash and then buy the plane ticket. For instance, if you need 25,000 points to get a free flight and $1 equals 1 point, then you'd need to charge $25,000 to get a free ticket. At my cash back rate of 1.7%, I'd earn $425 -- enough to buy almost any ticket I'd want. Plus, I could buy it on any airline and not have any blackout dates. Or I could spend it on anything else I wanted -- it is cash after all.  Finally, many miles cards charge an annual fee, which decreases their value even further.

One thing that could make them more valuable to you is if you could double dip -- get double points for the same spending (like staying at a hotel and getting both hotel points and frequent flier miles.) But since I don't do enough of this to matter and I wouldn't want to deal with the hassle anyway, a cash back card was the best option for me.

So, was this a good answer or could it have been better?

As an aside, I recommend Blue Cash from American Express. It's my cash-back card of preference.

Also, I generally do not answer person-specific questions -- I just don't have time, nor the expertise, to answer all the questions I get. From now on, anyone emailing me questions will not get a direct response. If I choose to respond, it will be in a post, though it can take me a few weeks to get to any specific question.

Besides, you certainly have someone better to ask than me, don't you? ;-)

Comments

[SDG]

You have not considered the fact that you can sell airline miles at $.018-$.019/mile which exceeds your 1.7%.

[FMF]

Where/how can you do that?

[T Struck]

I have a Hilton Honors Visa card and I am extemely happy with it. I earn 2 point for every dollar spent. You can redeem a free night for as little as 7,500 points. I usually redeem 15,000 - 20,000 points for a free night. The most I've redeemed was 30,000 points for a free night but that was a 4 star hotel on the beach. I know Hilton sets aside a few rooms at each hotel for reward members, but I've never had an issue redeeming points at hotel when I wanted.

Tim
http://struckreviews.blogspot.com/

[SDG]

Simple - you contact a mileage broker who basically serves as a middle man between you (with miles) and a customer (needs miles for trip). Customer makes the reservation and gives confirmation code to broker who forwards the confirm. number to you. You then call FF desk at airline and say you would like to fulfill the reservation using your miles. Once reservation is ticketed you forward email to broker and he mails you the check w/i 3 days. Piece of cake.

Keep in mind the broker only deal in large mileage lots (90k+) so not everyone can do this - I traveled 100K+ miles a year + spent $30k month in business expenses so I accumulated mile very quickly - and turned these into a very sizeable amount of cash.

[FMF]

Ok, so it's:

1. Not useful for most people.

2. Involves extra work (there is a cost of time here too.)

Still, it's good to know this exists for ultra-travelers.