TomCat96 wrote:To OP, I appreciate you broaching this topic. I think everyone can learn from everyone else here.
Thanks. That way my thought.
At first I wasn't really interested in discussing churning or just chasing signup bonuses. However after reading this thread I've kinda become fascinated by it over the past few days. So I'm glad people have brought this to the table.
Having just finished my M.S. program...I guess I was subconsciously looking for another new hobby.
TomCat96 wrote:My strategy is premised off the following assumptions:
1. that a dollar in saved travel expenses = a dollar in cash back. (cash back is not a privileged form of rewards)
2. that one should be able to extract approximately 2 cents on every Chase ultimate reward (UR) point, and about 2.3 cents on every starwood point.
That said, I have the following cards:
Chase Freedom, Chase Ultimate Rewards, and Starwood.
I could apply for more cards to get sign on bonuses, but I am buying a house within the year and want to avoid hard credit inquiries. Thus, the focus of my strategy will be on rewards and not the totality of rewards and bonuses.
In my opinion, if we allow ourselves the above assumptions, travel rewards are superior to cash back. (with caveats below)
The Chase Freedom offers 5x points on rotating categories. You can exchange UR points for cash directly at the rate of 1 dollar for every 100 points. This means that the 5x points has a LOWER BOUND of 5% cash back. The upper bound of the 5x points though, is however much value you can extract from your travel rewards by using your points effectively. Generally speaking, that number appears to be 2 cents per point.
What that means however is that the LOWER BOUND for chase UR points on the chase freedom, is
5% cash back rotating, 1% everything else.
The likely total rewards back however, based on the 2 cents per point is
10% cash back in travel expenses, 2% everything else.
Now moving to the Chase Sapphire, that means you get
4% cash in travel & dining, 2% everything else.
With regards to the Starwood points, you are looking at
2.3% cash back.
Thus, based on those numbers, there are few other cards which beat those cards.
AMEX 6% cash back, beats those numbers mathematically during the non-shopping quarter.
The Penfed 5% back on gas similarly beats the above numbers during the non-gas quarters--but not by much. The Chase Sapphire offers an effective 4% rewards on travel, including gas.
What this means, after I have reviewed other people's strategies here in an attempt to optimize my own, is that my strategy still appears to be superior in most cases. The AMEX 6% cash back is the most decisive improvement that can be made to my strat, and I should probably pick up that card.
However, by and large, because miles and points can be used at a rate that exceeds 1 cent per point, that means mathematically,
1 chase ultimate reward point is superior to 1% cash back.
In fact, 1 chase ultimate reward point is slightly better than 2% cash back.
And most decisively, 5 chase ultimate reward points is significantly better than 5% cash back.
This is interesting. Most of what I read values Ultimate Rewards Points at < 2 cents per point. Although that value can apparently be had if you transfer the points to other partners.
I also read that Sapphire 2% doesn't apply to gas. Can anyone confirm?
Thanks for responding back. I want to say, to those inquiring about how chase UR points convert to 2 cents a point,
this single issue is crucial as to why travel rewards are generally better than 2% cash back.
For some reason, this issue is always glossed over. But it must be emphasized!
You get 1 chase UR point per dollar spent. You can convert chase UR points directly to cash back off your statement. So if you have 100 Chase UR points, you basically get a dollar off your credit card bill. This is the worst way
to use your chase UR points. But I set this out there because it means that chase UR points cannot be worth any less than 1 cent
. If you find a worse deal, simply convert your points to cash.
Now as to how to you can get MORE than 1 cent per chase UR point, that depends on you. 2 cents is a VERY rough average based on likelihoods.
What do I mean? Well you can convert chase UR points to any number of airline miles.
You can use them for hotels as well...One person mentioned hyatt hotel points. You can use them to deduct against first class.
So why is the 2 cents thing so variable? Because it depends on a ridiculous number of personal factors.
According to some blogs, some people have gotten as high as a whopping 19 cents of value per Chase UR point when they applied the points towards first class. If coach costs $100, and if first class cost $1000, then this would be like saying the coach flight costs 5000 UR points, but the first class costs 5263 points. This is unlikely, but possible. Who know what kind of oddball deals the airlines might put in place that day.
But the point is that these oddball deals can and do occasionally happen. I get 2x points on dining, which includes starbucks. If I were to apply my points towards that particular first class upgrade deal, then I'm getting a whopping 38% cash back on my cup of coffee.
Let's say however that I dont care about first class at all though. I just want to get from point A to B. In this case, I am only capable of getting 2% cash back per point in the example I gave, because I would never in a million years spend for first class. I can only save on the money I would otherwise spend.
Same thing applies towards destinations. I might get a 6 cents a point if I want to fly out to detroit. But if I never see myself going there, I can never take advantage of the 6 cents per point valuation.
your cash back in the form of travel expenses offset comes entirely in the form of looking at destinations you are likely to travel to and comparing the costs of all the carriers.
The bottom line is that getting the most out of your chase UR points is completely dependent on your personal preference. But for me, I have faith that I can get at least 2 cents per point. the points guy cites a 2.3 cent valuation per chase UR point. But one poster claimed to get 8 cents per point. It's completely dependent on your travel needs, and we can really only speak in generalities.
I will say this though. Generally speaking some of the highest savings from UR points have come from offsetting first class upgrades. As a single male, this is useless to me when I travel alone. But when I travel with female company, I might opt for the first class upgrades. I can certainly see that happening down the line. So for purposes of computation, I retain the 2.3 cent per Chase UR point valuation. In fact, it is likely I might be able to extract more than that per point.
Under my travel habits then, chase travel rewards are worth significantly more to me than 2% cash back. In fact, with some mild vigilance, getting between 4-10% cash back in the form of travel expenses(2x for dining + coffee, 5x rotating categories) offset is fairly routine.
Nevertheless, for some people, doing the research to optimize point redemptions is taxing and a huge chore. For those people, 2% cash back across the board is probably the best option.
For me, I take odd pleasure in doing this kind of research, and therefore extracting more than 2% cash back is not a difficult matter at all