Fuel surcharges on Korean's SkyTeam partners

Last week I saw a flood of posts about Korean Air adding the ability to search and book SkyTeam partner awards online (for example). Since Korean Air SKYPASS is an Ultimate Rewards transfer partner, it's worth checking to see if there are any good values on their SkyTeam partners now that it can be done easily online.

The three most important things people know about Korean Air SKYPASS are:

1. You can only book awards for yourself and a very tightly defined group of family members;
2. SKYPASS awards pass along fuel surcharges;
3. Korean Air's award "zone" definitions are unusually generous, with Hawaii located in North America and South America being treated as a single zone.

Being a literal-minded sort of person, I decided to see how bad those fuel surcharges are on all of the SkyTeam carriers departing from the United States.

Here's what I found.

Not bookable online

While I was able to find award space on these SkyTeam airlines using Delta's search engine, I couldn't pull up the same flights using SKYPASS:

• Aeromexico to Latin America;
• Alitalia to Italy;
• Aerolineas Argentinas to Argentina.

The functionality may be added in the future, but for now I don't believe SkyTeam awards are bookable online using SKYPASS on those carriers.

Low fuel surcharges

Carriers that charge low fuel surcharges are the likeliest to be worth redeeming SKYPASS miles on, since you can take advantage of Korean's generous award chart without suffering the drawback of paying a high cash co-pay. On these low-fuel-surcharge routes you're likely to save money whether you choose to fly in economy, business, or first class.

For each airline I've given a sample route and the cost in SKYPASS miles for an economy ticket, and I've separated out the taxes and fees and the fuel surcharges. In all cases these prices are roundtrip, since Korean requires SkyTeam awards to be booked as roundtrips.

• Delta to Peru, ATL-LIM. 50,000 SKYPASS miles, $103.40 in taxes and fees, $0 in fuel surcharges.
• Delta to Japan, SEA-NRT. 80,000 SKYPASS miles, $80.04 in taxes and fees, $0 in fuel surcharges.
• Aeroflot to Russia, JFK-SVO. 50,000 SKYPASS miles, $252.12 in taxes and fees, $0 in fuel surcharges.
• China Eastern to China, LAX-PVG. 90,000 SKYPASS miles, $420.60 in taxes and fees, $8 in fuel surcharges.
• China Airlines to Taiwan, HNL-TPE. 90,000 SKYPASS miles, $73.15 in taxes and fees, $0 in fuel surcharges.

Medium fuel surcharges

These routes charge less than $500 in fuel surcharges, and might be worth considering in premium cabins or if you find award space on dates with particularly expensive cash fares.

• Delta to China, SEA-PEK. 90,000 SKYPASS miles, $70.60 in taxes and fees, $282 in fuel surcharges.
• Delta to South Africa, ATL-JNB. 80,000 SKYPASS miles, $99.95 in taxes and fees, $390 in fuel surcharges.
• China Southern to China, LAX-CAN. 90,000 SKYPASS miles, $70.60 in taxes and fees, $208 in fuel surcharges.

High fuel surcharges

These are the routes where high fuel surcharges mean economy award tickets are likely to cost the same or more than economy tickets, while premium cabin award tickets may cost the same as an economy ticket paid for with cash.

• Delta to Europe, JFK-BCN. 50,000 SKYPASS miles, $81.25 in taxes and fees, $556 in fuel surcharges.
• Air France to Europe, JFK-CDG. 50,000 SKYPASS miles, $113.16 in taxes and fees, $576 in fuel surcharges.
• KLM to Europe, JFK-AMS. 50,000 SKYPASS miles, $82.26 in taxes and fees, $576 in fuel surcharges.

Those flights would cost just 80,000 SKYPASS miles roundtrip in business class, for a total cost of $1437.25 - $1489.16 if you value transferred Ultimate Rewards points at their cash value of 1 cent each. Unfortunately business class space on SkyTeam across the Atlantic is very poor so you're unlikely to be able to take much advantage of these price points.

Routing rules

The basic routing rules for SkyTeam awards are pretty simple, although there are a host of exceptions: you can have three segments in each direction between your origin and destination, one stopover per itinerary, and one open jaw at your destination (which does not consume your stopover).

Drew at Travel is Free wrote a more detailed guide to Korean's routing rules, but I don't know if there's much point in trying to intellectualize their rules and restrictions. Basically, you can do a lot of things, within reason, and you can do some things beyond reason,  if you use Korean-operated flights. For example, a LAX-PVG-NRT-PVG-JFK itinerary will not price out entirely on China Eastern, but if you make it LAX-PVG-NRT/NRT-ICN-JFK with the return operated by Korean, it'll happily price out. This may also have to do with a Maximum Permitted Mileage restriction — the point is there's no substitute for getting in and playing around with the search engine to see if it'll accept your particular crazy idea.

For example, the engine happily priced out LAX-HNL(stopover)-NRT(destination)-HNL(transfer)-LAX for 80,000 SKYPASS miles and $87.84 total in taxes, fees, and surcharges. While a roundtrip to Hawaii for 25,000 miles is a good deal, a roundtrip to Japan with a stopover in Hawaii for 80,000 miles is a great deal.

Overdiversifying, underdiversifying, and practicing what I preach

I recently had the pleasure of redeeming 30,000 American AAdvantage miles for a $290, one-way domestic plane ticket, which gave me an excellent opportunity to reflect on some travel hacking wisdom I never get tired of preaching: the least valuable point is the one you don't redeem.

The real risk of underdiversifying is paying cash

The point of travel hacking should be to pay as little as possible for the trips you want to take. I'm absolutely indifferent to whether you want to travel domestically or internationally, by plane, train, or automobile, with your family or alone, in first class or in steerage. I just want to help you spend as little money as possible to do it.

Diversifying your points balances is a way of achieving that. With no rewards currencies at all, you'd pay the retail cost for all your travel, minus any savings achieved by booking through online portals, paying with discounted gift cards, taking advantage of best rate guarantees, and the other techniques we have available.

With a single rewards currency, you can start to save money when you're able to find award space with that loyalty program. If you only collect Hilton HHonors points, you're in good shape as long as you're visiting a city with a Hilton property, and that property has award space. You'll still pay cash for your airfare, but hotels can often be the biggest expense on a trip, so the savings there can quickly add up.

With multiple rewards currencies, you can start to bring down your costs considerably. If you earn Ultimate Rewards points with an Ink Plus card, then you'll be able to save money by redeeming Hyatt Gold Passport points when you visit a city served by Hyatt, and by redeeming United, British Airways, Flying Blue, and Southwest points when those airlines and their partners make award space available. Even better, when award space isn't available, you can still get a 20% discount on revenue flights by redeeming Ultimate Rewards points at 1.25 cents each.

I won't belabor the point: having more rewards currencies reduces the chance that you'll have to pay retail for your travel. As long as those rewards currencies are acquired cheaply enough, that means each redemption saves you money on your travel, which, again, is the point of the game.

The real risk of overdiversifying is unredeemed balances

Many travel hackers and bloggers believe that "earning and burning," or keeping points balances as low as possible by redeeming award currencies roughly as quickly as they're earned, is the best approach. The reason normally given for this is that regular devaluations decrease the value of earned miles and points, so your balances will never be worth as much in the future as they are in the present.

Meanwhile, I spend no time thinking about devaluations, and don't think you should either. Your travel hacking practice should be giving you big enough savings on each redemption that even substantial devaluations won't affect the calculus of redeeming miles versus spending cash.

But the logic of diversifying your points balances really can be taken too far!

Above I said that when you don't have the right currency to pay for the trip you want to take as cheaply as possible, you run the risk of having to pay cash and not save any money at all. One way to react to that possibility is to accumulate high balances in as many programs as possible, to ensure that you always have enough of the right currency for the job.

The problem with that approach is that it exposes you to the real risk of overdiversifying: unredeemed balances. From hundreds of interactions with readers and friends in the community, I have come to believe that accumulating large, unredeemed balances is the single biggest mistake made by even experienced travel hackers.

There's no mystery to how it happens: a new credit card is launched, or refreshed, or suddenly has a much higher-than-usual signup bonus. Once the credit card affiliate bloggers get their links, you see two or three weeks of blanket coverage online. Sometimes the coverage even runs over into the mainstream media. Even those who are disgusted by the orgy of profiteering start talking about the orgy of profiteering, bringing the offer in front of even more eyeballs.

And then, like clockwork, people start asking: "I have all these Wyndham/Membership Rewards/Amtrak/Choice/Trump Shuttle points. What do I do with them?"

The answer, unfortunately, is usually "nothing."

Pay as little as possible for the trips you want to take

Without travel hacking, most of us couldn't afford to spend a week in the Maldives. But even without travel hacking, many of us could afford to fly home for Thanksgiving.

Paying $150 for a $600 plane ticket you'd otherwise pay cash for is a savings of $450.

Spending $2,500 for a trip someone else paid $15,000 for is an expense of $2,500.

I've heard that the Maldives are lovely, and I'm sure I'd enjoy visiting. But speculatively accumulating huge balances at random as signup bonuses change and cards are launched or discontinued, instead of targeting programs that save you money on the trips you want to take is a way of spending money, not saving it!

Again, this says nothing about the merits, or lack thereof, of the Maldives, of your favorite Park Hyatt, or of Emirates First Class. I'm sure they're lovely. But being talked into taking someone else's idea of the perfect trip is an expensive mistake — travel hacking just makes it less expensive.

Conclusion: my fantastic AAdvantage redemption

All of that brings me to my 30,000-mile, $290 one-way American Airlines ticket. If you believe that the goal of travel hacking is to get the highest dollar value from each redeemed mile, this is a preposterous redemption — less than a penny per point!

But I had a different problem: an unredeemed American Airlines balance. I'd earned the miles cheaply, through Barclaycard US Airways anniversary miles, a negative-interest-rate loan I took out, and some experiments I'd been running through the American Airlines shopping portal, so I was certainly saving money on the ticket compared to paying cash.

But even more importantly, I judged ridiculous the idea of paying $200 (the cash value of the 20,000 US Bank Flexpoints I'd need to redeem) or $232 (the cash value of the 23,200 Ultimate Rewards points I'd need to redeem) when I had more than enough AAdvantage miles sitting in my account unredeemed. I didn't have a plan for the miles because I had earned them more or less accidentally: I had overdiversified into AAdvantage miles, and was sitting on a balance of miles that were, unredeemed, worthless to me.

The point of travel hacking is to pay as little as possible for the trips you want to take. I wanted to take a $290 flight and $5.60 in taxes and fees was as little as I could pay for it. Mission: accomplished.

Why I manufacture cash

I was chatting with a blog subscriber the other day who expressed surprise when I told him I was manufacturing spend on a 2% cash back card, rather than a mile- or point-earning credit card.

That exchange made me think I should present my argument for why travel hackers as a general rule either should manufacture cash back, or at least should be willing to manufacture cash back. The simple reason is that doing so keeps you honest.

Bonused spend is capped or limited

There are cards that are straightforwardly superior to cashback-earning credit cards, or may be under certain circumstances. For example, if you have access to grocery store manufactured spend, a US Bank Flexperks Travel Rewards card (2x), Hilton HHonors Surpass American Express (6x), Amex EveryDay Preferred (4.5x), or American Express Premier Rewards Gold (2x) card are either clearly or convincingly worth more than manufacturing spend on a simple 2% cash back card.

But manufacturing spend at grocery stores faces all sorts of obstacles, from daily limits on purchases to annual caps on bonused spend. Whether the limits you face are imposed by the stores you visit, the cards you carry, or the inconvenience of visiting bonused retailers, they leave you with a simple choice: restrict your manufactured spend to bonused retailers, or manufacture unbonused spend as well?

Unbonused spend should present hard choices between rewards currencies

I loosely consider the 3 most lucrative travel rewards-earning credit cards for unbonused spend to be:

• Chase Freedom Unlimited. 1.5 Ultimate Rewards points per dollar spent, flexible if transferred to Chase Sapphire Preferred, Ink Plus, or Sapphire Reserve.
• Amex EveryDay Preferred. 1.5 flexible Membership Rewards points per dollar spent.
• Starwood Preferred Guest American Express. 1 Starpoint (1.25 airline miles) per dollar spent.

You would need to get 1.33 cents per Ultimate Rewards or Membership Rewards point in value, or 2 cents per Starpoint (1.6 cents per mile when transferred in 20,000-Starpoint increments), to break even compared to a 2% cashback-earning credit card.

Those thresholds are, on the one hand, trivially easy to meet. Getting 1.33 cents per Hyatt Gold Passport point or United Mileage Plus mile is considered a poor redemption of those currencies since it's so easy to get so much more value from them. Even 1.6 cents per transferred Starpoint is relatively easy to achieve on long-haul flights, especially in premium cabins.

On the other hand, those thresholds are only easy to meet when the points are redeemed for travel. When you earn rewards currencies other than cash because of their possible future value, then fail to redeem them, you are ultimately paying a premium for an inferior product.

Consider two travel hackers, each of whom manufactures $10,000 in unbonused spend each month for a year. The first uses a Chase Freedom Unlimited and earns 15,000 Ultimate Rewards points. The second uses a 2% cash back card, and earns $200 in cash back. Both pay the same purchase and liquidation fees. At the end of the year (in the 13th month), the first travel hacker will have 180,000 Ultimate Rewards points, and the second will have $2,400 in cash.

To make up the $600 in cash value, the first could redeem all 180,000 Ultimate Rewards points for 1.33 cents each — an easy lift, as described above.

But what if the first travel hacker redeems just 120,000 of their Ultimate Rewards points for travel, leaving them with a 60,000-point balance? Now she needs to get 1.5 cents per Ultimate Rewards point — still not too difficult, on long-haul United award redemptions or at mid-tier Hyatt properties. After all, Hotel Hustle pegs the median Hyatt Gold Passport point value at 1.862 cents.

Finally, consider if the first travel hacker redeems just 60,000 of their 180,000 Ultimate Rewards point haul for the year. They still have $1,200 in cash value, but that means they'll need to get 2 cents per Ultimate Rewards point to break even with the 2%-cashback travel hacker. Now we've found ourselves, rather than being safely below the median Hyatt point value, 7.5% above it. Rather than merely looking for a decent United redemption, we need an excellent one. All to break even with the person who's been taking their rewards to the bank in the form of cash each and every month!

This has nothing to with devaluations

When I point out the folly of hoarding miles and points, people often think I'm talking about the risk of devaluations. But as I wrote in the linked post, 

"For all the wailing and gnashing of teeth whenever an airline or hotel devalues its miles, that process is relatively gradual and relatively predictable.

After all these years, despite everything that's happened in the airline loyalty industry, the 25,000 domestic saver award ticket still exists."

If there is never another devaluation of any loyalty program under the sun; if every loyalty program opened up every seat, in every cabin, on every flight, for award redemptions, unredeemed points will still be worth nothing, while cashback earned can still be put to work paying for the expense of your choice, from groceries to retirement savings.

Conclusion

Past performance is no guarantee of future results. But it's as good a place as any to start!

When deciding between a cashback-earning credit card or putting the same unbonused spend on a travel rewards-earning credit card, take a look at your existing balances and your account history. Do you redeem the points you earn? Are you consistently getting the value you need to break even compared to a 2% or higher cashback card, taking into account the orphaned points you don't redeem?

If so, terrific — keep doing what you're doing. If not, then it's time to ask further questions about your manufactured spend strategy.

And those questions are how cashback credit cards keep travel hackers honest.

Finding the value in the Chase Sapphire Reserve

Now that everyone's had a chance to calm down about the Chase Sapphire Reserve card, let's take a look at the card's features and see what, if any, value it might have to a travel hacker.

Keep in mind that since the Sapphire Reserve has a $450 annual fee, you don't need to get $450 in value to make the card worth getting. You need to get $450 in value to break even.

Ultimate Rewards flexibility

When you have a Chase Sapphire Preferred, Ink Plus, or Sapphire Reserve, you can transfer your Ultimate Rewards points to Chase's travel partners.

I won't relitigate the question of who qualifies for a Chase Ink Plus credit card. But suffice it to say, some readers cannot or feel they cannot be approved for Chase Ink Plus cards, in which case their only option if they want to make their Ultimate Rewards points flexible has been to carry a Sapphire Preferred, with its $95 annual fee.

If carrying a Sapphire Reserve allows you to downgrade your Sapphire Preferred to a Freedom or Freedom Unlimited, that brings your Sapphire Reserve's annual fee down by $95, plus the value of any additional points you earn with whichever of the the two, far superior, credit cards you change your Sapphire Preferred to.

Note that this is not true if you have access to an Ink Plus, since its accelerated earning rates at gas stations and office supply stores makes it worth carrying whether or not you have a Sapphire Reserve.

100,000 Ultimate Rewards-point signup bonus

After spending $4,000 on purchases within 3 months, you'll earn 100,000 Ultimate Rewards points, worth $1,000 in cash. Since the annual fee of $450 isn't waived the first year, this is the equivalent of a $550 signup bonus, less the difference in value between the cashback you'd otherwise earn on the same $4,000 in spend. Assuming you have a 2% cashback card you'd otherwise manufacture spend on, the total value of the signup bonus drops to $510 in cash.

Is a $510 signup bonus worth pursuing? Maybe! But I walked into a Citi bank branch today and picked up a brochure for a $400 cash bonus for opening a new Citibank Checking account. Doctor of Credit has a list of a few thousand dollars in bank account signup bonuses. The Chase Sapphire Reserve signup bonus is a bit higher than those signup bonuses, but a bit harder to get — you have to be approved, after all!

In short, if you chase signup bonuses, the 100,000 Ultimate Rewards-point signup bonus is probably all you need to know about this credit card. If you don't, you'll need to find the card's value elsewhere.

Increased value of Ultimate Rewards travel reservations

With a Sapphire Preferred or Ink Plus credit card, there are exactly two reasons you would redeem Ultimate Rewards points to book travel through the Ultimate Rewards booking engine:

• you are booking paid air travel on an airline or a stay at a hotel without award availability;
• or, although there is award availability, transferring Ultimate Rewards points to one of Chase's transfer partners would yield less than 1.25 cents per point in value.

The two situations have different implications, and need to be treated differently.

If you regularly use Ultimate Rewards points to book travel when there is no award availability with Chase's travel partners, then the move from a 1.25 to 1.5 cent-per-point redemption means saving Ultimate Rewards points: every $1,000 in paid reservations you make costs 13,333 fewer Ultimate Rewards points (66,667 instead of 80,000). If you currently book $3,375 in paid Ultimate Rewards reservations per year, the Sapphire Reserve will pay for its annual fee in the cash value of those savings.

In the second case, you are moving the threshold for points transfers compared to paid bookings. With a Sapphire Preferred or Ink Plus card, at all redemption values above 1.25 cents per point, accounting for taxes and fees, you'll get more value transferring Ultimate Rewards points to a travel partner than booking through the Ultimate Rewards portal. For example, a simple domestic United one-way costing 12,500 Mileage Plus miles and $5.60 in fees is a better value than redeeming Ultimate Rewards points for the same flight at any price higher than $161.85. At 1.5 cents per point, that breakeven point moves to $193.10. This is a very small change in the breakeven point!

The fact that taxes and fees are levied on both paid airline reservations and award flights means that the breakeven point increases by less than the 20% increase in the value of Ultimate Rewards points redeemed for paid travel.

Thus the difference between the first and second situations becomes clear: if you already find value redeeming your Ultimate Rewards points for paid travel, the Sapphire Reserve generates genuine savings compared to what you're currently paying. However, the increase in breakeven point is not significant enough to change the value calculation for Ink Plus and Sapphire Preferred cardholders who already get more than 1.5 cents per point in value from their United Mileage Plus and Hyatt Gold Passport points transfers.

Southwest Airlines presents a slightly different case, recently discussed by Trevor at Tagging Miles.

$300 annual travel credit

I'm the only blogger who says this, which either means I'm wrong or that I need to keep saying it more loudly and convincingly: statement credits are worth much less than cash.

How much less? Well, we've already established that with the Sapphire Reserve, $300 in travel booked through the Ultimate Rewards booking engine costs just $200 in Ultimate Rewards points.

If that is true, then how can it be the case that a $300 annual travel credit is worth $300, rather than $200?

There are lots of ways to get $300 in travel out of the $300 annual travel credit:

• Buy $300 Alaska Airlines tickets and refund them to your travel bank.
• Buy $300 in Southwest Airlines tickets and redeposit their value to your account.
• Buy $300 in gift cards from a travel provider that sells its own gift cards (Marriott properties all sell Marriott gift cards, for example).
• Pay $300 for travel.

The card is too new to know whether this would work, but you could theoretically even book an Alaska Airlines ticket more than 61 days out, or a fully refundable airline ticket, or a refundable, prepaid hotel reservation, wait for the credit to hit your account, then refund the reservation. I consider that an excruciatingly bad idea, but that's up to you.

The point is, $300 in travel is not worth $300 in cash to a travel hacker, but credit card annual fees have to be paid for in cash!

Conclusion

There are a lot of places a travel hacker can look for value with the Sapphire Reserve, but the card's benefits are not additive in the way affiliate bloggers suggest: 100,000 Ultimate Rewards points are not worth $1,500, a $300 travel credit is not worth $300, and the increased value of Ultimate Rewards points through the Chase booking portal is only valuable to the exact extent you redeem Ultimate Rewards points through the Chase booking portal.

This doesn't mean the Sapphire Reserve is a bad card or that you shouldn't get it.

This does mean you should look at your own pattern of earning and redemption, then think for yourself before jumping on the latest credit card affiliate bandwagon.

Some bonus categories I never think about

I belong to the noisy-but-unpopular school that believes everyday spending should properly be a rounding error in the typical travel hacker's overall miles and points strategy. That's because more miles can be earned in an afternoon of light manufactured spending than will be earned in a month or year of trying to earn as many points as possible on actual purchases.

The flip side of that is a blind spot when it comes to the bonused categories of spend on cards that I already carry, either for purposes of manufactured spend or recurring annual bonuses. In the interests of keeping my blind spots few and far between, I decided to take a closer look at a few of those categories.

Hotels

With increasingly limited access to gas station manufactured spend, you may find that you're not able to manufacture $50,000 in spend in a Chase Ink Plus's double point category of "gas stations and hotel accommodations when purchased directly with the hotel."

Since Ultimate Rewards points are worth 1.25 cents each when redeemed for paid airfare, or more when transferred to Hyatt Gold Passport, Southwest Rapid Rewards, and (usually) United MileagePlus, you're strictly better off paying for your hotel stays with a Chase Ink Plus than with the 2% cash back card you use for your other everyday purchases. One possible exception is if you are having trouble finding eligible expenses to redeem your Barclaycard Arrival Plus, Capital One Venture, or BankAmericard Travel Rewards miles against, although you can always consider refundable reservations in that case.

I'm fond of paying the revenue component of my Hyatt stays with Hyatt gift cards purchased at a discount using cashback rewards, but if you pay for Hyatt stays directly, the 3 Hyatt Gold Passport points earned per dollar with the Chase Hyatt credit card are superior to the 2 Ultimate Rewards points earned by both the Chase Ink Plus and Chase Sapphire Preferred — assuming you plan to transfer your Ultimate Rewards points to Hyatt Gold Passport at any point in the future.

The math is somewhat less favorable when paying for Hilton stays with the American Express Hilton HHonors Surpass card, which earns 12 HHonors points per dollar spent at Hilton properties. According to the Wandering Aramean visualization tool, 12 HHonors points are worth a median 5.376 cents, while 2 Ultimate Rewards points, transferred to Hyatt Gold Passport, are worth a median 3.724 cents. That's an edge, but it's an edge that's highly dependent on your actual redemption pattern.

Finally, the Chase Marriott Rewards Premier credit card is by and large not worth holding for either its recurring benefit (one free category 1-5 night each account anniversary) nor for manufactured spending (one elite night credit for each $3,000 spent). But if you do have it for one reason, the other, or both, you are still unlikely to get more value from the 5 Marriott Rewards points earned per dollar spent at Marriott properties than you would from 2 Ultimate Rewards points earned on the same spend — unless, of course, you are already planning to transfer Ultimate Rewards points to Marriott for some reason, like booking a 7-night Hotel + Air package.

Restaurants

As I've written before, most of the time one or more rotating cashback bonus card is offering 5% cash back at restaurants, so the idea of needing a particular card "dedicated" to restaurant spend is misleading: you should use your most lucrative card, which will, at least 6 months of this year, be a Discover it or Chase Freedom card. But that leaves the other half of the year, which makes it a legitimate question whether there are better cards than a straight 2% cashback card for use at restaurants.

Using the same median Hilton HHonors point value as above, the 6 HHonors points earned per dollar with the Hilton HHonors Surpass American Express at restaurants slightly edges out a 2% cash back card, earning the equivalent 2.688 cents per dollar spent, while the Chase Hyatt credit card earns 2 Hyatt Gold Passport points per dollar spent, or a median 3.724 cents per dollar.

This matters because the Chase Sapphire Preferred, often promoted by affiliate bloggers for its high affiliate payout and earning rate on travel and dining, earns 2 Ultimate Rewards points per dollar. In other words, for just $75, rather than $95, you can earn 2 Hyatt Gold Passport points at restaurants with a card that also offers a free night at Category 1-4 Hyatt properties worldwide. That's a fact that's helpful to keep in mind the next time someone tells you the Chase Sapphire Preferred is the best card to carry for restaurant spend.

Airline tickets

Finally, I very rarely find myself booking air travel directly through an airline (preferring to use miles, Ultimate Rewards points, or Flexpoints earned with a US Bank Flexperks Travel Rewards card), but if you do book air travel directly, or need to pay the taxes and fees attached to award tickets, you can do better than a 2% cashback card with cards you may already carry.

If you periodically sign up for a "spare" US Bank Flexperks Travel Rewards card, for example during the current Olympics promotion, you can use that extra card to pay for airfare, earning 2 Flexpoints per dollar spent, and transfer the resulting bonus Flexpoints to your primary account for future redemptions.

If you use an American Express Premier Rewards Gold card to manufacture grocery store spend on an ongoing basis, you may as well use it to pay for airfare, earning 3 Membership Rewards points for your airline tickets as well, which can be transferred to potentially lucrative travel partners like Delta SkyMiles. The same goes for a Citi Prestige card you may carry to raise the value of your existing Citi ThankYou points.

And the Chase Hyatt credit card earns 2 Hyatt Gold Passport points per dollar spent on airfare, giving it an edge over a straight 2% cashback card, depending as always on your actual planned redemptions.

Conclusion

I don't think it's useful, let alone necessary, for a travel hacker to stress over every possible bonus point at every possible merchant. But for the kind of purchases that you know you make frequently, it's at least worth considering finding additional value by keeping in mind the bonus categories offered by cards that you already use to manufacture spend, or hold for their recurring annual benefits.

As I indicated above, I don't usually pay for airline tickets or hotel stays with credit cards. But digging into my existing cards' bonus categories, I realized I could replicate the majority of the Chase Sapphire Preferred's "travel and dining" bonus categories with cards I already had: the Chase Ink Plus and Chase Hyatt credit cards. Between the two, they cover hotels, airlines, restaurants, and rental cars.

Obviously that leaves out things like cruises, travel agency bookings, local transportation, and so on. But they do include the bulk of reimbursable business travel, so if you do spend a large amount in those categories each year, you may find yourself coming out ahead by examining the bonus categories on your existing card card portfolio.

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?

Anatomy of an Award Trip: Spring Break in San Francisco

If you follow me on Twitter (as you should!) you know I spent last week in San Francisco. It was only upon returning that I realized I hadn't posted an anatomy of the award trip. Better late then never!

Getting there: Amtrak's California Zephyr

This was my last long-haul Amtrak sleeper cabin redemption before the December 8, 2015, revenue-based Amtrak Guest Rewards devaluation. I transferred 40,000 Chase Ultimate Rewards points to Amtrak Guest Rewards points for a 2-zone bedroom reservation between Chicago and San Francisco on the California Zephyr.

Total cost: 40,000 Amtrak Guest Rewards points, transferred from Ultimate Rewards. Total value: $1,246. Value per point: 3.12 cents per Ultimate Rewards point.

Staying there: Hyatt Fisherman's Wharf

As a newly minted Hyatt Diamond, I was eager to see what all the fuss was about and booked a 5-night Points + Cash reservation at the Hyatt Fisherman's Wharf, and applied one of my 2015 Suite Upgrade Awards.

Total cost: 37,500 Hyatt Gold Passport points and $582.25. Total value: $1,769.96. Value per point: 3.17 cents per Ultimate Rewards point.

I then earned 3,250 of those points back, bringing my final value per point to 3.47 cents per Ultimate Rewards point. Note that this value is based on an ordinary room reservation, not a suite reservation, since I could have applied a Suite Upgrade Award to either type of reservation.

Getting back: Delta first class tickets

To get back, I employed a strategy I use increasingly often: I booked my partner on an award ticket and myself on a paid ticket using a Delta voluntary denied boarding voucher. My partner doesn't play the game at all (besides traveling with me) so I don't make any attempt to get her elite status or earn bonus miles in her accounts.

Total cost: 37,500 Delta SkyMiles and $5.60, plus $729.10 in voluntary denied boarding compensation. Total value: $1,458.20. Value per point: 1.93 cents per SkyMile.

Conclusion

From my point of view, this award trip was quite close to ideal: I redeemed points I earned extremely cheaply for relatively expensive reservations.

In the case of Ultimate Rewards points redeemed at 3 cents or more per point, I earned close to 15% back on spend I manufactured with Ultimate Rewards-earning credit cards in their 5-points-per-dollar bonus categories.

In the case of Delta SkyMiles earned at 1.4 SkyMiles per dollar spent with my American Express Delta SkyMiles Platinum credit card, I earned roughly 2.7% back when redeeming those miles for my partner's first class ticket, which is quite strong for unbonused manufactured spend.

And of course when redeeming Delta voluntary denied boarding vouchers for my own travel, I came out ahead simply by being able to redeem it at face value.

Tune in tomorrow for some reflections on the train ride, hotel stay, and my impressions of a 5-day visit to the bay area!

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.

Do this now: activate Chase Freedom Q1 2016 bonus categories

When it rains it pours. Just as Discover it, Citi Dividend, and US Bank Cash+ bonus categories are now available for registration, so are the Chase Freedom bonus categories for the first quarter of 2016.

The bonus categories for the first quarter of 2016 are purchases at "Gas Stations" and "Local Commuter Transportation."

If you live in or are able to travel to cities where 7-Eleven store locations are both coded as gas stations and sell PIN-enabled Visa gift cards, then this is a great opportunity to pick up Ultimate Rewards points on the cheap. If you don't, then you can at least earn some bonus Ultimate Rewards points on your gas purchases or by reloading your local transportation cards or buying monthly passes.

In any case, register now, before you forget.