Chase Sapphire Preferred is terrible, get Slate instead

I'm going to do my readers a favor and assume that by the time they've graduated to blogs like mine from the training-wheels affiliate bloggers, they're perfectly aware of my objections to the Chase Sapphire Preferred, so I won't relitigate that case today. Suffice it to say, the only person who should even entertain the notion of paying a $95 annual fee for the card is a business traveler who's reimbursed for their travel expenses and is allowed to pay for their own hotels and meals while on the road. Even then, I'd be skeptical.

But whenever I rail against the Sapphire Preferred, someone inevitably comes back with their supposed trump card: "Sure," they say, "you'd have to be crazy to keep the Sapphire Preferred, but a 40,000 Ultimate Rewards-point signup bonus makes it worth applying whenever you're eligible for a new bonus."

That's wrong too. Here's why.

Both Sapphire Preferred and Slate can be product-changed to Freedom

While Sapphire Preferred is an Ultimate Rewards-earning card and Slate isn't, both products are "own brand" Chase credit cards, and cardholders can call in to request a product change to the best no-annual-fee Ultimate Rewards-earning credit card: Chase Freedom.

That means the end game is the same with both cards: a product change to Freedom. The only comparison worth making is the advantages of signing up for each card in the first place. So which card offers bigger rewards for signing up?

What are 40,000 more Ultimate Rewards points worth to you?

A lot of bloggers will try to tell you what 40,000 Ultimate Rewards points are worth. A night at the Park Hyatt Vendôme costs 672 Euro, so 40,000 Ultimate Rewards points must be worth $810!

But I don't really care what 40,000 Ultimate Rewards points are worth in the abstract. I care what 40,000 more Ultimate Rewards points are worth.

And the answer is that if you're not going to redeem them, they're worth $400.

Now, maybe you are going to redeem them. Maybe you keep your Ultimate Rewards balance as low as possible by continually redeeming them for premium cabin international trips and luxury hotels. But even if so, don't value 40,000 more Ultimate Rewards points at the highest value you get from the program; value them at the average value you get across all your travel redemptions.

What is a $30,000 negative-interest-rate loan worth to you?

I wouldn't have thought it was possible, but last week I understated the value of the Chase Slate introductory balance transfer offer of no balance transfer fee for transfers within the first 60 days, and a 0% interest rate on balance transfer for 15 months.

I wrote, "for the first 60 days of a Slate account membership, you can transfer up to $15,000 in balances with no balance transfer fee."

But that's not exactly right. You can transfer up to $15,000 from non-Chase-issued credit cards in the process of opening a new account, but that actually has nothing to do with the $0 balance transfer fee and 0% balance transfer APR: it's a restriction Chase places on all balance transfers.

In fact, Chase's rule is that only $15,000 can be transferred in each rolling 30-day period. Since the $0 balance transfer fee lasts for the first 60 days of card membership, you're actually able to transfer up to $30,000 under the no-fee, 0% APR offer.

Of course, that would require having a sufficiently high credit limit, but Chase does allow you to transfer available credit from other credit cards, so you can always scrounge up as large a credit line as possible from your worthless Marriott, British Airways, Hyatt, and Southwest credit cards, for example.

Before I dig any deeper, let's be clear on the math here: your $30,000, 15-month loan has a negative interest rate because you've transferred the balance from other, rewards-earning credit cards. Using conservative assumptions of a 2% cash back credit card with 1% in purchase and liquidation fees, your $30,000 loan is worth a minimum of $300 — before you even get around to using the money!

So, how should you use the money?

Money is fun. Lots of money is even more fun

So now you've got $30,000 in cash lying around, and you only need to make minimum payments on your new Slate card for 15 months. What do you do with the cash?

• Max out high-interest savings accounts. Maybe you're like me and you drip a steady amount into your high-interest savings accounts each month. That's no longer necessary: max them out and reap 5% or higher APY on your savings.
• Pay down your mortgage. While your home is hopefully financed at an extremely low interest rate, you may still be paying private mortgage insurance if you haven't yet built up enough equity. By bringing your equity up to 20% of your home's value, you may be able to save hundreds of dollars a month in mortgage insurance payments (I'm not your banker or insurance agent; check with them first).
• Pay down your student loans. I have a small Perkins student loan that's accruing interest at a rate of 5.6% APR. I'm going to pay it off, saving a few hundred dollars in interest payments over the life of the loan.
• Make retirement contributions. If you qualify for the retirement savings contribution credit, up to 50% of your contributions to qualifying retirement plans can be rebated when you file your taxes. I recently wrote a walkthrough of the retirement savings contribution credit over at the Saverocity Forum; there's a lot more information available there.
• Invest it. Of course traditional investment vehicles aren't paying much at the moment, but we're travel hackers: there are alternatives. You can fund Kiva loans with a 5%- or up-to-6%-earning credit card. If you belong to a bank or credit union that allows it, you can fund certificates of deposit with a rewards-earning credit card. A 6-month CD funded with a 2.22% cash back credit card suddenly adds 4.44% to your annualized return. 3-month CD's will double that again.
• Buy something. Of course this isn't strictly speaking a way of maximizing the yield on your loan, but if the alternative is to finance a car or appliance at a high interest rate, being able to make the purchase with cash may save you hundreds or thousands of dollars.

Conclusion

The options I listed above are just the first few that sprang to mind; you no doubt have your own ideas about what you'd do with a $30,000 negative-interest-rate loan. So do the math, and in almost all cases I suspect you'll find the loan is more valuable than the additional Ultimate Rewards points.

After all, Ultimate Rewards points are easy to earn — a lot easier than finding negative-interest-rate loans!

Has the Chase Sapphire been quietly retired?

For years, Chase has offered 3 Ultimate Rewards-earning personal (not small business) credit cards: the Chase Freedom, Chase Sapphire, and Chase Sapphire Preferred.

The Freedom is Chase's entry into the crowded field of rotating 5% cash back category cards, while the Chase Sapphire Preferred is a premium, flexible-Ultimate-Rewards earning credit card that, while paying affiliate bloggers handsome commissions, is essentially useless for the serious travel hacker due to its low earning rate and $95 annual fee which is generally not waived, even for those who spend above-average amounts on the card.

The Sapphire has meanwhile always been the odd card out: it earns 2 non-flexible Ultimate Rewards points per dollar spent at restaurants but not on travel purchases, and has no annual fee. Meanwhile, for the last three years the Chase Freedom has offered 5 Ultimate Rewards points per dollar at restaurants during the second quarter, making the Sapphire redundant for 25% of the calendar year.

The Sapphire has vanished from Chase's website and affiliate channels

Today I mentioned on Twitter that I had been able to request a product change from Sapphire Preferred to a second Freedom, and I was asked whether it would make more sense to change to Sapphire, instead.

A quick search revealed that the Sapphire has completely disappeared from Chase.com, while Credit Karma's review page does not have an active application link for the card. CreditCards.com is hopelessly annoying to navigate but I couldn't find an application link there, either.

Do yourself and Chase a favor: product change to Freedom

It appears that Chase is now more deliberately juxtaposing the no-annual-fee Freedom card with the premium, $95-annual-fee Sapphire Preferred. I think this actually does a huge service to their customers, who might have previously confused the Sapphire with a card worth carrying, which it is not and has never been.

If you happen to be a current Chase Sapphire cardholder, this is as good an occasion as any to call in and request a product change to the Freedom, since you'll get your new card in time to take advantage of 2015's first quarter bonus category of grocery stores (excluding Walmart and Target stores).

Update: Do refundable Arrival reservations justify keeping Sapphire Preferred?

Background

In the most recent of my periodic, blistering attacks on the Chase Sapphire Preferred, I explained why I consider the "travel" bonus category to be a red herring:

• "The Barclaycard Arrival isn't superior in earnings to the Sapphire Preferred for travel purchases;
• "It's superior to the Sapphire Preferred for travel purchases because that's how you can leverage its dominant 2.22% cash back earning rate on all non-bonused (manufactured) spend."

Developments

Then on Sunday, when I wrote my wrap-up post on Frequent Traveler University, I shared something mentioned in one of the sessions on manufactured spend (and which had previously been shared with me by a few readers privately):

"Speaking of which, Barclaycard allows Arrival redemptions against purchases that are later refunded (tread lightly here)."

In response to a reader question, I explained that neither airlines nor credit card companies like to see a repeated pattern of refunded purchases, but that doing so occasionally in order to maximize your rewards probably wouldn't pose a risk of account closure.

While I did (accidentally) do this once, the fact is that I actually do spend a lot of money on travel, and I'm happy to capture my 60-70% discount by putting manufactured spend on my Arrival card and redeeming Arrival miles against those real travel purchases.

Updated Analysis

The fact that you can redeem manufactured spend against manufactured transactions undermines the first proposition I laid out: that travel purchases have to be put on the Arrival in order to leverage its high earning rate. The most extreme case would be saving up your manufactured Arrival miles until the end of the year and buying a single, $15,000 refundable first class ticket.

That way you would be able to put all the travel reservations you intend to honor on a Chase Sapphire Preferred and earn 2 Ultimate Rewards points per dollar on those purchases.

However, even without that analysis, my first argument, regarding the annual fee, still stands:

"Consider how much you'll have to spend in order to recoup the Sapphire Preferred's $95 annual fee:

• At 2.5 cents back per dollar, you'll need to spend $3,800 in travel categories in order to earn back the value of the annual fee.
• But it'll take another $3,040 to recover the $76 in value you would have earned from putting the initial $3,800 in travel spend on a no-annual-fee 2% cash back card!
• With the conservative valuation of 2.5 cents back per dollar spent in bonused travel categories, you'll need to spend $6,840 before you start showing a profit."

This is obviously an attainable sum for very, very many of my readers.

And if you prefer to take the Sapphire Preferred's 7% annual dividend into account, just $3,551 covers the annual fee and $2,655 covers the foregone 2% cash back on that amount.

Whether you're using $6,840 or $6,206 as your "true" break-even point, a business traveler might spend that amount in just two or three business trips, while even a leisure traveler who has to buy tickets and hotel rooms for a family could easily anticipate spending that amount in a year on bonused travel purchases.

Was I wrong?

Sorry, but I'm not about to go that far.

While the Sapphire Preferred's 50,000 Ultimate Rewards signup bonus is terrific, the possibility of asking for a product change from the Sapphire Preferred to a second, third, or fourth Freedom card means that by keeping the Sapphire Preferred for an additional, paid, year you're foregoing (using this year's bonus categories as an example) 15,000 Ultimate Rewards points at gas stations, 7,500 Ultimate Rewards points at restaurants, and 7,500 Ultimate Rewards points at Amazon.com.

All while paying $95 for the privilege.

Chase Freedom bonus categories and the Sapphire Preferred

I assume everyone who carries a Chase Freedom card has already received their quarterly text message telling them to register for next quarter's bonus categories of "restaurants and Lowe's home improvement stores."

So instead of reminding you to register for 5 Ultimate Rewards points per dollar spent on the Freedom in those categories next quarter, let me take the opportunity to continue my fruitless war against the Chase Sapphire Preferred.

The Sapphire Preferred, with its $95 annual fee, has 2 permanent bonus categories: restaurants and travel.

But neither category alone, nor both together, is worth a $95 annual fee. Here's why.

You should put non-bonused spend on a 2% cash back card

In non-bonused categories, a no-annual-fee 2% cash back card is clearly superior to a dollar spent on the Chase Sapphire Preferred. You would need to get over 2 cents per point in value from every Ultimate Rewards point earned in non-bonused categories in order to work your way up to a loss of only the $95 annual fee.

Just use the 2% cash back card instead.

You should put eligible travel purchases on the Barclaycard Arrival

As I reported back in December, the Arrival's definition of "travel" purchases doesn't align exactly with the Sapphire Preferred's. Namely, while Chase bonuses taxi fares, Barclaycard does not allow Arrival mile redemptions against them. That's a real difference, but of course its significance depends on how frequently you take taxis.

2 flexible Ultimate Rewards points are strictly more valuable than 2 Arrival miles, being worth a minimum of 2.5 cents towards paid travel through the Ultimate Rewards portal, compared to the 2 Arrival miles' value of 2.22 cents.

So why don't they justify putting your travel purchases on the Sapphire Preferred? Because of the annual fee.

Consider how much you'll have to spend in order to recoup the Sapphire Preferred's $95 annual fee:

• At 2.5 cents back per dollar, you'll need to spend $3,800 in travel categories in order to earn back the value of the annual fee.
• But it'll take another $3,040 to recover the $76 in value you would have earned from putting the initial $3,800 in travel spend on a no-annual-fee 2% cash back card!
• With the conservative valuation of 2.5 cents back per dollar spent in bonused travel categories, you'll need to spend $6,840 before you start showing a profit.

What makes the Barclaycard Arrival World MasterCard different? Redeeming Barclaycard Arrival miles against the same $6,840 in travel purchases will yield at least $752 in excess value over the 2% cash back card, with an annual fee of just $89:

• Redeeming 684,000 Arrival miles against a single transaction will yield a 10%, 68,400 mile, dividend, worth $684 towards a future redemption;
• That future redemption will yield a dividend of 6,840, redeemable for up to $68 towards a third purchase.

To rephrase this point slightly differently:

• The Barclaycard Arrival isn't superior in earnings to the Sapphire Preferred for travel purchases;
• It's superior to the Sapphire Preferred for travel purchases because that's how you can leverage its dominant 2.22% cash back earning rate on all non-bonused (manufactured) spend.

Lots of cards bonus restaurant spending

Earning 2 Ultimate Rewards points earned per dollar spent at restaurants with the Sapphire Preferred is a nice touch, but it's hardly revolutionary. Check out Frequent Miler's list of cards giving bonuses in various common categories to see why.

The no-annual-fee Chase Freedom offers 5 Ultimate Rewards points per dollar spent at restaurants this quarter.

So for 25% of this year you would be downright insane to put restaurant charges on your Sapphire Preferred card. And for the rest of the year, you can simply select restaurants as one of your US Bank Cash+ bonus categories to secure 5% cash back year-round on up to $2,000 per quarter spent at restaurants.

Conclusion

Leave the Sapphire Preferred at home.

Travel bleg: where should I stay in New York City?

When I published my 2013 end-of-year report on my manufactured spend activity, one of the requests I got from some readers was for more information on how I spend my miles and points and not just how I earn them. I just booked a pretty involved itinerary for March that I'll be posting about once it's finalized, but I'm still struggling with the last piece of the puzzle: where should I stay in New York City?

I'm planning on a long weekend in the City, preferably from Thursday to Sunday, although Friday to Sunday is fine as well. Since I always keep a balance of Club Carlson Gold Points, I went ahead and booked a 2-night award stay at the Radisson Martinique on Broadway for 50,000 Gold Points, valuing that 2-night stay at $222, which seems like a good value for New York City. For comparison, the AAA rate would be $511.92 for the same stay.

To book the previous Thursday would cost another 50,000 Gold Points or $238, which I consider a push since the paid rate would also earn Gold Points.

My concern is that for some reason I have a bad impression of the Radisson Martinique. I've never stayed there, but whenever I read about it it's people saying things like:

"It’s such a so so hotel. There is no way for me to pay to stay there."

"I am not the biggest fan of this hotel...Truly NY-style matchbox size rooms."

So I'm curious if my readers have any great insights or little-known hacks for getting great values in Manhattan. I have all of my February statement cycles to go, so I could run up the score on my Chase Sapphire Preferred in order to transfer Ultimate Rewards points to Hyatt and stay at one of their properties for 20,000 or 25,000 Hyatt Gold Passport points, but it's tough to imagine that's going to be a better value than the Radisson Martinique.

Are there other properties or programs I should be looking at? Good best rate guarantee opportunities?

Pointshound, Amtrak, Skiplagged, Updated signup bonuses

I'm heading to Chicago for a long weekend tomorrow, so updates might be spotty for the next few days. There's one newish technique I'll be checking out while I'm there, so watch for that update this weekend or early next week. In the meantime, here's a rundown of some quick hits which probably don't deserve their own blog posts, but which I wanted to bring to my readers' attention.

Pointshound Points Posting

I wrote a few posts back in July when Pointshound first launched their "double up" rates, which allows you to earn both bonus airline miles through Pointshound and elite qualifying nights and regular points with many of their hotel partners. These stays also qualify for hotel promotions. 

My feeling was that if you were planning to book through your hotel's website, and Pointshound offered the same nightly rate with the same cancellation policy, you may as well also earn a few hundred airline miles for your booking as well. I also was the first to reveal a simple technique for instant Pointshound Level 3 status, earning around twice as many miles per night on "double up" bookings, and somewhat more than that on standard (non-double up) bookings.

I haven't written about Pointshound recently because, frankly, my airline miles didn't post, and I wasn't interested in sending any more business to a sub-par operation. It was a good idea, but if they couldn't implement it correctly, I was fine waiting for someone who could (Rocketmiles is currently making a run at part of their market segment).

Imagine my surprise when I got a stream of e-mails on November 7 notifying me that my points had posted for 5 separate reservations. To be clear, these were "double up" reservations for August 30 - September 2, 2013. By my math, that means my points posted 9.5 weeks after checking out (in fairness, I did receive my "double up" hotel points and elite night credits for the stays immediately; just not my Pointshound airline miles).

So who knows, maybe Pointshound has managed to get their act together. File this under developing...

Amtrak Bonus Points with Google Wallet

I love Amtrak Guest Rewards points, which I value at between 3 and 6 cents each, depending on my planned redemptions (making them easily one of Chase's most valuable transfer partners). So I can't help but pass along this opportunity to earn 500 Amtrak Guest Rewards points for linking your AGR number to a mobile Google Wallet account.

Unfortunately, as far as I can tell you do need to own a smartphone, download the Google Wallet app, and add Amtrak Guest Rewards as a loyalty program to the app. All this takes a few minutes and is about as much fun as you would expect. You can unlink your AGR account once your points post, however, and they are worth between $15 and $30, depending on your redemption. To put it slightly differently, you would need to spend $250 on Amtrak or book 5 one-way tickets to earn the same number of AGR points.

Skiplagged for Hidden City Ticketing

There is a whole world of travel hacking that I simply don't have the time or patience to master. It involves things like fuel dumping and "hidden city" ticketing. The former technique is too complicated to explain here, but the latter is simple: sometimes it's cheaper to book tickets to places you have no intention of visiting, which happen to have stopovers in the city you actually intend to visit. As long as you don't check bags (which would be checked to your final destination) you can just leave the airport at your "intermediate" destination.

You can save real money doing this, but domestic airline tickets typically aren't expensive enough for me to spend time checking every possible permutation of hidden city ticketing.

Skiplagged is a new website that aims to take care of all that mindless searching for you, and it's going to become a regular stop for me, along with Kayak and ITA Matrix when I'm searching for paid flights. Their homepage has some examples of hidden city ticketing that you can book today, if you're so inclined, that offer (in some cases) substantial savings.

Updated Signup Bonuses

Here are a few updated signup bonuses you'll find on the site:

• The Chase Freedom card (see Chapter 1) now has a 20,000 (non-flexible) Ultimate Rewards point signup bonus. If you don't have this card yet, include it in your next application cycle, especially if you already have a flexible Ultimate Rewards point-earning card.
• Speaking of which, the Chase Sapphire Preferred card (see Chapter 2) has raised their signup bonus from 40,000 to 45,000 flexible Ultimate Rewards points after spending $3,000 within 3 months and adding an authorized user (the second requirement is new).
• The Business Rewards Gold card (see Chapter 7) now has a 30,000 Membership Rewards point signup bonus (instead of the usual signup bonus of nothing). I'm still trying to track down a non-affiliate version of this offer.
• The Capital One Venture Rewards card (see Chapter 2) has raised their signup bonus from 10,000 to 20,000 fixed-value Venture Rewards miles.

As my readers know, I don't receive any kind of bonus, referral credit, points, recognition or anything else of value if you sign up using these links, which are not connected to me in any way, shape or form. I provide them only as a service to my readers.

On the other hand, if you find the blog helpful, consider buying my ebook, The Free-quent Flyer's Manifesto, leaving a review on Amazon.com, and telling your friends and family about the site! It's the only advertising I have and it means the world to me.

Pro tip: Product Changes

If you have my Kindle ebook (The Free-quent Flyer's Manifesto), follow the travel blogosphere, or visit forums like FlyerTalk or Milepoint, then you know that travel hackers spend a lot of time thinking about their applications for new credit cards, maximizing the number of miles and points we earn for each "hard" credit pull, which in the short term reduce an applicant's credit score.

But one easy, free, and potentially lucrative technique gets a lot less publicity (presumably because bloggers don't receive affiliate income for promoting it): the product change. Just yesterday I did my third product change in 12 months, and realized I should draw my readers' attention to these opportunities. 

What is it?

A "product change" is the term for changing a credit card account from one product offered by a bank to another product offered by the same bank. A product change differs from an application for new credit in several ways. They:

• do not require an additional credit check;
• can maintain your account's history;
• do not earn a signup bonus (except - occasionally - for product upgrades) 

As I'll discuss below, product changes are best for cards that have low signup bonuses, which aren't worth wasting a "hard" credit inquiry on. 

Why change products?

It's helpful to think of product changes in three conceptual categories: downgrades to no-annual-fee cards; changes to totally different product lines; and product upgrades.

1. Downgrades. Perhaps the most common type of product change is from a product that charges an annual fee to one that does not. For example, say you've decided to apply for the Chase Ink Bold card, and you already carry a Chase Sapphire Preferred. The annual fee is $95 for both cards, but you only need one card that earns flexible Ultimate Rewards points in order to make all your Ultimate Rewards points flexible. Instead of canceling your Sapphire Preferred card, you can downgrade it to a no-annual-fee Sapphire card (or a Freedom card). That way, you'll keep the account's history and credit line intact (although you'll lose the valuable double earning rate on travel purchases with the Sapphire Preferred).
2. Product line changes. This is the category my product changes tend to fall into. About a year ago, I noticed that the Bankamericard Cash Rewards card offered 3% cash back at gas stations on up to $1,500 in purchases per calendar quarter. The signup bonus, however, was only $100: not nearly enough to waste a credit inquiry on. Then I realized that I still had an old Bank of America WorldPerks card that earned nearly worthless WorldPoints, so I called Bank of America and asked for a product change to the Cash Rewards card – they immediately agreed. Likewise, a few months later I was considering applying for the Chase Freedom card, which offered just 10,000 Ultimate Rewards points. Instead, I called Chase and asked for a product change from an old Chase Slate card I still carried. Finally, just yesterday I noticed that the annual fee on my second US Bank FlexPerks Travel Rewards card was about to come due (I applied for a second card during the hyper-valuable Olympic Games promotion last summer). Instead of canceling the card, I called US Bank and asked for a product change to the US Bank Cash+ card. Instead of canceling 1 card and having 2 additional credit inquiries, product changes allowed me to keep my credit lines and credit history, while still giving me access to lucrative new earning opportunities.
3. Upgrades. The final category of product changes is product upgrades, which usually applies to cards issued by American Express, although it can apply equally to any bank's credit cards. For example, there's a long-standing offer of 50,000 Hilton HHonors points to upgrade from the no-fee American Express Hilton HHonors card to the Hilton Surpass card (just login to your American Express account and click here to see if you're eligible). Likewise, if you have an American Express Gold Delta personal card, then you're not eligible for a signup bonus for the Platinum Delta personal card. But if you can't wait to start earning Medallion Qualification Miles by reaching $25,000 and $50,000 in calendar year purchases with the Platinum card, you can still request a product change from the Gold Delta card (though you'll usually be better off waiting until you're eligible for a new Platinum account, since it occasionally offers truly massive signup bonuses).

What can go wrong?

A product change is typically a pretty straightforward process, but there are a few simple things to keep in mind. Always clearly identify the card you're changing from and changing to: I have two FlexPerks Travel Rewards cards, so I made sure the US Bank representative knew which card I was talking about by giving her the last 4 digits of the card number. Always make sure the representative knows you're asking for a product change, and not asking to apply for a new card. It never hurts to ask the representative to confirm that there won't be an additional credit check – they shouldn't have a reason to ask for your Social Security number, so if they do, that's a red flag that you're having a miscommunication.

Finally, thanks to some new consumer protection regulations in the recent financial reform law, some credit card companies will refuse to do product changes for the first 12 months your account is open. This regulation is interpreted differently by different card issuers, so your results may vary depending on how long you've held a card and which bank issues it.

Happy hacking! 

Guide to Chase's Ultimate Rewards-earning cards

With all the flurry this week over the increased signup bonuses for Chase's Ink line of small business cards, I realized that even I was having trouble keeping track of all the different Ultimate-rewards earning cards issued by Chase. In case there's anyone else in the same situation, lets take a systematic look at all 7 cards.

While some of the cards are personal cards and some are small business cards, that's a less important distinction than between the fixed-value and flexible Ultimate Rewards points they earn: 

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The Freedom and Sapphire personal cards and Ink Cash and Ink Classic small business cards earn Ultimate Rewards points that cannot be transferred to Chase's travel partners unless you first move them to the Ultimate Rewards account associated with one of the 3 flexible cards. They can be redeemed for cash, gift cards, or paid travel – except the Ink Cash, whose points can only be redeemed for cash.

The next, arguably even more distinction between the cards is the constellation of overlapping bonus categories:

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Since you only need to hold one flexible Ultimate Rewards card in order to convert all your points into flexible points, for 95% of travelers it doesn't make sense to pay more than one $95 annual fee (note that this analysis only applies once the first, fee-free year has elapsed).

Which annual fee should that be? The Sapphire Preferred, Ink Bold, or Ink Plus? The chart above makes clear that the most relevant question is: how much do you intend to spend at gas stations and office supply stores?  If you'll spend more than $25,000, you'll need to either carry an Ink Bold or Plus, or both an Ink Cash and Ink Classic, since each card's $25,000 cap on 2x earnings is counted separately.

The ability to manufacture Ultimate Rewards points at 0.4 cents each is what made me assess the Ink cards as the second best tool for buying Vanilla Reload Network reload cards at gas stations. This is an incredibly lucrative opportunity: the question is to what extent you plan on taking advantage of it.

If you liked this analysis, please consider supporting the blog by ordering a copy of my eBook, the Free-quent Flyer's Manifesto!

Who should use Travelocity's co-branded credit card?

[edit 7:37 pm: searching around a bit more I found this offer for the $39 annual fee card for 10,000 points after first purchase and 10,000 points after $500 in spend within 3 months. I also edited the application links below.] 

[edit 6/18/13: see the comments for one data point applying through the 20,000 point link. I'm surprised that Barclaycard would deny an application just because an offer was expired, but that was reader Paul's experience (no credit pull, though).]

In the comments to a post last month, reader travel well asked whether I had any experience with the Travelocity Rewards co-branded American Express card. I hadn't heard of the card, but did some research, and want to share what I found with readers.

There are two versions of the Travelocity Rewards Amex: a $39 annual fee version and a no annual fee version.

Earning

• The $39 annual fee version earns 5 points per dollar spent at Travelocity, 2 points per dollar spent at your choice of either gas stations, grocery stores, or restaurants, and 1 point per dollar spent everywhere else. The link I found offers 7,500 bonus points after your first purchase [edit: see above].
• The no annual fee version earns 3 points per dollar spent at Travelocity and 1 point per dollar spent everywhere else. It offers 5,000 bonus points after first purchase.

Redemption

Like the US Bank Flexperks Travel Rewards Signature Visa, the Travelocity Rewards points earned by this card can be redeemed in fixed-value tiers. The value in turn depends on the redemption tier. From the Travelocity website:

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As that list illustrates, points are worth 1 cent each until you reach the 20,000 point level, when the value jumps to 2 cents each. Then each subsequent point is worth an additional cent, until you reach the 40,000 point level, when the value jumps back up to 2 cents each. This means that the most lucrative redemptions are always in intervals of 20,000 points.

Fortunately, the Travelocity Rewards card does allow partial redemptions, and indeed as far as I can tell allows redemptions only in the tiers specified. Redemptions are made directly through the Travelocity website, for reservations made with Travelocity. After selecting your flights, hotels, or rental cars, select the Travelocity Rewards American Express as your method of payment, and you'll see the option to redeem points for part of your purchase. As the above analysis makes clear, whenever possible you should redeem them in blocks of 20,000 points. When you do so, you'll earn a full 10% rebate on all your purchases made at Travelocity with the $39 annual fee card and 6% rebate with the no annual fee card. After selecting your redemption amount, complete your purchase and you'll receive a statement credit for the amount of your redemption.

Who should use the Travelocity American Express card?

This card looks great on paper: a 10% rebate on Travelocity bookings, which can be paired with 2 Ultimate Rewards points per dollar when you click through to Travelocity through the Ultimate Rewards Mall. Still, there are two drawbacks that I think are serious enough to keep me from getting the card personally.

First, the more lucrative card has a $39 annual fee. Admittedly, that won't break the bank – if I were able to redeem my points regularly at the 20,000 point level, then the 5-6 cent edge this card has over a card like the Chase Sapphire Preferred (for double points on travel) would be justified. That's especially true if carrying this card allowed me to cancel my Sapphire Preferred, which carries a hefty $95 annual fee.

However, the second problem is that 20,000 point threshold. To earn those 20,000 points, I'd need to spend $4,000 on Travelocity, which isn't realistic for me personally: I purchase travel using my Barclaycard Arrival World MasterCard (for a 65% discount on paid travel after manufacturing spend), I redeem US Bank Flexpoints for paid travel (for a 74%-80% discount on paid travel), and of course I redeem airline miles for award travel. Even more importantly, sometimes Travelocity doesn't have the best price on airline tickets, or doesn't offer itineraries that are available elsewhere, in which case I use other online travel agencies instead or book directly through the airline. All that would add up to paying multiple $39 annual fees while I waited to hit the 20,000 point sweet spot.

All that said, if you already spend a lot of money on paid travel through Travelocity, enough to hit that 20,000 point threshold at least once a year, then this is a card with terrific earning potential. I would probably pair it with a Chase Ink card in order to continue to earn double Ultimate Rewards points through direct hotel bookings (and have access to the Ultimate Rewards Mall) while still earning hotel loyalty points and credit for nights and stays towards elite status.

What's the best way to book a paid ticket?

Travelling on international premium cabin award tickets is one of the most lucrative uses you can make of your airline miles and flexible credit card points.  The example I usually give is a 100,000 United MileagePlus award to Europe in Business Class.  If you manufacture those points at .79 cents each, you'll pay $790, plus up to a few hundred dollars in taxes and fees.  The point is that you aren't saving much money over a paid economy ticket, but you get to enjoy the comfort of flying in a premium cabin instead.

The downside is that you don't earn elite status-qualifying airline miles for the distance you travel on award tickets, which can be substantial on international flights.  If you value the benefits of elite status, then you'll need to make some paid domestic flights to reach the elite status threshold you're interested in.

That's why today I'm going to cover the most lucrative methods for booking paid airline tickets.

Booking Directly Through an Airline

he most obvious reason to book through an airline's website directly is to use a credit or certificate issued by the airline.  Airlines typically hand out these certificates in exchange for voluntarily giving up your seat on an overbooked flight.  Likewise, if you cancel a non-refundable flight you may have a credit available to use for a later flight (after subtracting any cancellation fees).

When you do so, it's best to use a credit card that gives bonus points on airline purchases.  For example, the Sapphire Preferred Visa and MasterCard issued by Chase give double flexible Ultimate Rewards points on all "travel" purchases.  The American Express Business Gold Rewards and Premier Rewards Gold cards likewise offer triple Membership Rewards points on purchases made directly through an airline.

In terms of fixed-value and cash back cards, the US Bank Flexperks Travel Visa Signature card offers double points on airline purchases, if that is the bonus category you spent the most in during a given statement cycle.  These points are worth up to 2 cents each, meaning you can earn up to 4% back in value on travel redemptions.

Otherwise, your best bet is a 2% cash back card like the Fidelity Investment Rewards American Express or Visa card, or a card you're meeting a minimum spending requirement on.

If you have elite status with Delta, you'll also earn 1 Starwood Preferred Guest Starpoint per dollar spent on airfare directly through the Delta website.  As you'll see below, that's not necessarily the most lucrative method of making paid Delta reservations.

Clicking Through Ultimate Rewards to an Online Travel Agency

If you have a Chase Ultimate Rewards-earning credit card, you have access to the Ultimate Rewards Mall, which allows you to earn bonus Ultimate Rewards points on purchases made through online travel agencies, or OTAs.  You can earn 1 bonus point per dollar spent at Expedia, Priceline, or Orbitz and 2 bonus points per dollar spent at Travelocity or Hotwire.  These OTAs can price out itineraries very differently, so it's always worth checking whether you can find a better price or more convenient itinerary on one OTA rather than another.

The Chase Sapphire Preferred bonuses all travel spending, including OTA reservations, so that's a reliable way to earn a total of 3-4 Ultimate Rewards points per dollar spent on airline tickets (depending on which OTA you use).  In my experience, when booking only an airline ticket (and not a package which includes a hotel, rental car, or cruise) through Travelocity, there will be two credit card charges, one from the operating airline which covers airfare, taxes, and fees:

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​With a second charge from Travelocity to cover their booking fee (up to $10.99):

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n these situations I believe the American Express Premier Rewards Gold and Business Gold Rewards cards will give triple points for the first, airline charge, for a total of 2 Ultimate Rewards points and 3 Membership Rewards points per dollar spent, a 5-10% rebate, depending on how you value those points.

Cash Back Portals

If you don't have access to he Ultimate Rewards mall, and you don't have a card that bonuses airline or travel purchases, and you don't have elite status on Delta (to earn 1 Starpoint per dollar), then you can still earn a small rebate on your flight purchases by clicking through a cash back portal.  All three of these cash back portals offer a fixed or variable amount of cash back when you click through to online travel agencies and make an airline reservation. 

• TopCashBack (Expedia: $2.25, Travelocity: $3.00, CheapTickets: $5.50, Priceline: $5-$7)
• BigCrumbs (Expedia: $1.75, Travelocity: $2.80, CheapTickets: $3.15, Priceline: $2.80)
• Fat Wallet (Expedia: $1.25, Travelocity: $1.50, CheapTickets: $20(!), Priceline: 1%)

Conclusion

As this analysis makes clear, the best method of making paid airline reservations depends heavily on what tools you have at your disposal.  The single best combination is using the Premier Rewards Gold or Business Gold Rewards card from American Express at Travelocity or Hotwire, after clicking through to one of those travel agencies from the Chase Ultimate Rewards shopping portal.  To get access to that shopping portal, however, you'll need at the least least a no-annual-fee Chase Freedom card.  To turn those fixed-value Ultimate Rewards points into flexible Ultimate Rewards points, you'll need either a Sapphire Preferred, Ink Bold, or Ink Plus card.  However, even if you just redeem your Ultimate Rewards points for cash back through your Freedom card, you'll still be earning a generous 2% cash back on all your paid airline reservations, in addition to whatever awards you earn through the credit card you ultimately make your purchase with.