Sustainability: value, cost, and risk

When a good deal comes along, especially if it doesn't have a designated expiration date, folks often talk about whether the deal is "sustainable" or not. The general idea is that if a deal is "too good to last," then it won't.

Of course, there are lots of ways a deal can end. If it's ended retroactively, those who jumped on it quickly will find they've wasted their time, or worse. If it's ended going forward, the prospective benefits of a credit card application may be cut short, or someone can be left with a garage full of merchandise they have to return or resell at a loss.

I think there are three slightly different issues related to sustainability that guide how I think about how long a deal is likely to last: value, cost, and risk.

High-value deals aren't particularly vulnerable

For $75 per year, anyone can carry a Hilton HHonors Surpass American Express and earn 6 HHonors points per dollar spent at grocery stores. Applied to certain high-value redemptions, like a 5-night stay at a premier property like the Conrad Maldives Rangali Island, that might work out to a roughly 14% return on your grocery store spend (for a sample reservation from December 31, 2017, to January 5, 2018).

That's a great value. And since it costs American Express just a fraction of the value the cardholder receives, it's not particularly vulnerable. After all, American Express doesn't care where you redeem your Hilton points, they care what they pay for them, and they pay much less for 6 HHonors points than they earn on your grocery store swipe fees.

Likewise, the US Bank Flexperks Travel Rewards card offers "up to" 4 cents per dollar spent at grocery stores, but it's not like you get a check every month. Instead, you have to save up enough points to redeem for a flight you're planning to book. Then you have to hope the fare is close to the top of a redemption band. It could take the average customer years to save up enough points to redeem for a single flight, during which time they've paid multiple annual fees and they haven't cost US Bank a dime — in fact, they've been a profit center. That's a high-value deal to the travel hacker that has nonetheless proven extremely resilient over time.

High-cost deals are vulnerable in the medium-term

Compare that to the original "old" Blue Cash card from American Express, which offered 5% cash back at grocery stores and drug stores. Admittedly, cash back accrued with a 2-month lag time, but you could earn unlimited cash back far in excess of any swipe fees on a card, and with no annual fee. The "old" Blue Cash card was a loss center, and American Express noticed. They shut down some heavy hitters and transitioned the remaining cardholders to the product they continue to offer, which limits bonused earning to $50,000 of spend per calendar year.

Banks and other merchants have proven willing, but not particularly skillful, at shutting down opportunities like this. When you find an opportunity that moves cash directly to you from a bank or merchant, it's a good bet the opportunity will be closed within 6-18 months.

High-risk deals are extremely vulnerable

In my experience, banks don't seem to mind customers who grind away at them day in and day out. The reason isn't any secret: acquiring a single customer who runs up credit card balances they're unable to pay off covers the costs of many people happily earning 1-2% per month. A fisherman doesn't get at angry at all the fish he doesn't catch; he knows the more fish there are, the more likely he is to land a big one.

But unprofitable behavior is different from risky behavior. Spending a multiple of your credit limit each month isn't likely to get you shut down because it's unprofitable — lots of things we do are unprofitable in the short term. Spending multiple times your credit limit each month is likely to get you shut down because it's risky — if you look like you're struggling to juggle your credit limits across multiple cards, it creates the (not unreasonable!) fear that a particular bank might be the one left holding the bag.

That's not to say risky deals aren't worth pursuing. They're often very worth pursuing! But the riskier your behavior looks to the other participants in a deal, the more rapidly it's likely to be shut down — even if it's no more or less profitable than a high-value deal that's been available for years.

My Borgata Black Label trade up experience

For quite a while now My Borgata Rewards has been running a status match program called "Trade up to Black Label." New My Borgata Rewards members who show elite status with "Caesars Entertainment, MGM, Tropicana Atlantic City, or Trump Casinos" will instantly receive My Borgata Rewards Black Label status and:

• "$100 BONUS SLOT DOLLARS or Match Play
• "Complimentary Stay in a Classic Room
• "Access to VIP Lounge"

During a weekend trip to Philadelphia I popped over to Atlantic City to see how the status match works in practice. Here's my report.

Getting the status match

When I arrived at the Borgata, which is not on the Boardwalk but rather stuffed into a little corner of Atlantic City along with the Golden Nugget and Harrah's, I went straight to the My Borgata center and got in line for a new account. I mentioned the promotion (it's prominently advertised on-site as well) and showed a screenshot on my phone of my M life Platinum status (showing 0 tier credits, points, etc.). In other words, I didn't need a physical M life Platinum card in order to take advantage of the status match.

The My Borgata agent was happy to get me set up with a new Red Label account and immediately upgrade me to Black Label.

Although she kept apologizing for her "system being down," it seemed to me to work perfectly so I'm not sure what she was talking about.

Using $100 Bonus Slot Dollars

I chose the $100 Bonus Slot Dollars option, which can be redeemed for credit on any of the casino's slot machines. The $100 in match play option can be used on table games, but requires a real dollar to be matched to each bonus dollar.

The only two things you need to know about Bonus Slot Dollars are that once added to a machine, they can't be withdrawn and added back to your account, and that only your winnings can be cashed out, not the Bonus Slot Dollars you add to a machine. To simplify things, I just added $10 at a time to the machines I played, then after betting $10 withdrew however much I had won.

I ultimately won about $280 on my $100 in free Bonus Slot Dollars. If you go to Atlantic City, you should definitely try to do that.

Hitting the Amphora Lounge

After "gambling" up an appetite, my partner and I decided to head to the Amphora Lounge for dinner. Both the Amphora Lounge and the buffet cost $10 for Black Label members (and $10 for up to one guest), and the My Borgata staff member had added $20 in comp dollars to my account when I signed up. My impression is that the Amphora Lounge has a more limited food selection than the buffet, but drinks are included (and as Matt suggested on Twitter, they are happy to make drinks to carry out).

(Not) redeeming my complimentary stay in a Classic Room

Once back in Philadelphia, I activated my online My Borgata Rewards account and logged in to see how the free night benefit works. The stay has to be booked within one month for a stay no later than 3 months in the future.

Long story short, there are no complimentary rooms available in the next 3 months, or at least none available online. I assume this varies with demand and with the season, so maybe if you status match at some other time of year there would be more complimentary rooms available. But there aren't any right now, so don't count on this benefit when deciding whether to make the trip.

Is it worth it?

On the one hand, I came out pretty far ahead on my day trip to Atlantic City: after backing out the $46 in train tickets, plus cabs and tips, I made about $200 and got material for this blog post.

On the other hand, if you go to Atlantic City and status match to My Borgata Rewards Black Label, you might not win $280 on the slot machines. After paying for gas and parking, or train tickets and cab fare, plus the obligatory salt water taffy, the trip might turn out to be a pretty expensive "free" dinner with cocktails in the Amphora Lounge.

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.

Hacking business travel: the good, the bad, the ugly

Last night I was chatting with a friend who's going to be in town next month for a work conference. Even in my spare time I'm always trying to help people save money, so I quickly checked whether I could offer him a better rate than what he'd paid for the conference hotel. I offered to book the stay for about half of what he had reserved the same room for, and then he asked the fateful question: "will the hotel still give me a receipt?"

Most people travel mostly for business, and business travel is expensive

Loyalty programs have a fundamental genius in their core value proposition: direct your company's travel business to us during the week, when hotels and airlines are engaged in a cutthroat competition, and we'll give you free flights and rooms on the weekends, when we're empty.

Credit cards directed at business travelers have a similar premise: use our product, instead of our competitor's, for your reimbursed business expenses and we'll share our cut of the transaction fees with you.

The travel hacker would ideally like to complete this circle by redeeming loyalty currencies for his reimbursed business expenses, thereby monetizing his points balances precisely when those points are most valuable.

Taxes make hacking business travel difficult

The core problem with hacking business travel is taxes: taxes make business travel cheap.

The marginal federal tax rate on a self-employed person is between 14.13% and 50.93%. That means a self-employed person who pays for travel in cash already gets a huge discount off retail simply by excluding the cost from her self-employment income. A nominal 3 cent-per-point redemption therefore becomes a 2.58 cent-per-point redemption for someone in the lowest tax bracket, and a mere 1.47 cent-per-point redemption for a self-employed person in the highest federal income tax bracket. Accounting for state income taxes would make the situation correspondingly worse.

For employees, the situation is similar. Even if you were able to negotiate with your employer for higher pay in exchange for making your own travel reservations (I'm not even sure this arrangement would be legal), the increase would have to be higher than the retail value of your travel expenses to account for federal and state income taxes.

But we think outside the box around here, so here are three approaches to hacking your business travel: the right way, the wrong way, and the illegal way.

The right way: just ask

If you work at a company where travelers book their own travel and are later reimbursed, then you could simply ask your supervisor or boss whether you could redeem miles and points for your travel and be reimbursed with cash. The human resources and accounting departments would probably have to sign off on the idea, but at a small company those might be the same person, and they might agree.

They also might not, so you have to be willing to risk flat-out rejection (and potential followup questions about your sanity) to go this route.

The wrong way: spoof reservations

Another option I consider moderately unethical would be to in fact book paid reservations, print off your receipts and, if necessary, your credit card statements, then cancel the reservations and rebook the same reservations with points.

Naturally, this would only work if the travel department doesn't require, or doesn't check, that hotel folios and boarding pass ticket numbers match the supporting documentation.

There are two reasons I believe this approach to be at least moderately unethical, even though at face value the outcome is identical to the "proper" method of paying cash and being reimbursed for travel expenses. The first is that I regard any technique that requires you to obscure your activity is inherently suspect. Now, we all may hem and haw and come up with circular explanations for carrying around thousands of dollars in gift cards, but the fact is that money orders are, in fact, perfectly legal to buy and use in the United States — if pressed, no one would feel the need to deliberately conceal their use of gift cards to manufacture spend.

The second reason I'm wary of this technique is the potential consequences for the travel hacker's employer in case of audit. While the travel or bookkeeping department might not bother to compare PNR's, ticket, or reservation numbers, that's precisely the kind of information an audit team might notice, or even look for. If your behavior puts your employer in legal or business jeopardy, I regard that behavior as ethically suspect.

The (il)legal way

While misleading your employer about your travel reservations may be unethical, trying to do the same thing with the IRS is an excruciatingly bad idea. If you're deducting business travel from your Schedule C or other business tax form, you'd better have supporting receipts showing what you actually paid for your travel. Redeeming miles and points, then claiming the cash value of your trips as a deduction, is a recipe for disaster.

On the other hand, it's also true that miles and points are treated as having a cash value in other situations. For example, when you win a stash of miles and points in a sweepstakes, or when they're awarded as a bonus for signing up for a checking account, you're issued a 1099-INT or 1099-MISC for the value of the points.

If you have a large enough business, and travel enough, it may be worth consulting with a tax attorney and getting some formal advice about what values you might assign to the miles and points you redeem for your business travel.

For example, if you could convince a tax attorney to advise you that Hyatt Gold Passport points are worth 1 cent each, then a 15,000-point redemption for a $400 hotel night would yield a $150 deduction, compared to a $400 deduction. Applying the same 14.13% tax rate to both deductions yields $21.20 in tax savings for the point redemption and $56.52 for the cash rate, for a total redemption value of 2.43 cents per Hyatt Gold Passport point (an out of pocket cost of $400 minus $56.52, compared to 15,000 points minus $21.20).

Again, that's an avenue that's only worth pursuing if you have a large enough business that the savings involved comfortably cover any fees you pay to your tax attorneys.

Travel hacking without spend

While I write a lot about strategies for using manufactured spend to get pay for travel at deep discounts, I know that many of my readers find manufacturing spend to be distasteful, time-consuming, or impossible (I know because you never hesitate to tell me in the comments section).

So at a reader's suggestion, I want to share some thoughts on travel hacking without manufacturing spend, and indeed without the requirement to spend any money on credit cards at all (besides annual membership fees).

Annual benefits

There is a not-unreasonable intuition that in the absence of manufactured spend, which properly focuses on high earning rates, bonus categories, and valuable points, annual recurring benefits of credit cards would become more important in developing a travel hacking strategy.

For airlines, those benefits include things like American Express Delta Platinum and Reserve companion tickets, the Chase Southwest Airlines 3,000 (Plus) or 6,000 (Premier) annual bonus points, the Bank of America Alaska Airlines annual $99 companion ticket and, for those grandfathered in, the 10,000 bonus anniversary miles offered by the Barclaycard American Airlines Aviator card.

Many hotel co-branded credit cards offer anniversary nights: the Chase IHG credit card gives a free night worldwide, Chase's Hyatt credit card gives a Category 1-4 night annually, and US Bank's Club Carlson credit cards give 40,000 (Premier Rewards and Business Rewards) or 25,000 (Rewards) bonus Gold Points on each account anniversary.

If our intuition that recurring benefits are more valuable without manufactured spend is true, then one credit card strategy might be to carry:

• both a personal and small business version of both the Platinum and Reserve cards ($1290 in annual fees);
• a Chase Southwest Premier card ($99 annual fee);
• a Chase IHG credit card ($49 annual fee);
• a Chase Hyatt credit card ($75 annual fee);
• and one or more US Bank Club Carlson Premier Rewards and Business Rewards credit cards ($75 and $60 annual fee, respectively). Note that US Bank doesn't impose a hard cap on the number of its products you're allowed to have.

For $1,648 in annual fees per year, you could thus buy 4 domestic companion tickets on Delta (subject to fare bucket constraints), 6,000 Southwest Rapid Rewards points (worth perhaps $100), a free night at any IHG Rewards property, a free night at a Category 1-4 Hyatt property, and 80,000 Club Carlson Gold Points (good for at least one free night at any Club Carlson property).

I'm deliberately leaving out the Citi Hilton Reserve free weekend night benefit and the Club Carlson free domestic night benefit, since they each require $10,000 in annual spend.

Without price compression, free nights are an expensive trap

In a world with plentiful manufactured spend, travelers experience a phenomenon I've dubbed "price compression:" nights and flights that have large differences in retail price have much smaller or nonexistent out-of-pocket differences in cost to the travel hacker.

For example, a free Category 4 Hyatt night from the Hyatt credit card can be combined with Hyatt Gold Passport points transferred from a Chase Ink Plus, where you've manufactured cheap Ultimate Rewards points.

Without manufactured spend, and the price compression it produces, you'll be paying the retail price of your stays out of pocket, less any rebates earned by booking through shopping portals and online travel agencies. Unless you typically spend only a single night in each city you visit, travel solo, or have a very understanding travel companion, this can become very expensive very quickly.

To see why, take a stylized example of a city with a Category 4 Hyatt that costs $125 per night and a nearby Holiday Inn that costs $100 per night. On a four-night stay, you'll pay $375 out of pocket for the Hyatt, and $400 out of pocket for the Holiday Inn: a savings of $25.

So far, so good. But remember you paid a $75 annual fee for your Hyatt credit card! If you only compared the value of your night to your annual fee, you'd mistakenly believe you saved $50. By taking into account how the "free" night benefit affects your behavior, you'll realize the truth: the Hyatt credit card in fact cost you $50.

Of course if you are a solo traveler or have an understanding travel companion, moving hotels in the middle of your stay may not be a big deal. If you have a lot of one-night stays, you may also save real money. But that's an individual assessment you should take seriously before paying hundreds, let alone thousands, of dollars in annual fees.

You'll find a similar principle applies to the airline credit cards: if Delta flights are consistently more expensive, or less convenient, than competitor flights you may find yourself over-paying just to take advantage of your companion ticket. Southwest Rapid Rewards points, likewise, are only valuable if you're able to earn enough of them to redeem them for the flights you want.

None of which is to say these are bad credit cards or bad benefits. They just need to approached critically if you're to have any hope of using them to save money on travel.

Everyday spend

My standard response when asked which credit card people should use for their actual purchases is that actual purchases should represent a rounding error in your miles and points balances. Without manufactured spend, of course, that rounding error may turn into the bulk of your balances!

In my view, there are only a few credit cards that have any measurable advantage over paying for your purchases with cash.

• Discover it Miles. If you can sign up for a Discover it Miles card that doubles your cash back after your first year, you'll earn 3% cash back on all purchases and pay no annual fee or foreign transaction fees. You can boost your earning even more by redeeming your cash back for certain gift cards — you can currently redeem $90 in cash back for $100 in Hyatt gift cards, turning a Discover it Miles card into a 3.33% cash back card. Canceling and applying for a new card each year may let you continue on an ongoing basis.
• BankAmericard Travel Rewards. If you have $100,000 on deposit with Bank of America, Merrill Lynch, or MerrillEdge, you'll earn 2.625% cash back on all purchases, and pay no annual fee or foreign transaction fee.
• American Express Amex EveryDay Preferred. If you make 30 purchases per month, this card earns 1.5 Membership Rewards points per dollar spent everywhere, 3 points at gas stations and 4.5 points at grocery stores. Because of its $95 annual fee, you should only consider this card if you spend a lot of money each year. If you do, you might find the ability to transfer points to Delta, Air Canada, British Airways, or American Express's other partners more valuable than cash back.

Travel hacks that don't require spend

Of course, credit cards are just one tiny corner of the travel hacking universe. It's just a corner that's become unusually prominent because there's so much money to be made selling credit cards to the unwitting.

So here's a brief list of other travel hacking techniques, no credit card required:

• Mistake fares and attack fares. Among the original travel hacks are simply waiting for an airline to slip up and forget to add a zero to an airfare, or to "attack" a rival's hub by cutting fares far below normal. By following Twitter accounts like @TheFlightDeal and @EscapeATX, and bookmarking sites like Flyertalk's mileage run forum, you can handily see whenever those hard workers find a new error fare or attack fare. Julian the Devil's Advocate wrote up a terrific guide to getting text alerts for a particular city or airline that interests you.
• Stacking portal and online travel agency rewards. In the bleak world without manufactured spend, you've got to make every dollar count. By clicking through shopping portals to online travel agencies before making hotel reservations, you can earn portal rewards plus the rewards offered by whichever travel agency you select.
• Best rate guarantees. I've written before that I find best rate guarantees to typically be a waste of time, and I don't think it makes a whole lot of sense to make booking decisions around best rate guarantees. But once you've identified a hotel and rate, it's common sense to check if there's a lower rate elsewhere that's eligible for a best rate guarantee claim.
• Hidden city ticketing. It's not for everyone, and it won't work for every itinerary, but it's possible to save a lot of money searching for flights using Skiplagged, a service that takes care of the hard work of finding cheaper "hidden city" tickets. Note that you usually will not be able to check bags when flying domestically on such tickets.
• Corporate rates and other discounts. There are a number of lists circulating of corporate rate codes, which can bring down the cost of chain hotel stays significantly. Likewise, if you find out there's a convention, conference, or athletic event in a city being held during your visit, you may be able to piggyback on their lower negotiated rates.
• Aggressively book and rebook. Autoslash makes it easy to monitor rental car rates so you can rebook your car if and when the price goes down. By booking cancellable hotel reservations early on, periodically checking for price changes lets you lock in any price declines while being protected from any price increases.

None of those techniques will save you as much as manufacturing spend will, which is why I write a lot about the benefits of manufacturing spend. But the universe of travel hacking, like the universe itself, is vast and growing, so it pays to keep an open mind and to keep exploring!

The travel hacking index card

I popped by the library this week to pick up "The Index Card," the famously slender volume of personal finance advice by personal finance columnist Helaine Olen (author of "Pound Foolish," a previous entry in my pretty good book review series) and University of Chicago professor Harold Pollack.

It's a pretty good book about personal finance, although not spectacular. The authors' "model portfolio" is invested in small-cap and international index funds for reasons that are not made clear, presumably in order to keep the book as simple as possible. But people who don't understand why they're doing the right thing are just as vulnerable to persuasion from hucksters are people who are doing the wrong thing. So while their model portfolio isn't terrible, it also doesn't have a straightforward evidence-based argument presented for it.

Reading "The Index Card" got me to thinking about what would go on a travel hacking index card. There's plenty of information about individual rewards programs and "sweet spots," which makes it easy to get bogged down in specifics — and difficult to tell the difference between real values and credit card sales pitches.

So what kinds of simple rules can keep a travel hacker from making expensive mistakes while developing a travel hacking practice that helps them achieve their financial and travel goals?

Here's what I came up with, with a few words about each.

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1. Start slow

When you're just getting started, there's absolutely no reason to sign up for more than a single new credit card as you get a feel for how credit card rewards programs and travel loyalty programs really work.

This rule also applies to experienced travel hackers testing out new techniques. I'm happy to take a loss by putting $5 on a prepaid debit card with a $5 activation fee, so I can find out whether it's PIN-enabled before I start filling up shopping carts with them.

2. Keep good records, but don't get hung up on a single system

When you're dealing with thousands of dollars in financial products or merchandise, you obviously want to keep good records. But the system you develop when you are just getting started might not serve you well as you scale up or down. A reseller handling $50,000 in merchandise per month has different record-keeping needs than one who just jumps on the biggest deals. When a system starts to get clunky, take a step back and think about how you can improve or simplify it.

Likewise, an envelop in the glove compartment may work great when you're handling a few thousand dollars in money orders, but may start to become unwieldy when you're handling a hundred thousand dollars.

3. Build relationships

The overwhelming majority of travel hackers love this game and love helping people think about the myriad problems we encounter on a daily basis. The rest are ornery bastards, but you'll learn to identify them pretty quickly.

I'm always reminded of the couple that spent a million Starpoints on a paid American Airlines flight using SPG Flights, instead of transferring a small fraction of that number to AAdvantage and booking award tickets. If they'd known to ask anyone in the travel hacking community, they'd have half a million Starpoints left in their account! Don't be them.

4. Every deal dies eventually

I like to joke on Twitter about bloggers killing deals, but the simple fact is, most bloggers of any merit are fairly circumspect about deals they believe are fragile, and most credit card affiliate bloggers either don't know or don't care about real travel hacking deals, since there's no money in it for them.

Bloggers don't kill deals; time kills deals. So when your favorite deal dies, take a moment to mourn, but don't lash out at the blogger you're certain is responsible for its passing.

5. Treat employees calmly and with respect

Let's stipulate that you're always right. You know a store's point-of-sale system better than any of the cashiers there. You know a chain's purchase limits by heart. You have a Christmas card from the CEO clearing you to purchase an unlimited number of cash equivalents using the payment method of your choice.

If you cannot explain yourself briefly, calmly and with respect for the employee you're dealing with, you will fail, you will be remembered, and you will draw attention to techniques that will become harder to implement. Service employees don't work for you: they work for their supervisors, managers and, ultimately, for faceless corporations that they know are completely indifferent to their well-being.

Customer service employees have more to lose than you do.

6. Spend cash last

Once you've dug deep into the travel hacking weeds, you're going to have some unavoidable expenses (or investments, if you prefer): annual fees on your most valuable credit cards, activation fees and liquidation costs, losses on reselling mistakes, postage on 94 envelopes, and so on.

The last thing you want to do is unnecessarily add to those expenses by paying cash for your travel while you hold out for some "ideal" points redemption! You've already paid for the points — now use them. Save your cash for expenses that can only be paid for with cash.

7. Be realistic about your travel goals

In other words, earn the points you redeem and redeem the points you earn. I'm not saying you should think small: if you want to go to the Maldives, travel hacking makes that possible, if not exactly easy. But don't build a travel hacking strategy around something amorphous like "this blogger made the Maldives sound nice."

If you have an ambitious goal, then pick a date (or range of dates, since award availability can be tough), pick a strategy (Hilton or Hyatt?), earn the points you need, then stop. Enjoy your vacation.

If you have less-ambitious goals, then focus on earning the miles and points you find yourself redeeming most often. Consider using fixed-value points currencies like US Bank Flexpoints. Earn points you're likely to be able to use across a range of destinations, like Hilton HHonors.

8. Don't structure transactions

It's against the law, and if you do it the government will ruin your life.

Conclusion

The travel hacking index card isn't a travel hacking strategy: it's a strategy for developing a practice that will achieve your travel and financial goals with mistakes as few and cheap as possible along the way.

So what did I miss — what would my readers add to a travel hacking index card?

About Hyatt suite upgrade awards

Hyatt Diamond enthusiasts know that there are three kinds of room reservations at Hyatt properties: paid reservations, Free Nights, and Points + Cash reservations.

Points + Cash reservations are popular for two key reasons: they earn elite-qualifying stay credits and, like paid reservations, they're eligible for Diamond suite upgrade awards.

During my stay at the Park Hyatt Vienna, I got the best of both worlds.

Hyatt is thrilled to combine reservations into a single stay

There are few trivialities more annoying than having a room key deactivated in the middle of a hotel stay because you made two or more reservations as award availability or points became available.

As Joe Cheung pointed out during my most recent appearance on the Saverocity Observation Deck podcast, Hyatt is able to combine reservations so that multiple reservations are treated as a single stay, which is a terrific convenience given how some of their properties throttle Points + Cash award availability, potentially making you piece together a stay gradually over many months.

How I applied a suite upgrade award to two award nights

Soon after being matched to Hyatt Diamond status, I booked three Points + Cash nights at the Park Hyatt Vienna, and applied one of my four Diamond suite upgrade awards.

Then, since I don't chase signup bonuses and was well below the supposed "5/24 rule" for new Chase credit card approvals, I applied for a Chase Hyatt credit card and was approved, which quickly earned me two free nights at any Hyatt in the world, as long as award space was available.

I bided my time (i.e. set a Hotel Hustle award alert) and finally award availability opened up for my second and third nights in Vienna. I placed a quick call to Hyatt and had my Points + Cash award nights replaced with free credit card nights.

That made me wonder: would I have to change rooms after my first night, since that was the only night I had the right to apply a suite upgrade award to?

Of course not.

Can you apply suite upgrade awards to award nights? Maybe!

If you can replicate my experience, the advantages are obvious: you can earn a stay credit based on your first, Points + Cash night, but save cash by redeeming only points for all your subsequent nights.

So to review, here was my experience applying a suite upgrade award to my Park Hyatt Vienna stay:

• book a Points + Cash stay;
• apply a suite upgrade award to the entire stay;
• replace all but the first night with award nights;
• enjoy my suite for the entire stay.

Since my first night was also my 5th paid night during the current Stay More Play More promotion, I even got to take home 5,000 bonus Hyatt Gold Passport points for my trouble.

Starting from scratch: airline tickets

Travel hacking is an iterative game: the options you have available today are restricted by the decisions you made in the past. That's one reason I avoid giving advice whenever possible: your situation is different from mine, not just depending on the merchants you have available geographically, but also depending on which banks you have relationships with, which products you've already had or lost, and the amount of time you have available to dedicate to the game.

Having said that, I do sometimes think about how I would design a travel hacking strategy from scratch: with a blank slate, what approach would I take to the loyalty ecosystem to get the most value for my travel hacking dollar?

Today's post is about how I would approach booking airline tickets if I were starting from scratch. Tomorrow's will be about hotel stays.

Revenue versus award

Starting from scratch, there's a basic decision you have to make about how to pay for the flights you're responsible for securing each year: will you book revenue tickets or award tickets? Once you're deeply involved in the game you may have large balances across a range of programs you can deploy for their optimal uses. But when you're just getting started, it's much easier to focus on this stark choice.

When booking revenue tickets, you'll usually get a fixed return on your travel hacking dollar, or one that falls in a relatively narrow band: US Bank Flexpoints are worth 1.33 to 2 cents each, Chase Ultimate Rewards points in a premium (Ink Plus or Sapphire Preferred) account are worth a fixed 1.25 cents each, and Citi ThankYou points are worth between 1.25 cents and 1.6 cents depending on whether you have a Premier or Prestige card, and the airline marketing the flight.

When booking award tickets, there's no such band of values: points can range in value from a fraction of a penny up to 10 cents or so depending both on the cash price of the flight and the number of miles required to book it.

Note that neither of these options is any more or less "free" than the other. Since you should be manufacturing spend furiously, you're paying acquisition and liquidation fees for whichever currency you happen to choose. The only question is which strategy will bring the cost of your travel down the most.

Revenue tickets are cheap

On the revenue side, there are lots of good options depending on your situation:

• Citi ThankYou Premier. A fixed 3.75 cents in airfare per dollar spent at gas stations. At $5.75 in "all-in" cost for $505 in spend, a 69.6% discount off retail.
• US Bank Flexperks Travel Rewards. Up to 4 cents in airfare per dollar spent at grocery stores or gas stations (wherever you spend more each month). At $6.30 in "all-in" cost for $506 in spend, an "up to" 68.9% discount off retail.
• BankAmericard Travel Rewards. For those with $100,000 on deposit with Bank of America, Merrill Lynch, and MerrillEdge, a fixed 2.625 cents in airfare per dollar spent everywhere. At $4.30 in "all-in" cost for $504 in spend, a 67.5% discount off retail.
• Chase Ink Plus. For small business owners, a fixed 6.25 cents in airfare per dollar spent at office supply stores (and 2.5 cents per dollar spent at gas stations). At $9.18 in "all-in" cost for $309 in office supply spend, a 52.5% discount off retail.

When I say "depending on your situation," I mean to draw attention to the fact that you when starting from scratch, you shouldn't pursue all four options! If you don't have access to gas station manufactured spend, the Citi ThankYou Premier won't work for you. If you don't have access to grocery store manufactured spend, the Flexperks Travel Rewards card isn't for you. If you don't have access to $100,000, the BankAmericard Travel Rewards card won't give you the same value it will someone who does. And if you don't own a small business, Chase probably won't give you an Ink Plus.

Award tickets are cheap and (can be) hedged

On the award side, the picture looks radically different. Three of the four major domestic airlines offer some form of "last-seat" availability on their own flights: Delta, American, and Alaska will sell almost any seat on almost any date for some number of miles, while United reserves last-seat "standard" availability to their co-branded Chase credit cardholders. Thus there are three pots airline rewards currencies fall into:

• Delta. When starting from scratch, there are two main ways into the Delta ecosystem: their own co-branded credit cards, and American Express Membership Rewards co-branded credit cards. Unfortunately, neither of them is cheap. The American Express Delta Platinum and Reserve credit cards offer 1.4 (Platinum) and 1.5 (Reserve) SkyMiles per dollar spent everywhere when you spend exactly $25,000 (Platinum) and $30,000 (Reserve) and $50,000 (Platinum) and $60,000 (Reserve) each calendar year. But the Delta Platinum card costs $195 per year and the Reserve $450 per year! Meanwhile, the American Express Premier Rewards Gold costs $175 per year and earns 2 Membership Rewards points per dollar spent at gas stations and supermarkets. Those points can then be transferred to Delta on a 1-to-1 basis. Moreover, Membership Rewards points let you hedge your downside risk: if a particular Delta award redemption gives you less than 1 cent per Membership Rewards point, you can book it as a revenue ticket. If it gives you more than 1 cent per point, you can book it as an award ticket.
• Alaska and American. Advanced travel hackers muck about with applying for Alaska and American co-branded credit cards over and over again at various intervals. But when starting from scratch, there's a simple way into both ecosystems at the same time: with the Starwood Preferred Guest American Express. When transferred to either Alaska or American, the card earns 1.25 miles per dollar spent everywhere, which is higher than the amount you can earn directly with either airline's co-branded credit card. Like Membership Rewards points, Starwood Preferred Guest also offers a hedged downside risk, since you can redeem their points for between 1 and 1.43 cents per point for revenue tickets using "SPG Flights."
• United. If you're able to make United your main airline, then you'll never do better than with a Chase Ink Plus small business credit card, because of its bonused earning rate at office supply stores and 1-to-1 transfer ratio to United MileagePlus. But if you can't get a small business credit card, then you have some hard decisions to make. You could get a Chase Freedom Unlimited, which earns 1.5 Ultimate Rewards points everywhere, and a Chase Sapphire Preferred, which enables the transfer of Ultimate Rewards points to United, but that combination comes with a $95 annual fee. Alternatively, a Chase United MileagePlus Club card earns 1.5 United miles on all purchases but has a $450 annual fee. That's the kind of up-front expense that's not precisely crazy, but needs to be well-justified before taking it on.

Your situation should drive your decision between revenue and award tickets

As I mentioned, I try not to give advice.

Your situation is different from mine: your award availability, typical revenue flight prices, and airline service have nothing to do with mine.

But in my experience, for many people, much of the time, a focus on revenue tickets will generate bigger savings than a focus on award tickets, and if I were starting from scratch, that's where I'd start.

Fortunately, you don't need to take my word for it: all the numbers are above. Look at your own travel needs and it should quickly become obvious whether revenue flights or award flights will generate more value for your travel hacking dollar.

Tomorrow, I'll take the same approach to hotels: starting from scratch, are award nights really cheaper than just paying for your hotel stays?

The concept of loyalty and the Wyndham Rewards revaluation

I had an interesting exchange on Twitter the other day with Seth, the Wandering Aramean, who was arguing in response to Trevor at Tagging Miles that loyalty currencies are on a perpetual downward valuation spiral. While they devalue at different rates and different times, Seth claimed, they never increase in value.

My response was, "What about Wyndham?" After all, the May 11, 2015, revaluation of the Wyndham Rewards program made the 4 cheapest award categories (5,500 to 14,000 Wyndham Rewards points) more expensive, while the 5 most expensive award categories (16,000 to 50,000 Wyndham Rewards points) became less expensive when all properties were realigned at 15,000 Wyndham Rewards points per night.

Meanwhile, the Barclaycard Wyndham Rewards credit cards continue to offer 2 Wyndham Rewards points per dollar spent everywhere.

Reconciling these two positions is easy, as long as you can tell the difference between loyalty programs and loyalty.

If you were a loyal Wyndham guest, you probably got screwed

I admit that I've been travel hacking so long that it's a bit tough to remember what "loyalty" is supposed to signify.

But if "loyalty" means anything, it's surely the willingness to pay more to direct your stays or flights to a particular travel provider, not for any short-term interest but because over multiple nights, flights, stays, and years, your business will be rewarded in a way it wouldn't if you stayed at the cheapest possible hotel and booked the cheapest possible flight each time you traveled.

Since most travelers, most of the time, are traveling domestically, and only rarely staying in the most expensive categories of property, the change of cost of Wyndham Rewards nights to a flat 15,000 points was, as Seth asserted, a radical devaluation for "loyal" travelers, which is to say for travelers who directed their paid stays to Wyndham in order to secure cheap future award nights.

If you're a travel hacker, the Wyndham Rewards revaluation was a godsend

Compared to putting the same spend on a 2% or 2.105% cash back credit card, the Barclaycard Wyndham Rewards credit cards allow you to purchase a night at any Wyndham Rewards property in the world for between $150 and $158. As it is for a "loyal" Wyndham Rewards customer, at many properties that's an increase over the cost prior to the May 11, 2015, revaluation.

But the key takeaway for the travel hacker is that other, cheaper options remain for the nights you'd otherwise have redeemed Wyndham Rewards points for. There's a difficulty in analyzing the situation precisely, but fortunately Wyndham still makes available the list of properties which went up and went down in category in 2013, which at least gives a sense of what properties were in which categories prior to the 2015 revaluation.

With all that in mind, here are some United States properties which, as of 2013, cost less than 15,000 Wyndham Rewards points per night. These are properties that became more expensive after the 2015 revaluation. Next to each property I also suggest the cheapest nearby competing property and its imputed redemption value.

I don't claim this is exhaustive research — anybody can do the same research and find more extreme examples at their leisure using the links provided above.

• Baymont Inn and Suites Florence/Muscle Shoals. Was 14,000 Wyndham Rewards points ($147 IRV). Nearby: Hampton Inn Florence-Midtown. 20,000 Hilton HHonors points ($70 IRV).
• Days Inn Tempe ASU. Was 10,000 Wyndham Rewards points ($105 IRV). Nearby: Embassy Suites Phoenix - Tempe. 30,000 - 40,000 HHonors points ($106 - $141 IRV).
• Days Hotel Oakland Airport-Coliseum. Was 14,000 Wyndham Rewards points ($147 IRV). Nearby: Hilton Oakland Airport. 30,000 HHonors points ($106 IRV).
• Ramada Denver Midtown. Was 10,000 Wyndham Rewards points ($105 IRV). Nearby: Hampton Inn & Suites Denver-Speer Boulevard. 30,000 - 40,000 HHonors points ($106-$141 IRV).
• Knights Inn Lafayette Midwest. Was 5,500 Wyndham Rewards points ($58 IRV). Nearby: 
  Homewood Suites by Hilton Lafayette. 30,000 - 40,000 HHonors points ($106-$141 IRV).
• Travelodge - Columbus. Was 5,500 Wyndham Rewards points ($58 IRV). Nearby: 
  Hyatt Place Columbus/OSU. 8,000 Hyatt Gold Passport points ($80 IRV). Also
  DoubleTree Suites by Hilton Hotel Columbus Downtown. 20,000 - 30,000 Hilton HHonors points ($70 - $106 IRV)

Conclusion

The point of this post is not that the Wyndham Rewards revaluation was "a good thing." Whether or not a particular individual benefited or suffered from it depends on that person's past and future pattern of paid and award stays.

My point is that for a travel hacker the increases in prices at Tier 1-4 Wyndham Rewards properties are easily offset by balances in competing programs with more reasonably priced properties in the same markets.

Meanwhile, the decrease in prices for properties in Wyndham Rewards tiers 5 to 9 (16,000 to 50,000 Wyndham Rewards points) make their top-tier properties radically more affordable in the same markets as their competitors continue to charge high prices, whether you choose to pay in cash or in points.

Am I mainly a domestic traveler? Does it matter?

The idea for this post came to me last weekend when a reader I met in DC suggested that I'm "mainly a domestic traveler," in contrast to his own travel style as an international business class traveler.

This exchange happened to resonate with me since I remembered a post Matt at Saverocity wrote last year which claimed I tend "to fly on these domestic tickets a lot, leveraging super sweet spots with the Flexperks and other programs," while he "see[s] little of [me] flying internationally."

I was a bit surprised by both claims, since I think of myself as doing a lot of international travel.

So, am I mainly a domestic traveler? What does or would that mean?

My 2015 travel was mainly domestic

In 2015, I spent a total of 81 days wholly or partially traveling, only 11 days of which were spent traveling internationally, on my Italian caper.

That produces a fairly low 14% of travel days spent on international travel, which suggests I may, indeed, be primarily a domestic traveler.

My 2016 travel (so far) is mostly international

The travel I've booked so far in 2016 is much more evenly split: of the 35 days I've either traveled or have booked for 2016, 18 of them are international, on my upcoming summer vacation in Europe, while 17 are domestic, including my January trip to New York and March trip to San Francisco and my upcoming trip to Lexington, Kentucky.

That being said, I'm sure my travel in the second half of 2016 will bring the ratio of domestic versus international travel days up substantially.

Folks should do whichever kind of travel interests them most

I have a buddy in the venture capital space who once explained to me that when a venture capitalist invests, he or she doesn't buy a portion of the existing company, they buy a portion of the company as it will exist post-investment.

In other words, the investor isn't buying a share of the scrappy garage-based company, they're buying a share of the company once it moves into its swanky new headquarters in Brooklyn.

People sometimes seem to apply a similar principle to their own travel once they begin travel hacking. They gradually (or suddenly) become less interested in taking the trips they used to take at a fraction of the cost, and become increasingly excited about booking travel that never would have occurred to them before they learned just how cheap travel could become.

Know and remember who you are

There is a vast travel hacking blogosphere intent on selling you on the most comfortable new airline equipment, the longest new routes, and the best new inflight champagne.

If you were jealous and anxious about the airline equipment and inflight service you were missing out on before you started travel hacking, then by all means, use travel hacking as a tool for satisfying your envy, if you think it will help.

But if you were fine traveling in economy before you discovered travel hacking, it's worth thinking long and hard about whether you'd rather take the same trips and pay a fraction of the price, while saving the difference, or pay the same amount and fly in a cabin of service that meant nothing to you before bloggers and forums starting explaining how you haven't lived until you've spent 10 hours in a slightly more comfortable box.

Conclusion

I'm well aware that my readers are an eclectic bunch and I'm not in the position to tell anybody what cabin anybody should be booking their domestic or international travel in, or which currency they should be booking it with.

What I'm interested in is keeping my readers grounded in the real world they actually inhabit, in the face of a blogosphere intent on pumping awards balances as high as possible with credit card applications that don't make a lick of sense in the context of the trips they're actually interested in taking.