Making travel free

In my experience there are two broads ways people tend to view the benefits of travel hacking. For fun, let's call the two groups "budgeters" and "savers." Their behavior is not systematically different in any way — they might both apply for the same number of cards each year, manufacture the same amount of spend with them, and redeem their points for the same awards. But they talk about their techniques in very different ways.

Budgeters stretch their budget

You'll catch a budgeter saying something like, "I have 2 weeks of vacation per year, and a $4,000 travel budget. Before I started travel hacking, I could only take $4,000 vacations. Now, my $4,000 budget gets me vacations that would cost $20,000 or $30,000!" These are the kinds of stories you read about on the websites of Bankrate employees Brian Kelly and Daraius Dubash.

In practice, might mean spending $4,000 on fees (or losses if the budgeter is also a reseller), then redeeming the miles and points they earn for international business class or first class flights and five-star hotels, while before they spent the same amount on domestic economy flights and discount hotels.

In this way, the budgeter's travel budget takes them farther and in greater comfort than it did before they discovered the wonders of travel hacking.

Savers spend less for the same amount of travel

A saver says "I can't believe I used to pay full price for my travel. I used to pay $9,421 for my family's annual week-long Christmas trip to the Andaz Maui at Wailea Resort, and now I pay a flat $1,750 in Ultimate Rewards points!"

In other words, the saver takes destinations, comfort, and style as a given, and seeks to pay as little as possible for it by signing up for credit cards, manufacturing spend, and all the other crazy things we do to earn our travel hacker merit badge.

The happy medium is probably somewhere in between

Realistically, most people aren't entirely budgeter or entirely saver: if you generate enough miles and points per year to cover all your travel expenses, you're probably paying slightly less than you would in cash and traveling slightly more, or in greater comfort, than you would if you paid entirely in cash.

You can make travel free (but probably shouldn't)

There's another extreme which I've run into somewhat less often, but has its own special kind of appeal: make travel free by reimbursing yourself for all the fees you incur manufacturing spend.

To make this work, you need to be earning points that can be converted to cash or redeemed for travel in another, potentially higher-value way. Here are a few examples:

• Manufacturing spend with a Chase Ink Plus at office supply stores, you may pay $27.55 for 4,634 Ultimate Rewards points. If you redeem 2,755 of those Ultimate Rewards points for cash, you've generated 1,879 Ultimate Rewards points worth of travel at no net cost.
• Manufacturing spend with a US Bank Flexperks Travel Rewards card at a grocery store, you might pay $12.60 for 2,024 Flexpoints. Redeem 1,260 of those Flexpoints for cash, and you're left with 764 Flexpoints at no net cost.
• Manufacturing spend with a Barclaycard Arrival+ card at an unbonused merchant, you might pay $4.30 for $10.61 in Arrival+ miles. By being sure to redeem 41% of your Arrival+ miles on refundable reservations, your remaining Arrival+ miles are redeemable for truly free travel.

The reason you probably shouldn't do this is that it's not necessary. When you have enough miles and points to pay for your travel, you don't have to manufacture any more — you can simply earn cash back, or redeem your excess points for cash back. By manufacturing your most valuable points first (the points you're actually going to redeem), you need never find yourself in a situation where you're redeeming miles and points for cash, rather than deploying them to save money on more expensive reservations than their cash value — with the exception of points, like Barclaycard Arrival+ miles, which are worth the same when redeemed against refundable reservations as they are against reservations you intend to keep.

Conclusion: how much is your time worth?

There is a very small group of people for whom time is money.

• For Uber drivers, time is money: every minute spent doing anything but driving for Uber is time that could be spent driving for Uber.
• For many lawyers, time is money: as long as there's work that can be billed to clients, every 6 minutes doing anything but working for clients is time that could be billed to clients.
• For waiters at high-end, understaffed restaurants, time is money: as long as there's someone who can't make it into work, there's a shift that could be worked.

But most people have free time.

It may not feel like free time, because there may be a baseball game on you really want to see, and if you really want to see it, you can't exactly be out manufacturing spend during the ballgame.

I love HBO's hit series Game of Thrones. If I had cable TV, and HBO, you better believe I'd watch Game of Thrones every Sunday night — that's time I wouldn't be free to manufacture spend.

But there's a very common tendency for people to describe their time as being "too valuable" to manufacture spend, when what they really mean is they'd prefer not to. Preferring not to manufacture spend is a very understandable impulse — it can be tedious, frustrating, and stressful.

But unless you would otherwise be driving for Uber, billing clients, or picking up extra shifts at Chez Panisse, you should find another word than "valuable" to describe your desire to use your time doing something else. Because in all likelihood, your time is free.

What happens when a Flexperks reservation is refunded to the original payment method?

Background

For a recent trip to Washington, DC, I used US Bank Flexpoints to book my partner's ticket on the only daily nonstop flight home from Washington National Airport. Since economy tickets cost $264 while first class tickets cost $343.10, either option would have the same cost to me: 20,000 Flexpoints (an example of what I call "price compression"). I used Delta denied boarding vouchers to pay for my own $264 ticket in economy.

When I checked us in the night before our flight, I found that my partner had been seated in economy, although her ticket correctly showed her first class fare. My first move was to reach out to Delta's Twitter handle @DeltaAssist to see if they could resolve the problem:

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Since my partner needed to get back in time for work the next morning, I decided not to push harder over Twitter and instead resolve the issue once we got back home.

Filing a Department of Transportation complaint

Since Delta wouldn't offer a refund over Twitter, I filed a Department of Transportation complaint, explaining that Delta had neither offered a refund nor reaccommodated my partner in the class of travel I paid for. I asked for a refund of the $79 price difference between first class and economy and any other compensation she was entitled to.

Response from the Department of Transportation

My first response from the Department of Transportation was a lengthy e-mail, reading in relevant part:

"Based on the information you have provided, your complaint appears to fall under the Department's rules. I will forward your complaint to the airline and ask the company to respond directly to you with a copy to me. Airlines are required to acknowledge receipt of a consumer complaint within 30 days and provide a substantive response to the complainant within 60 days. I will review the airline's response. If you need to contact me, please include your name and case number (see above). I will make every effort to reply to your message within one business day."

Response from Delta

Three days later, I received an e-mail from Delta's refund department, saying:

"I’m happy to help with your request regarding a refund.

We’re sorry you weren’t seated in the forward cabin as planned. An adjustment has been made for the fare difference between the class of service purchased and the class of service flown.

A refund for you
We processed a refund on April 8, 2016 as follows:

006........../$79.00/VI....5853."

Now, obviously, I don't have a Visa card ending in 5853: that's the account number used by the travel agency contracted by US Bank to book Flexperks reward tickets.

US Bank is clueless

My first thought was to call US Bank and see if their customer service agents knew what happens to Flexperks ticket refunds. They don't.

But they were able to transfer me to, and give me the direct number for, "The Rewards Center," the travel agency they use to book revenue flights. That number is 1-855-516-9182.

The Rewards Center is slightly less clueless

To communicate with the Rewards Center, you don't need your credit card number, your Flexpoints number, or even your airline record locator. You need your "Trip ID," the 12-digit number that is e-mailed to you when you make a Flexperks Travel Rewards redemption.

The frontline Rewards Center customer service agent had no ability to understand what I was talking about; he kept trying to transfer me back to US Bank. But once I said the word "refund" enough times, he finally was willing to check with his supervisor, and eventually came back to say that no refund had been processed for my reservation.

How Flexperks reservations are refunded

At that point I decided to wait and see how this played out. And it turns out, with no additional action on my part, my $79 refund was processed automatically — back to my Flexperks Travel Rewards Flexpoints account.

Remember that I paid 20,000 Flexpoints for a $343.10 first class reservation, getting roughly 1.72 cents per Flexpoint.

On April 20, 2016, 12 days after Delta e-mailed that they were processing my refund request, I received a "Points Adjustment" of 4,605 Flexpoints into my account.

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For those doing the math at home, 4,605 Flexpoints for a $79 refund comes to 1.72 cents per Flexpoint — a refund of the exact number of Flexpoints corresponding to the original redemption rate.

Conclusion: when booking first class, go ahead and snap an economy screenshot

In this case, I actually had an economy ticket booked within minutes of the first class ticket I redeemed US Bank Flexpoints for, which allowed me to upload my economy receipt to the Department of Transportation complaint website.

But that won't usually be the case! My recommendation is, out of an abundance of caution, whenever using Flexpoints (or any other fixed-value rewards currency) to book revenue airline tickets in business or first class, take a screenshot of the economy fare as well. If an equipment change lands you in economy, you'll be glad to have some evidence supporting your refund request for the amount you actually overpaid for the premium cabin you didn't get to sit in.

Earn cash first, spend cash last

Last week I wrote about the option of redeeming Wells Fargo's Go Far reward points for 1.22 cents each when using them to purchase Hyatt gift cards (an offer that's still ongoing).

Commenter Rob S made an observation in the comments to that post that I think is worth exploring in some more depth. He wrote:

"but those WF reward points can be used for flights at 1.5 cpp. Some people can redeem at 1.75 cpp. so i don't think I will be doing this"

Rob is referring to is what's called, for reasons lost to history, "uplift," the ability to redeem Wells Fargo rewards points for more than 1 cent each towards paid airfare after spending a certain amount on certain Wells Fargo rewards-earning credit cards.

Uplift isn't something I've written about before and I can't find any good blog posts to link to about it, but Rob is exactly correct: some people can redeem Wells Fargo rewards points for 1.5 or 1.75 cents each for paid airfare after meeting certain spending thresholds with their Wells Fargo credit cards.

The question I want to explore is, under what circumstances does uplift change the value proposition of redeeming Wells Fargo rewards for cash?

Earn cash first

I have a simple approach to my manufactured spend practice: I earn cash first. That's because cash is basically the opposite of miles and points: it's worth face value when redeemed for goods and services, and if you choose to invest rather than spend it, it increases, rather than decreases, in value over time.

Miles and points, on the other hand, are worth varying amounts depending on current cash prices and award availability. Therefore, given the option between cash and points, I'll always earn cash first.

Spend cash last

The flip side of the above principle is that once I have miles and points in my rewards accounts, I'll redeem them whenever possible rather than spending cash. Again, that's because cash is flexible and can be deployed wherever necessary, while miles and points can only be redeemed for dates and flights the loyalty programs choose to make available.

When I find that availability, you better believe I'll redeem miles and points for it.

How uplifting are Wells Fargo rewards?

Suppose a Wells Fargo cardholder has earned the maximum uplift of 1.75 cents per "Go Far" rewards point redeemed for paid travel. Keeping in mind that those rewards points can each be redeemed for 1 cent in cash, the uplift provides a discount of 43% off paid airfare (a $175 flight would cost $100 in foregone cash back redemptions).

That's a pretty good discount, for a civilian.

But a 43% discount off paid airfare is not exactly inspiring for a travel hacker. If you earn US Bank Flexpoints, then at the top of each redemption band you'll get a 50% discount off paid airfare (plus a $25 credit towards in-flight purchases). If you earn Chase Ultimate Rewards points (transferred to United or British Airways) or American Express Membership Rewards points (transferred to Delta) you might be accustomed to getting much larger discounts, depending on your local airfare market.

Hyatt gift cards are cheaper than cash

The reason I wrote favorably about redeeming Wells Fargo rewards points for Hyatt gift cards is not because they give a discount off Hyatt stays, but because they give a discount off the cash portion of Points + Cash stays (or, in the cash of pure mattress runs, the cash cost of the stay). That's the portion you've already committed to paying in dollars, which is the component you should be seeking to minimize the cost of.

Paying $41 instead of $50, or $246 instead of $300, is a savings in cash for the portion of a stay you were going to pay in cash anyway. There is literally no other currency but US dollars you can use to pay the cash portion of a Points + Cash stay.

How much do you charge friends and family for travel?

Travel hacking is a specialized combination of knowledge, skills, and opportunities, plus of course making the time to take advantage of them. For those willing to invest in this world, the payoff is tremendous: the ability to pay for travel at a steep discount, whether you're buying luxury accommodations for the price of a Motel 6, or getting a Motel 6 for the price of a youth hostel.

Once you've invested the time and attention to learning those skills, it's natural to want to share the rewards with friends and family who, at least in my case, treat travel hacking as a curious combination of magic and fraud.

While I'm always eager to help out, being both a businessman and a poor person means I like to look for mutually beneficial arrangements when booking travel for my loved ones. In that spirit I think there are basically three models one can use when trying to help people save money on travel.

Offer a fixed discount off retail

This strategy makes the most sense for "arm's length" transactions. If you have more miles and points than you have near-term plans for, you can offer to book travel for friends and family at a fixed discount off the price they're already planning to pay.

If someone wants to book a $600 domestic flight, and you discover there's low-level award availability (or, better yet, discounted award availability like that offered to Citi AAdvantage credit cardholders), you can offer to book the flights for a mere $450. This is a classic win-win situation: the traveler gets a 75% discount off retail, and you get 1.8 cents or more per mile in cash — a pretty good redemption!

The drawback of this method is that there are situations where it simply doesn't apply: if a flight is cheap enough, or the mileage cost is high enough, there may simply not be a middle ground in which the booker and traveler can meet to mutual benefit.

Charge the opportunity cost of earning (or redeeming for cash) your points

This is the strategy I usually follow when offering to book travel for my close friends and family. If a hotel room costs 40,000 HHonors points, I'll offer to book it for $141, since that's the amount of cash back I could have earned manufacturing the same $6,667 on a 2.105% cash back card. In other words, I want to be "made whole," but I'm not interested in extracting any profit out of the transaction. If that's a discount off retail they'll usually be interested, and if not, there's no harm done.

But there are two pitfalls here. The first is figuring out what your actual opportunity cost is. In the case of hotel points or airline miles earned with a credit card (at the expense of cash back), the calculation is simple, as shown above. But if you're redeeming Ultimate Rewards points for a friend's Hyatt stay, the relevant cost isn't how much cash you could have earned instead of earning Ultimate Rewards points, it's how much the Ultimate Rewards points are worth if redeemed for cash. The same is true of any rewards currency that can be directly redeemed for cash, like US Bank Flexpoints.

The second wrinkle is valuing instruments that are, due to price compression, worth manifestly less than their face value to the travel hacker. For example, a $400 American Airlines voluntary denied boarding voucher is worth much less than $400 to me, since I can redeem 20,000 US Bank Flexpoints, worth $200 if redeemed for cash, for the same flight (in reality it's not quite that bad since the voucher has the added flexibility of being combinable with cash for flights at the bottom of a Flexperks redemption band).

When deciding the opportunity cost of something like that, you could either think about the actual delay that earned you the voucher in the first place (how much is 5 hours in a Chicago airport worth? Did you have to buy lunch?), or simply assign it the value of the points you would use to book a flight of the same value. In the above example, that could be the $200 cash value of 20,000 Flexpoints.

Travel is free (for other people)

The third option, of course, is to just give travel away! What are you, some kind of cheapskate?

For children, grandchildren, nieces, nephews, parents, grandparents, and anyone you're about to propose to, the best option is not to charge them anything for their travel. Your miles and points didn't cost you much, you have too many of them, and it'll mean the world to them to get to see the world.

This is the strategy I use when booking vacations for my partner and I, and it's fun. I heartily recommend occasionally splurging on your loved ones, the operative word being "occasionally."

I don't mean to get all philosophical this close to the end of the post, but people basically don't value stuff they get for free. Or, to put a slightly finer point on it, people quickly get used to getting stuff for free and quickly come to accept it as the natural order of things, rather than a gift or treat for a special occasion.

That's why I think for kids or siblings it's probably better in the long run to offer a big discount off retail rather than spread free trips around like gelt at Hanukkah.

Conclusion

So, what did I miss? Do you charge your loved ones for "free" travel, and if so, how much?

What revealed preferences have taught me about valuing miles and points

One fascination of the miles and points community is "valuing" their loyalty currencies. This should be, in principle, one of the most important aspects of an earning strategy: earn more valuable points before less valuable points is a mantra as obvious as it is useless.

But determining the value of points is vigorously disputed terrain.

Hotel Hustle can tell you the value other people are getting for their hotel points

I love Hotel Hustle, and write about it relatively often. It has two relevant features here: you can plug in your own points valuation and search by "Hustle Hotness:" what percentage of your assigned value you're getting at each property in your search destination.

But additionally, Hotel Hustle will show you the range of values other people using Hotel Hustle have found on their own, real-world searches.

For these purposes I've always like the median value, which has 50% of search results giving more value, and 50% of searches giving less value. So across all the tabulated Hotel Hustle search results, you can see that Hilton HHonors points are worth a median of 0.44 cents each.

That doesn't mean you'll get 0.44 cents per point, but it's a benchmark you can use to evaluate your earning and burning decisions, and it's based on real-world award search results.

Affiliate bloggers make up values depending on which way the wind is blowing

Bankrate.com employee Brian Kelly will tell you each month what cards have the biggest affiliate payouts.

Likewise Thought Leader from Behind Gary Leff will periodically post his updated points valuations.

And of course Rich Weirdo Ben Schlappig has a whole page devoted to valuing miles and points.

Here are the values revealed preferences show for the miles and points I earn

The concept of "revealed preferences" is a powerful one in behavioral economics. Rather than attempting to establish the value of goods in the abstract, or by measuring quanta of pleasure, revealed preferences allow you to determine a good's value to the consumer by the price they're actually willing to pay for it. Revolutionary, right?

So here are the values I actually put on my miles and points, determined strictly by what I do, in fact, pay for them each month:

• 1.4 SkyMiles are worth about 2 cents. When buying cheap, PIN-enabled prepaid debit cards at unbonused merchants, I split my purchases between my American Express Delta SkyMiles Platinum Business card and my 2% and 2.105% cash back cards. My indifference between earning 1.4 SkyMiles and 2% cash back means I value SkyMiles at about 1.43 cents each.
• 6 Hilton HHonors points are worth up to 4 cents in airfare. I only have a single local grocery store that sells PIN-enabled prepaid debit cards, and I can choose between using my American Express Hilton HHonors Surpass card or my US Bank Flexperks Travel Rewards card. I use my Surpass card, valuing each HHonors point at up to 0.67 cents in paid airfare.
• 2 Ultimate Rewards points are worth slightly less than up to 4 cents in airfare. As above, I have a single local merchant that codes as a gas station and sells PIN-enabled prepaid debit cards. I could use either my Chase Ink Plus or my US Bank Flexperks Travel Rewards card for purchases there, but lean towards the Flexperks card, valuing an Ultimate Rewards point at slightly less than up to 2 cents in paid airfare.

Conclusion: my values aren't yours

My situation is unique, as is yours. I travel all the time, and am dedicated to keeping my rewards balances as low as possible, meaning I'm not stockpiling millions of any one currency. Instead, I'm redeeming miles and points roughly as quickly as I redeem them, giving me lots of "gut-check" opportunities to see whether I'm getting enough value from my rewards currencies to justify earning more of them.

For example, in January I had decided to cancel my American Express Delta SkyMiles Business Platinum card, when a health emergency in the family caused me to redeem most of my SkyMiles balance at a value of over 5 cents per SkyMile. With an empty SkyMiles account, and the possibility of future urgent travel, I decided it made more sense to keep the card and pay 1.43 cents per SkyMile again this year.

Likewise, just this week I redeemed 20,000 US Bank Flexpoints for a first class flight that otherwise would have cost $343. Alternatively, I could have redeemed 27,440 Ultimate Rewards points (at 1.25 cents each), making me feel fantastic about earning 2 Flexpoints per dollar instead of 2 Ultimate Rewards points per dollar at my local gas station.

The 5.5 cards I'll use to manufacture spend in 2016

Happy New Year's Eve to all my readers (and especially to my beloved subscribers)!

2016 is almost upon us, so I thought it might be interesting to share my manufactured spend strategy for the first half of next year.

Here are the five cards I'll be doing virtually all my manufactured spend on for the next 6 months, plus a bonus card to fill in the remaining gaps.

Wells Fargo Rewards

I applied for this card back in March while opening my Wells Fargo checking account, but was declined for income verification reasons. When I received a pre-approval offer in the mail, I jumped on it and was approved with a $10,000 credit limit.

This card earns 5 Wells Fargo Rewards points per dollar spent at gas stations, grocery stores, and drug stores for the first 6 months, making it my manufactured spend workhorse until June, 2016.

Chase Ink Plus

Although gas station manufactured spend is no longer available in my area, I will continue to order $300 Visa gift cards from Staples and earn 1,545 flexible Ultimate Rewards points for $8.95 — about 0.58 cents each.

As a Hyatt Diamond in 2016, I plan to make a lot of Points + Cash reservations, which both earn elite qualifying stays and are eligible for Diamond suite upgrades. For those reservations, I'll be transferring in a lot of Hyatt Gold Passport points from Ultimate rewards.

US Bank Flexperks Travel Rewards

This card earns "up to" 4% at grocery stores when you redeem your Flexpoints for air travel. That's less valuable and less flexible than my Wells Fargo Rewards card, but when that card's credit limit isn't available, Flexperks Travel Rewards will be my backup card at grocery stores.

American Express Platinum Delta SkyMiles Business

Even less valuable than Flexperks, I'll spend $50,000 on this card in order to earn 70,000 redeemable SkyMiles and 20,000 Medallion Qualification Miles, enough to secure Silver Medallion status for 2017. Then I'll call American Express to ask for either a retention bonus or a product change to a more valuable card.

American Express Hilton HHonors Surpass

Thanks to my Hyatt Diamond status in 2016, I won't be staying with Hilton as consistently as I did in 2015. But I still plan to spend $40,000 on the Surpass in 2016 in order to both secure Diamond status for another year and earn another 240,000 HHonors points, which I'll redeem when Hyatt properties aren't available or are too expensive.

Bonus card: Barclaycard Arrival+

I won't be using Arrival+ nearly as much in 2016 as I did in 2015, but there are a few ideal use cases where I'll continue to generate some spend: funding Nationwide Visa Buxx cards, opening bank accounts, and my actual expenses outside of the Wells Fargo Rewards bonus categories.

Conclusion

As you can see, I keep my manufactured spend practice pretty simple: start with the most valuable cards I have available, set realistic goals, and work my way down from there. That has the additional benefit of giving me the clarity to see immediately which cards would see reduced spend if my ability to manufacture spend suddenly contracted.

Things US Bank told me about Flexperks Travel Rewards

It's difficult to know how to frame information you receive from US Bank over the phone. For example, a US Bank representative once told me I could product change my Club Carlson Business Rewards card to a Business Edge Cash Rewards card. I couldn't.

But after someone on Twitter reached out to me with a question about some language in the Flexperks Travel Rewards terms and conditions, I decided against my better judgment to call and ask what the heck they meant.

The $120,000 cap on Flexperks Travel Rewards earning

If you visit the website of the US Bank Flexperks Travel Rewards credit card, you'll find the following description of the card's rewards structure:

"Yearly Award Level: For Net Purchases less than or equal to $120,000, earn one FlexPoint for every $1. If during the calendar year, Net Purchases exceed $120,000, all FlexPoints for the remainder of the calendar year are earned at a rate of one FlexPoint for every $2. Exemption: FlexPerks Travel Rewards Visa Signature AutoPay Cardmembers who select the full payment option on the first available payment date after their statement date."

I've mentioned before the $120,000 calendar year purchase limit on FlexPoint earning, but never noticed the "exemption" for people with AutoPay set up. So I decided to call.

My representative had no idea what he was talking about

This is pretty much par for the course when calling US Bank, so I wasn't terribly surprised. But I kept asking for clarification, so he put me on hold and talked to someone who had worked at US Bank for all of 2 years(!), and who gave him the "complete" picture.

My representative's (secondhand) information was that if you have autopay set up to pay your bill in full, then there's no limit on Flexpoint earning. If you don't have autopay set up, then you have to make your payment on the first available payment date after your statement closes.

That sounds like nonsense, and strikes me as vanishingly unlikely to be correct.

A quick aside on base points and bonus points

There's some important credit card terminology that's relevant here. Typically, a credit card will earn some number of "base" miles or points on purchases everywhere. The American Express Hilton HHonors Surpass earns 3 "base" HHonors points everywhere, the Chase Sapphire Preferred earns 1 "base" Ultimate Rewards point everywhere, etc.

Then in certain spend categories, a credit card will earn "bonus" points. The HHonors Surpass card earns 9 "bonus" HHonors points for purchases made at Hilton properties, for example, and the Sapphire Preferred earns 1 "bonus" Ultimate Rewards point at restaurants and on most travel purchases.

That's not how the Flexperks Travel Rewards terms and conditions are framed

The language I quoted above was from the second clause of the rewards structure. The third clause reads:

"FlexPerks Travel Rewards Visa cardmembers may earn additional FlexPoints for purchases at merchant locations in the following categories: airline, gas or grocery (each, a "Category"). You will earn FlexPoints at a rate of two FlexPoints for every $1 in the one Category in any given monthly billing cycle that has the highest total of Net Purchases charged to your Account (the "Highest Category")...FlexPerks Travel Rewards Visa Signature cardmembers will be awarded FlexPoints at the rate of two FlexPoints for every $1 in Net Purchases during the current month's billing cycle for any merchant location that classifies itself as having telecommunication services/products."

There is no language about "base" FlexPoints and "bonus" FlexPoints: these are simply given as the earning rates for a variety of purchases. The same is true of charitable contributions, in the fourth clause:

"FlexPerks Travel Rewards Visa Signature cardmembers will earn FlexPoints at a rate of three (3) FlexPoints per every $1 in Net Purchases during the current month's billing cycle for any merchant location that classifies itself as a Charitable and Social Service Organization."

But that is how FlexPoints are actually earned

Here's a screenshot from one of my US Bank Flexperks Travel Rewards statements:

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As you can see, US Bank is actually following the usual practice of awarding "base" and "bonus" points separately on each statement.

Conclusion: I have no idea what's going on at US Bank

I've never bumped up against the $120,000 limit calendar year limit, so I don't know how it's implemented in practice. But it seems to me there are three possibilities:

• Earning is actually capped at $120,000 in total purchases, and all spend beyond that earns one FlexPoint per $2 spent, unless you set up AutoPay and pay your entire statement balance on the first available date after your statement closes. If you do, your earning is uncapped. This would be the simplest reading of the terms and conditions as written.
• The above, except bonused spend at gas stations, grocery stores, air travel, and charitable contributions is completely uncapped, whether or not you set up AutoPay. This would be another literal reading of the terms and conditions, but would conflict with the above — only one of the two can be true.
• A hybrid, based on how FlexPoints are actually awarded, whereby "base" points are earned at one FlexPoint per $2 spent above $120,000 but "bonus" point are uncapped. This would mean charitable contributions continued to earn 2.5 FlexPoints per dollar, which would still be a fairly strong choice for making Kiva loans.

Of course it's theoretically possible that the version I was told by my US Bank representative is actually correct: that if you have AutoPay set up at all, then you're not subject to any limits on FlexPoint earning. Possible, but unlikely.

So I'm turning it over to my readers who do even more Flexperks Travel Rewards volume than I do: what's your experience earning base and bonus FlexPoints once you've reached the $120,000 calendar year cap?

Use a demand schedule to maximize open jaws on revenue tickets, too

The "demand schedule" is a tool I first read about at Milenomics, which has now become more or less conventional wisdom: by creating a consolidated list of all the trips you plan to take, including flights, hotels, and transportation, you're able to maximize the value (and minimize the cost) of each trip by taking advantage of stopovers, open jaws, and roundtrip pricing.

Equally importantly, when a mistake fare or generous coupon code pops up, you have an itemized list of all the reservations you need to make with it. Avoiding paralysis in that way maximizes the value you get from your travel hacking practice.

I confess I'm not terribly diligent about maintaining my demand schedule; I more or less piece together trips as award space opens up, and most of my hotel stays are paid for with Hilton HHonors or Hyatt Gold Passport points, where I almost never have trouble finding rooms available with points.

But an upcoming trip illustrates why a little planning can go a long way.

Revenue tickets can include very cheap open jaws

I have a number of pre-devaluation award nights booked at Club Carlson properties in Europe for next summer, and paid 26,000 Avios and $358.18 to book two tickets back from Berlin to New York at the end of the trip.

My initial plan was to book our outbound flights to Budapest on Turkish Airlines for 30,000 United Mileage Plus miles each, since award availability is wide open next summer. That would involve transferring 50,000 Ultimate Rewards points (with a cash value of $500) from Chase to United Airlines Mileage Plus (I have 10,000 orphaned Mileage Plus miles in my account already).

Then I realized that I still have the US Bank Flexpoints I had been saving up for this trip before I found Air Berlin award availability. I still plan to book my partner's ticket by transferring 20,000 Ultimate Rewards points to United in order to empty my Mileage Plus account, but for my own flight I decided to look into revenue tickets on the same outbound flight.

While searching for Turkish Airlines revenue tickets, I immediately noticed that a one-way outbound flight prices out at $1,010 through the Flexperks booking portal, while it's only trivially more expensive to add a return flight from most Turkish Airlines destinations in Europe back to Chicago (for example, $1,185 returning from Berlin).

Because of that fluke of pricing, whether I book a one-way outbound or a return itinerary, I'll pay 70,000 Flexpoints — an example of what I've called in the past "price compression."

In other words, I can substitute 70,000 Flexpoints for 30,000 Ultimate Rewards points and get an additional one-way flight from Europe to Chicago — but only if I can decide on the origin and date of that future flight at the time of booking! A demand schedule would help in that calculus, but I don't have any additional trips to Europe planned, aside from our summer holiday.

Is this a good deal?

There are two competing intuitions when it comes to situations like this, and I want to give each one a fair airing:

1. since 30,000 Ultimate Rewards points are worth $300 in cash, and 70,000 Flexpoints are worth $700 in cash, a 30,000-points Ultimate Rewards redemption is $400 cheaper than a 70,000-Flexpoint redemption;
2. since 70,000 Flexpoints are worth a maximum of $1,399 in paid airfare, and 30,000 Ultimate Rewards points are worth up to 12.4 cents each, or $3,720, when redeemed for Korean Air First Class flights, it's better to redeem the fixed-value Flexpoints wherever possible, while saving Ultimate Rewards points for those redemptions where their value is maximized.

In other words, you can think of the reservations as minimizing your cash-equivalent outlay or maximizing your option value by retaining your most potentially-valuable points as long as possible.

Finally, the paid Flexpoints redemption booked into the "H" fare class will earn 100% of the actual miles flown, or roughly 6,142 Mileage Plus miles if I credit the outbound flight to United. As long as I ever plan to transfer Ultimate Rewards points to United again, booking the paid fare will save me 6,000 Ultimate Rewards points at that time. If I book a return flight from Europe to Chicago at any time within Turkish Airlines' booking window (and end up flying it), that will add another 6,000 or so miles to my United balance.

Suddenly, we're talking about paying 70,000 Flexpoints or 42,000 Ultimate Rewards points (30,000 spent on the reservation booking and 12,000 foregone by booking non-mileage-earning award flights), and the Flexpoints redemption is looking even more persuasive.

So, what should I do?

My decision will ultimately depend on whether I can find a return flight from Europe that I'm more likely than not to actually take.

Spending $700 in Flexpoints in order to save 36,000 Ultimate Rewards points isn't as compelling as saving 42,000 would be (if I was able to fly both the outbound and return), since it moves the cash-equivalent breakeven point from just above $300 to just below $300, and one-way economy flights between the United States and Europe cost exactly 30,000 Ultimate Rewards points when transferred to United Mileage Plus (subject to award availability).

How much would you pay to be able to book any flight on any day?

Another day, another devaluation.

Yesterday American Airlines announced the changes they'll be making to the AAdvantage program next year. You've likely already read all about them, but in summary, they are:

• Revenue-based mileage earning (beginning in "the second half of 2016");
• Award chart devaluation (effective March 22, 2016);
• Elite status devaluation (effective for qualification after January 1, 2016).

Since I credit my paid American flights to Alaska, I don't care much about the first or third points. But the award chart devaluation is real and, for premium cabin redemptions, significant.

Premium cabin awards are not cheap or easy

With yesterday's announcement, American Airlines joined Delta and United in raising mileage prices for premium cabin awards, in some cases astronomically. For example, a first class award seat on a 3-cabin aircraft to Sydney from the continental United States will cost 110,000 AAdvantage miles starting March 22, 2016, up from the 72,500 miles it currently costs, a 52% increase.

Of course, that's purely academic. There are no first class award seats between the continental United States and Sydney.

Yes, if you're flexible, if you're searching far in advance, close-in, and on every single day in between, you might be able to find one or two seats during the Southern winter. But don't hold your breath.

Premium cabin seats are (not that) expensive

For a lot of people, "travel hacking" is synonymous with "loyalty program hacking." And indeed, historically the loyalty programs operated by hotels and airlines have been a great source of outsized value for people willing to dedicate the time and attention to maximizing the value of their miles and points.

But those airline award seats we hunt down so diligently are also available on the open market! Believe it or not, the airlines just sell them. Of course, in exchange for the flexibility buying revenue tickets grants, you're going to pay a little more.

Or a lot more. That 220,000-mile roundtrip first class award ticket American promised you might cost $10,000 or $15,000 if you choose the flexibility of a revenue ticket.

Well, it might cost someone $15,000. But it doesn't have to cost you $15,000, because you're a travel hacker.

The revenue premium may be smaller than you think

A $15,000 first class flight to Sydney will give about 6.8 cents per AAdvantage mile in value after the March 22 devaluation (if you could find first class award space).

Since the Citi Prestige card allows you to redeem ThankYou points for 1.6 cents each on American-marketed flights, you'd need about 938,000 ThankYou points to purchase your first class revenue ticket. That's a lot of points, but the ThankYou Premier card earns 3 ThankYou points per dollar spent at gas stations, so you'd only need to manufacture $312,666 in gas station spend to make your redemption. That's obviously not something you'll be able to do in a weekend, but it might be a reasonable goal if spread out over a year or two.

Since the Citi and Barclaycard AAdvantage co-branded credit cards earn just one mile per dollar spent everywhere, you'd need to manufacture $220,000 on those cards to make your first class award redemption. In other words, the revenue premium — the additional manufactured spend required to book any seat on any flight — in this case is about 42%.

The $15,000 flight has the additional advantage of earning an Executive Platinum 165,000 AAdvantage miles, enough for another roundtrip to Sydney (albeit in business class instead of first).

Conclusion

Most people aren't going to manufacture enough spend to pay what American is asking for a first class ticket to Australia. Those who do probably don't value a first class ticket to Australia at $15,000, and would rather redeem their fixed-value points for the domestic economy flights they'd book anyway. That's a perfectly reasonable point of view.

The point I want to make is that while I sometimes say that cash is a superior earning choice for manufactured spend unless you have a particular, high-value redemption in mind, it may be a superior earning choice even if you do have a particular, high-value redemption in mind!

In other words, it's not enough to say that an award redemption will get you more value per dollar in manufactured spend than earning a currency like Ultimate Rewards (1.25 cents per point), Flexpoints (up to 2 cents per point, redeemed in tiers), Membership Rewards (1.43 cents per point with the American Express Business Platinum), or ThankYou points. You also have to be willing to redeem your loyalty currencies exclusively on the dates, flights, and times that the airlines choose to make award seats available, and put the time into learning the intricacies of each alliance and each airline.

If you don't find that fun or interesting, you may well be better off saving your time and paying the revenue premium instead.

Quick hit: my annual fees and retention offers

I wrote yesterday that I don't chase signup bonuses as one of my principle methods of earning miles and points. But I also consider recurring annual benefits to be worth almost nothing.

I've written before that companion tickets are scams, with the exception of the very generous version offered by Bank of America's Alaska Airlines — if you happen to live in a city served by Alaska — since it can be paid for with any credit card.

I've written before that annual free hotel nights are scams, although the Citi Hilton Reserve and Chase Hyatt free nights are slightly better than the rest — if you otherwise manufacture Hilton HHonors points or transfer your Ultimate Rewards points to Hyatt.

And of course, I'm the leading proponent of the argument that airline statement credits are worth (much) less than cash.

Five annual fees I'm willing to pay

As a result, I carry only five cards with annual fees, and I pay those annual fees solely because I believe manufacturing spend on the cards makes them worth keeping for my own miles and points strategy:

• Chase Ink+. Bonus earning at office supply stores and gas stations, and turns my non-flexible Chase Freedom Ultimate Rewards points into flexible Ultimate Rewards points. $95 annual fee.
• US Bank Flexperks Travel Rewards. Makes flying on paid airfares very cheap. $49 annual fee.
• Barclaycard Arrival+. Makes hotels, Uber, and taxes and fees on award tickets cheap. $89 annual fee.
• American Express Hilton HHonors Surpass. Makes hotels cheap. $75 annual fee.
• American Express Delta Business Platinum. Makes Delta elite status cheap. $195 annual fee.

Even I'm willing to admit the Delta Business Platinum card is a marginal play, but I do really like checking bags, so the elite status is something I'm — for now — willing to pay for, as long as I'm also earning 1.4 SkyMiles per dollar spent with the card.

Don't pay annual fees you don't have to

Those are the annual fees I'm willing to pay. But I mostly don't.

• On Wednesday I called the number on the back of my Ink+ card and explained I was trying to decide whether to keep the card. The frontline representative (no transfer required) offered me a $95 bonus statement credit to keep the card. $0 annual fee.
• Every year I spend $24,000 on my Flexperks Travel Rewards card I receive 3,500 bonus Flexpoints, which I redeem against my annual fee. While the Flexpoints themselves are worth up to $70 when redeemed for airfare, this allows me to treat this card as a no-annual-fee card, which is my preference. $0 annual fee.
• Each year I call Barclaycard and ask them to waive my annual fee. They have been happy to oblige for the last two years. $0 annual fee.
• Also on Wednesday, I called American Express, told the computer I wanted to close my account, and was immediately directed to a representative who offered me a $50 statement credit to keep the card. $25 annual fee.
• I haven't yet called American Express about my Delta Business Platinum card, whose annual fee I paid back in May. Hopefully they'll offer me something, although gunning for low-level Delta elite status is such a marginal play that I'll probably cancel the card anyway once I've secured status for the 2016 program year. $195 annual fee, minus a prorated refund.

Conclusion: your miles will vary

I assume one reason I have had luck so far with retention offers is that I spend hundreds of thousands of dollars per year on these cards.

If you spend less — or more — you'll find that the credit card companies have different offers for you, or possibly no offers at all, which is why it's important to know what annual fees you are willing to pay if you can't get them waived.

Only once you know how much you value a card, whether for its recurring annual bonuses or earning rate on manufactured spend, will you be able to decide whether the offers you receive from your credit card companies make it worth paying to keep your accounts open.