Is the Citi Prestige a good deal? Compared to what?

This isn't my favorite kind of blog post to write, but I do consider it essential service journalism in the context of a travel hacking blogosphere whose default mode is "breathlessly excited."

The Citi Prestige credit card is often pitched as an essential tool for the sophisticated travel hacker. In this post I want to make the argument that, on the contrary, the benefits of the Citi Prestige are valuable almost exclusively to the least-sophisticated travel hackers, who don't have a well-designed portfolio of credit cards, or to travelers who don't have access to even the most mundane techniques for manufacturing spend.

Let's take each of the benefits of the Citi Prestige card in turn.

Price compression makes airfare cheap

The first thing you hear about the Citi Prestige card is how it multiplies the value of your ThankYou points: with the card, ThankYou points are worth 1.33 cents each towards airfare, or 1.6 cents each towards airfare on American Airlines-marketed flights.

That creates a theoretical cash value of the current 50,000 ThankYou-point signup bonus of $665-$800 in paid airfare.

But $800 in paid airfare manufactured with a Chase Ink Plus card at office supply stores costs $380 in purchase and liquidation fees ($665 in paid airfare costs just $316).

So don't tell me a 50,000 ThankYou-point signup bonus is worth $800; it's worth between $316 and $380, the money you'd spend manufacturing the same airfare with a much more versatile (and, obviously, much cheaper) Chase Ink Plus.

If you have access to manufactured spend at grocery stores, then you'll find a card like the US Bank Flexperks Travel Rewards Visa runs around the world before the Citi Prestige has even got its boots on.

Compare a 25% discount on paid hotel stays to real travel hacking

The "killer app" of the Citi Prestige is supposed to be its "4th-night-free" benefit, whereby reservations made through Citi's contract travel agency, and paid for with the Citi Prestige, earn a statement credit equal to the amount of the stay's fourth night, including taxes.

In other words, when used for stays of exactly 4 nights, the Citi Prestige offers a discount of 25% on average (the actual discount will vary depending on the distribution of room rates over the four nights; Frequent Miler provides some extreme examples here).

By contrast, using only the most commonly available manufactured spending techniques, the Barclaycard Arrival Plus produces $21.05 in hotel stays for just $11.50 — a 45.4% discount.

A Chase Freedom Unlimited, earning 1.5 Ultimate Rewards points per dollar spent (or 1,515 Ultimate Rewards points for the same $11.50 above), paired with a $95 Chase Sapphire Preferred or Chase Ink Plus, requires just 1.01 cents in value per Ultimate Rewards point transferred to Hyatt Gold Passport point to match the 25% discount offered by the Citi Prestige. You have to look pretty hard to get that little value from a Hyatt Gold Passport point.

Finally, using an American Express Hilton Surpass card, you'll earn 6 HHonors points per dollar spent at grocery stores. Given only the most widely available cost of $6.30 for 3,036 HHonors points, you'll need to get just 0.28 cents per HHonors points to beat the Citi Prestige's 25% average discount on four-night stays. And that doesn't account for the value of 5th-night-free award reservations for Hilton elites.

Which brings me to the most important drawback of the Citi Prestige's "killer app:" it's only useful on stays of 4 nights or more! While all the cards and techniques I described above are useful on stays as short as 1 night, to get even a 25% discount on your paid stays, you'll have to stay for exactly 4 nights: any less, and your stay isn't eligible; any more, and your discount shrinks as a percentage of your total stay.

How does the the Citi Prestige 4th-night-free differ from the Club Carlson last-night-free?

When the US Bank Club Carlson co-branded credit cards offered the last night free on award stays, I was one of their biggest enthusiasts. That's because the last-night-free benefit allowed you to leverage the already generous 5 Gold Points earned per dollar spent on all purchases. In other words, it made valuable manufactured spend more valuable.

The Citi Prestige 4th-night-free benefit is exactly the opposite: it requires you to pay cash out of pocket for your room, which violates one of the most important principles underlying a successful travel hacking strategy: spend cash last.

Value all the other Citi Prestige card benefits at what you're willing to pay for them: nothing

You can check out the remaining benefits of the Citi Prestige over at Miles to Memories. They include:

• airline fee credits (worth much less than cash);
• lounge access (you're not paying for it now, are you?);
• Global Entry fee credit ($100 every 5 years, so, $20 per year);
• and 3 rounds of golf (not 3 foursomes, just 3 rounds: your friends will have to pay their own way).

Reimbursed business travelers should ignore everything I've said

Travelers who are reimbursed for their out-of-pocket expenses have opportunities that are, from a normal person's perspective, stratospherically lucrative. If you're able to book Monday-Friday hotel reservations for a product launch, investment banking intervention, or Republican Party platform committee meeting with your own credit card for later reimbursement, you have no excuse not to earn thousands or tens of thousands of dollars per year in 4th-night-free reimbursements from a Citi Prestige card.

But when a rich weirdo like Ben Schlappig tells you how much money he's saved with the Citi Prestige 4th-night-free benefit, remember that you don't have to pay cash for your hotels, and when you do, you can get a much better discount than 25% by developing a credit card portfolio and manufactured spend strategy that meets your actual travel needs.

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.

Membership Rewards points aren't worthless, but they are worth less

If you follow the miles and points bloggers who churn out a constant flood of material on signup bonuses, you already know that earlier this week there was an untargeted offer available for the American Express Platinum card which earned 100,000 Membership Rewards points after spending $3,000 in 3 months of card membership.

After the first day or so of unceasing posts about the offer I responded uncharitably on Twitter.

Since the blogosphere is going to keep trying to shove these offers down your throat, let's do a quick recap of why chasing offers like this is unlikely to be a great use of your travel hacking time and money.

Statement credits are worth (much) less than cash

When I wrote a post of this name, reader MJC helpfully suggested in the comments:

"The Amex Platinum 'airline credit' is also as good as cash, given that you can book a Delta ticket without attaching a Skymiles number to it, then pay for Economy Plus after the reservation is made, then cancel the reservation within 24 hours, and Amex Platinum will always refund your Economy Plus fees even though Delta refunds them as well"

Perfectly true — someone could do this over and over again until they'd redeemed their entire $200 airline fee statement credit each calendar year.

But, and I don't want to sound patronizing, are you going to do this? I ask because a lot of people get into travel hacking thinking they're one type of person, only to discover they are, in fact, the type of person who pays $95 annual fees on the Chase Sapphire Preferred year after year out of habit, fear, and/or greed.

Most importantly, the people trying to convince you to sign up for American Express Platinum cards aren't asking you whether you're the type of person who's actually willing to jump through all those hoops. And if they won't, I'm sure as hell going to.

Global Entry statement credits are worth $100 (to almost no one)

If you don't have Global Entry, and were just about to apply and pay for it, then you are fully justified in treating the American Express Platinum $100 Global Entry statement credit at its face value of $100.

But if you already have Global Entry and are planning to use your statement credit on a friend, or family member, or even sell it online, then it would not make sense to value it at $100. After all, you weren't willing to pay someone else's Global Entry fee if you had to pay out of pocket. That's what we call a "revealed" preference for cash over others' participation in Global Entry.

Membership Rewards points are valuable if you redeem them. Will you?

Finally we've come to the crux of the problem: are 100,000 Membership Rewards points worth a lot, or a little?

And my answer is an emphatic: maybe.

I was speaking yesterday to a subscriber who had already spent $50,000 on his American Express Delta Platinum card, and didn't have any good remaining options for earning large numbers of Delta SkyMiles easily (at least until next calendar year). He applied for the 100,000 Membership Rewards point offer because he knows how valuable SkyMiles are for flying from our local airport, and I congratulated him. That's as good as money in the bank.

Likewise, if you are planning a high-value Hilton vacation, being able to transfer 100,000 Membership Rewards points to 150,000 Hilton HHonors points and pay just $450 in fees (less whatever statement credits you're able to wrangle) is an easy one-off source of points.

But if you're signing up because, as one person responded on Twitter, "Singapore?" then you need to take a nice long walk around the block and decide when, exactly, you are planning to go to Singapore. Next month? The next six months? The next 10 years?

This matters because the longer your time horizon is, the more likely you are to be able to accumulate the needed points in better, cheaper ways than with a one-off Platinum signup bonus. A single Chase Ink Plus lets you earn up to 250,000 Singapore miles per year by manufacturing spend at office supply stores. But even more importantly, the Chase Ink Plus and Ultimate Rewards points in general are more valuable than Membership Rewards points, so you're unlikely to need to do an emergency transfer of points to Singapore (or any other program) in order to avoid paying a second (or third, or fourth) annual fee on the Platinum card.

I'm not angry, I'm just disappointed

Longtime readers know that I do not find arguments centered on "personal responsibility" particularly convincing. But there is one kind of responsibility that you are literally the only person who can take: knowing what kind of person you are.

Bloggers I consider irresponsible promote travel hacking as a way to experience the lifestyles of the rich and famous, as if all we can ask for out of life is a glass of champagne at 35,000 feet. If that is, indeed, all you can ask for out of life, then there's a flight to Singapore with your name written all over it.

But if you never felt the slightest longing to see the storied Singapore food courts before this 100,000 Membership Rewards point offer came around, it would be very strange indeed for such a promotion to instill such a longing in you at this late date.

Is that you, or is that the steady drumbeat of bloggers trying to sell you more and more expensive credit cards?

The chief business of the American people is business

Cool Calvin Coolidge, in a 1925 address to the American Society of Newspaper Editors, told the assembly:

"After all, the chief business of the American people is business. They are profoundly concerned with producing, buying, selling, investing and prospering in the world. I am strongly of opinion that the great majority of people will always find these are moving impulses of our life."

And yet whenever I discuss the superiority of the Chase Ink Plus small business credit card over the worthless Chase Sapphire Preferred, readers invariably remark how difficult it is to get the Chase Ink Plus "without a genuine business."

Normally I keep my business ideas close to my vest, but out of an overabundance of altruism, I've decided to share three easy ways to turn you from an employee into a proud self-employed American.

The gig economy makes business easy and fun

If you're a driver for the ride-sharing services Uber or Lyft, you've got a lot of expenses that you should be keeping strictly separate from your personal expenses: gas, vehicle maintenance, and car insurance for starters. Likewise if you do work through an app like TaskRabbit, you'll need to carefully separate any expenses you incur while on the job in order to correctly report your self-employment income come tax time.

Note that this is true no matter how much gig work you actually perform.

You don't have to be good at reselling to make it a business

Reselling is of course a term of art in the travel hacking community for folks earning miles, points and cash by buying up goods they think they'll be able to sell to others at a small, medium, or large markup, while pocketing the rewards currency of their choice.

But you don't need to a reselling savant to turn it into a business. Have you heard of random crap? Well before you start reselling random crap, you'll want to open a small business credit card to keep your random crap reselling business expenses separate from your personal expenses.

We are all content creators now

If you have something to say, you're definitely going to need your own website. That's going to come with all kind of expenses: hosting fees, maintenance fees and image licensing fees, just to name a few. And those are all fees you're definitely going to want to charge to a small business credit card.

Conclusion: unsuccessful businesspeople are businesspeople too

The Chase Ink Plus small business credit card exists so people will carry it. Those people are businesspeople. But if Chase limited card membership to people with longstanding and successful businesses, they wouldn't have very many cardholders at all, would they?

Your job, therefore, is to be the kind of small businessperson that gives Chase a reason to say "yes" to you and your small business.

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.

Let's all remember why (keeping) Chase Sapphire Preferred is so bad

I was going about my appointed rounds the other day enjoying the latest episode of the Saverocity Observation Deck podcast when I was suddenly felled by a violent attack of chagrin: here was Matt, the Fearless Leader(TM) over at Saverocity, defending the Chase Sapphire Preferred!

I'm not about to let all my hard work tearing that card to shreds be undone by a careless podcaster, no matter how dulcet his tones. So here's a refresher course on why almost no one should get the Sapphire Preferred (except for the signup bonus), put any spend on the Sapphire Preferred (after meeting the minimum spend requirement), or keep the Sapphire Preferred after the first year.

Everyday spend should be a rounding error in your miles and points strategy

Matt's first point was that on a trip into the city to meet some colleagues, he needed to buy a train ticket, catch a cab, pay for lunch, and do the whole thing in reverse. If he didn't want to bring a bulky wallet, he could grab the Chase Sapphire Preferred on his way out the door and use it for all his expenses, merrily earning bonus points all along the way.

A $100 roundtrip train ticket, $30 cab, and $400 lunch (Manhattan's expensive!) paid for with the Sapphire Preferred would earn Matt 1,060 Ultimate Rewards points. Valuing those points at a conservative 10 cents each means Matt has scored $106 in value, just from making purchases he was planning to make anyway!

But Matt knows perfectly well how to buy 1,060 Ultimate Rewards points for less than a penny each all day, every day. Using your actual purchases to decide which cards to get and keep is a surefire way to trick yourself into making bad — and expensive — decisions.

A Sapphire Preferred is a Freedom that hasn't hatched yet

Keeping a Sapphire Preferred after the first year for the bonus categories makes particularly little sense since the Sapphire Preferred can be product changed to a Chase Freedom. While great for manufacturing spend, the Chase Freedom has also bonused restaurants in one quarter for at least the last 4 years. So for 3 months of the year Matt shouldn't be putting his $400 lunches on the Sapphire Preferred anyway!

Likewise, in the current quarter Freedom is bonusing local commuter transportation, so if Matt's inclined to earn Ultimate Rewards points for his train tickets (Amtrak excepted), he can buy a whole year's worth of rail passes and earn 5 Ultimate Rewards points per dollar rather than the measly 2 points offered by Sapphire Preferred!

As Twitter user @BoonDR concisely put it, "a CSP is a Freedom that hasn't hatched yet." Keeping a Sapphire Preferred out of regard for its bonus earning categories is leaving literally tens of thousands of Ultimate Rewards points on the table every year you persist.

The value of flexibility depends entirely on your earning ability

Now let's get to the core issue: if you don't have or want a Chase Ink Plus small business credit card, you have no choice but to carry a Sapphire Preferred if you want your Ultimate Rewards points to be transferrable to Chase's travel partners (or redeemable for 1.25 cents towards travel booked through the Ultimate Rewards portal).

The problem is that without a Chase Ink Plus (and as many Freedoms as you can talk Chase into), you aren't going to be able to cheaply earn the kind of Ultimate Rewards balances that let you maximize the value of Ultimate Rewards' flexibility: the most valuable Ultimate Rewards redemptions give you a high redemption value per point (the appeal of Ultimate Rewards), but individually require large numbers of points.

Drawing on some examples I've used before, a 15.6-cent-per-point redemption at the Park Hyatt Milan is a great redemption — that costs 30,000 Gold Passport points per night ($30,000 in unbonused Sapphire Preferred spend). A 10-cent-per-point Lufthansa First Class redemption is a great value, but costs 110,000 United MileagePlus miles ($110,000 in unbonused spend).

The transferability of Ultimate Rewards points, whether it comes from a Sapphire Preferred or Ink Plus card, is valuable precisely to the extent that you are able to easily and cheaply manufacture Ultimate Rewards points. A combination of Ink Plus and Freedom gives that earning ability in a way that a Sapphire Preferred alone doesn't, which makes the Sapphire Preferred radically less valuable than the other two.

It's even worse if you're cannibalizing bonused spend

If you have limited liquidation bandwidth, as most of us do, then a dollar of unbonused spend put on the Sapphire Preferred might actually be displacing a dollar of bonused manufactured spend. And that's virtually never a good idea.

Ultimate Rewards points can be transferred to Hyatt at a 1-to-1 rate, which is a great deal if you're earning 2 or 5 Ultimate Rewards points per dollar. But if an unbonused dollar of Sapphire Preferred spend is displacing a dollar of bonused Hilton HHonors Surpass spend, you're exchanging 6 HHonors points for a single Hyatt Gold Passport point.

While Gold Passport points are worth more than HHonors points, they aren't worth 6 times more — Hilton's award chart tops out at 95,000 HHonors points, while Hyatt's ends at 30,000 Gold Passport points.

If you have a lot of reimbursed business travel expenses, fine, go for it

Since the Chase Ink Plus also gives 2 Ultimate Rewards points per dollar spent at hotels (up to $50,000 per year), it's still a strong choice for a lot of business travelers. But if you travel very regularly for business and are reimbursed by your employer for plane tickets, car rentals, and meals, you may have tens or hundreds of thousands of dollars in travel expenses each year to charge to the Sapphire Preferred. In that case, be my guest: keep Sapphire Preferred and you won't hear a peep out of me.

But if you're just charging the occasional taxes and fees on award tickets, and domestic economy tickets when you can't find award availability, we're likely talking about a few thousand bonus Ultimate Rewards points per year.

So do yourself a favor: call Chase and ask nicely for a product change to Freedom. You can thank me later.

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.

Quick hit: check your cardmember year Ink bonus spend

On Monday I mentioned two recent developments that should, at least for now, make earning Ultimate Rewards points at office supply stores easier and cheaper than ever using Chase's Ink line of small business credit cards. So easy, in fact, that you may find yourself maxing out your $50,000 Ink+ and $25,000 Ink Cash cardmember year caps on bonused spend earlier in your cardmember year than you're used to.

Fortunately, there's an easy way to check how much you've already spent in your Chase Ink bonus categories.

First, log into your Chase online banking account navigate to the Ultimate Rewards account linked to your Chase Ink card:

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Second, click on "More ways to earn" on the righthand side of the Ultimate Rewards homepage:

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Then, scroll down until you see your 5x and 2x earning categories. Next to each, you'll see the total number of bonus points you've earned as of your last credit credit card statement:

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As you can see, as of my last statement I had spent approximately $1,191 of my $50,000 office supply store bonus earning cap and $4,554 of my $50,000 gas station bonus earning cap.

Just remember, this is exclusive of the 1 Ultimate Rewards point earned per dollar spent everywhere, so you need to divide your office supply store bonus earning by 4, not 5, and you don't need to divide your gas station earning by anything: the number you see is the amount of your gas station spend during your current cardmember year as of your last statement.

Are office supply store Visa gift cards cheap or expensive?

This post was inspired by a comment left by reader net netty to my post on dealing with the new Visa gift cards being sold at Staples. S/he wrote:

"And I agree that everyone might have their own priorities but you are doing it wrong and giving bad advice if you are paying 6.95 per 1,000 UR pts."

This reminded me that it might be useful to write about how I decide between various methods of manufacturing spend: which techniques to use; which cards to use them with; and which to set aside for later.

Liquidation bandwidth is usually more limiting than purchase bandwidth

The simplest way to think about developing a manufactured spend strategy is by allocating your liquidation bandwidth across your current (and potential future) credit cards.

That usually means assigning bandwidth to your bonus-earning cards first; if the same $500 in spend will earn 500 Marriott Rewards with one card or 1,000 Ultimate Rewards points with another, the bonus-earning card is strictly superior, not least because Marriott Rewards is an Ultimate Rewards transfer partner.

A slightly different situation arises when trying to compare two different techniques with different price points and earning rates.

For example, Chase Ink cards earn 2 Ultimate Rewards points per dollar spent at gas stations, and 5 Ultimate Rewards points per dollar spent at office supply stores. The higher earn rate, however, comes at a higher cost: $6.95 per office supply store 1,000 Ultimate Rewards points, versus $4.95 or less per 1,000 gas station Ultimate Rewards points.

That means on a cost-per-point basis, gas station manufactured spend is the cheaper, and therefore "better," technique.

And indeed, in a world with unconstrained liquidation bandwidth, that would be the end of the analysis.

But in the real world of liquidation constraints, the analysis is turned upside down! The same 1,000 Ultimate Rewards points earned at office supply stores use up just $200 in liquidation bandwidth, compared to the $500 used up by gas station gift cards.

A travel hacker with access to only these two techniques and $5,000 in monthly liquidation bandwidth could earn 15,000 more Ultimate Rewards points monthly by choosing office supply stores over gas stations. Even if you value Ultimate Rewards points at just 1 cent each, office supply stores produce a small profit of $25.75 over gas stations.

That's because $1,000 in liquidation bandwidth costs $34.75 in office supply store activation fees and earns 5,000 Ultimate Rewards points ($15.25 in profit). Gas station fees for $1,000 in liquidation bandwidth are just $9.90, but that spend earns just 2,000 Ultimate Rewards points — and just $11.10 in profit.

Of course there are other liquidation constraints: office supply stores may sell cards that are easier to liquidate at Walmart, while gas stations may sell harder-to-liquidate Vanilla-branded gift cards.

On the flip side, for many people time is the most important liquidation constraint, and 25 $200 cards are without question more time-consuming to liquidate than 10, $500 cards.

Conclusion

Hopefully this post illustrates the importance of taking a liquidation-first approach as you develop your own manufactured spend strategy: allocate your liquidation bandwidth across all your credit cards and manufactured spend techniques, starting with the cards which maximize the value of each liquidated dollar. Usually, that means using your highest bonus spend categories first, and only then working your way down to unbonused (but hopefully still-valuable!) credit card spend.

New Staples Visa gift cards got you down? Try these two weird old tricks

I like buying Visa gift cards from Staples. I buy a lot of Visa gift cards from Staples. But the new Staples Visa gift card design has been causing me enough frustration that it's started to disrupt my mellow manufactured spend lifestyle.

I was tossing and turning the other night, dreading liquidating the $600 in Visa gift cards I had in my sock drawer, when I had a vision, a vision of restoring my manufactured spend equilibrium.

Background: the new Visa gift card design

Via Miles to Memories, here's a handy picture of the "old" Visa gift card design (on the left) and the "new" Visa gift cards (on the right) that have been costing me so much tranquility:

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Problem 1: glue used on new peels is sticky and gross

The previous generation of Visa gift cards could be liquidated right out of the package, once you'd removed any obstructing glue dots. The new card design still has the last four digits of the card number set as the default PIN, but the card number is itself covered by a peel that uses the stickiest, most inconvenient glue I've ever seen on a prepaid debit card. While removing the peel, and while being transported in your pocket or wallet, this glue gets everywhere, and can seriously affect the ability of the card to be swiped smoothly through magnetic readers.

Solution 1: don't remove the peel

Remember, you only need the last four digits of the card number in order to use the card as a PIN-enabled prepaid debit card. So instead of removing the peel completely, just peel back the right corner and jot down the last four digits somewhere — for example, on the card itself:

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Once you've noted the last four digits, return the peel to its original position: no muss, no fuss.

Problem 2: stray scraps of terms and conditions coming off on cards

This has happened on one third of the cards I've purchased in the last few weeks: a random glue splotch causes a strip of the paper that the card's terms and conditions are printed on to come off on the card, directly opposite the magnetic strip. This catastrophe causes the card to catch every time it's swiped, making it frustrating or even impossible to liquidate using a magnetic card reader. Here's an offending example:

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Solution 2: wrap it in receipt paper

This is a trick I learned years ago, but haven't had occasion to use in a long time. But while tossing and turning last night, I remembered: by wrapping a card in receipt paper, you can prevent irregularities in the card's surface from preventing the card's magnetic strip from being recognized. Just hold the receipt paper folded tight around the magnetic strip, position it at the top of the magnetic reader, and give it a smooth stroke:

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Result: success on my first swipe, and no awkward insistence that my Walmart cashiers let me swipe my cards over, and over, and over again.