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A Different Way To Value Credit Cards & Points
26 Jan. 2018
A Different Way To Value Credit Cards & Points

Opinions Vary

Point valuations differ depending on who you ask and what blog you read.  The valuation variance doesn’t seem all that different for most of the big points blogs, and follow pretty consistent and similar formulas.  I glance at the various estimates, but I have my own way of looking at point valuations.  Most of the time when I value a points currency or rewards credit card, I want to know how easily it is to manufacture points (MS), and how well those points can be used for quality redemptions.  Often the first question that I’ll ask in regard to a new rewards card is what is the points rate for general spend?  A few examples of what I’m talking about are listed below.

Club Carlson

Many points enthusiasts have abandoned the Club Carlson program.  Some of the perks that made it very attractive, like free nights from award stays, ended in 2015.  I understand the distaste for the program, but I travel to Europe often and Radisson Blu has nice hotels that are centrally located in many cities there, so it’s a card that’s still in my wallet.  If you do have the U.S. Bank Club Carlson Visa, you earn 10x for all stays with the hotel, but more importantly, 5x for all of your other spend.

Let’s say you visit a place where you can buy $10,000 worth of debit (gift) cards.  To keep it simple, let’s say that each card $500 card carries a $3.95 fee.  For $10k worth of cards your fees will be $79.  Tack on another $7 for unloading costs and you’re up to $86.  Gas and your time costs are excluded in this example, but those can be factored in if you have values that you’re comfortable with.  For $10k worth of cards you’re earning 50,000 Club Carlson points.  Most of the “nice” Club Carlson properties around the world that I’ve stayed at recently are listed at 50,000 points a night.  I’d also estimate that the average price of a nice Club Carlson property is around $175 a night, possibly more.  If you’re “paying” $86 for a night via MS for a nice Club Carlson hotel, then you’re basically getting it at half price or better.

Certainly there are ways around the $86 cost, but in general, using the full cost of MS to evaluate what can be done is the path that I use to evaluate programs.  You also get a free night for spending $10,000 on the card so that can be achieved in a single 10k run as well.  The card doesn’t provide amazing MS value, but there is some value there, especially if you can control and minimize your MS costs.  

Hyatt

Take the Chase Hyatt credit card as another example.  The annual free night benefit with the card is nice, even if it’s at a category 1-4 property.  That free night benefit alone offers more than enough value to offset the $75 annual fee.  The issue with the card is it only offers 1x for all spend outside of stays with Hyatt.  I’m new to the Hyatt program but very nice properties that I have stayed at recently were 25,000 a night.  So at 1x for general spend, it would take $25k in general spend, or 2.5 trips worth of $10,000 bundles of debits cards, to manufacture a night at Hyatt using the card.  That’s also $215 worth of costs just to obtain for a free night.  MSing the card for free award stays offers little (and perhaps negative) value, but the Hyatt card may have value for those who frequent the company’s hotels and who actually pay for stays.

Better plays for Hyatt are the Chase Freedom Unlimited (CFU) and the Chase Ink Cash (and Plus) cards.  The CFU earns 1.5x on all spend, thus cutting your overall costs and card runs in half if used for manufactured spend.  But the best Hyatt play is buying their gift cards at office supply stores with the Ink Cash/Plus cards, earning 5x Ultimate Rewards in the process.  It’s not MS, but it’s a great way to rack up Ultimate Rewards which can then be transferred to Hyatt at 1:1.  You’re essentially earning Hyatt points at 5x.

Membership Rewards

I’ve come to appreciate Membership Rewards (MR) more as through the past few years in the points hobby.  The Blue Business Plus card earns 2x for the first $50,000.  Even better the card has no annual fee.  So MSing $50k using the same scenario as before would be 5 x $86 or $430 in costs.  That $430 just produced 100,000 membership rewards, which could get you first class from New York and Frankfurt one-way for 76,000 points on Singapore Airlines, and still have 24,000 MRs left over.  Basically with 100k MRs you can redeem for many business and first class awards to South America, Europe, the Middle East, Africa, with 100k MR’s with a cash ticket values in the $5,000 to $10,000 range.

membership-rewards-singapore-airlines-first

First Class Singapore Suites from New York to Frankfurt, Germany for $6,500 for $326.80 in MS costs

There are taxes and fees (in the hundreds of dollars) that will generally accompany these awards, but your all in costs (including MS) should be well under $1,000.  Even with taxes and fees added to this award ticket, paying $650-700 for a cash ticket to Europe would be a good deal much less flying first class.  You could also fly first class on Lufthansa one way using 80,000 Singapore miles.  That flight value is also in the $5,000 to $8,000 range one way.

Other Good Rewards Cards for General Spend

Discover It                               3x (for year 1)
Barclays Arrival Plus               2x
Barclays Choice Privileges     2x
Capital One Venture               2x
Amex Platinum Business      1.5x
Amex Everyday Preferred    1.5x (after meeting 30 transactions in a month)
Starwood Preferred Guest   1.25x (when transferring points to airlines)

Summary

As a general rule, whenever a rewards card offers more than 1x for spend on the card, it’s generally MS friendly.  An exception to that might be many of the Hilton cards, as the high end Hilton property awards are expensive.  If you’re able to control your MS costs, then there really isn’t a card or point program that is out of reach, some will just accrue at much slower rates than others.

Some people I know MS to gain points en masse and don’t really care what their out of pocket costs are.  They figure that they will get more value down the road when they redeem, so they look the other way when the MS expense pile up.  But at their level, and at beginner/lower MS levels, most people are paying for points.  The trick is to make sure that your costs are well below the cost of the travel redemption otherwise it doesn’t make much sense putting your time and energy into MS.

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