2.5% Cash Back or Points? Spending Strategy

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
Posts: 122
Joined: Mon Aug 05, 2013 10:23 pm

2.5% Cash Back or Points? Spending Strategy

Post by Sophia1884 » Wed May 16, 2018 4:45 pm

Goal: I’m trying to find a way to “earn” free/cheap economy flights.

I’m having problems applying the info/math I’m finding to our situation. Can some of you kind folks help please?

Situation: We usually don’t travel much, we may start taking short trips around the West coast/to see family. We usually try to fly economy (3 people), stay at AirBnBs.

Monthly Expenses: $3/4,000

In our wallet:
*USAA (2.5 % cash back on everything)
USAA 2.5% is easy: monthly spend of $4,000*2.5%= $100 “free” money/mth
*AMX Platinum (fee is waived due to military)

AMX Plat: we can buy all of our tickets on this card=$500 tx* 5 pts= 2500 pts (50,000 points=$500 ticket: This means that for a $500 ticket, I’ll need to buy 20 tickets (50,000/2500)…this won’t happen.) There doesn’t seem to be a reason to use AMX Plat on purchases because $1=1 point, unless it’s travel and to get 50,000 points to get one ticket doesn’t seem very productive. It seems that I might as well just simplify and get the cash back.

Thoughts? Am I understanding this correctly?

I am also looking at getting the Chase Sapphire Preferred or Reserve because they include dinning at 2x/3x points AND 50,000 one time points for signing up. We spend about $450 monthly on eating out.

Preferred: $95 fee, waived first year, 2x on travel and dinning
Reserve: $450 fee, offset the first year with the 50,000 but not after. 3x on travel and dinning.

There, that’s all the info. Any suggestions on a spending strategy?

1. How can I tell if cash back or points are better for us?
2. How would you alternate/use the cards for most value?
3. I don’t understand how to tell if 2.5% of $1 (USAA) or getting point with AMX Plat/Chase is better. What is the math behind this?

As always, thank you!!

Posts: 2787
Joined: Wed Jun 18, 2014 7:12 pm

Re: 2.5% Cash Back or Points? Spending Strategy

Post by Jags4186 » Wed May 16, 2018 5:01 pm

1) Do the math just as you did above. Sign up bonuses will get you way further than just regular ol’ spend.

2) Figure out how many cards you are willing to juggle, use the card with the best category rewards for spend.

3) For domestic economy tickets, cashback is the way to go. You should get a stable of 5% cards to go along with your USAA Limitless. Chase Freedom, Chase INK Cash, Discover IT, Citi Dividend, (you can’t sign up for this directly, you need to convert another Citi card to this). This way you can push your average up well north of 3%. If you average 3%, to get a $300 flight you’d need to spend $10,000. Plus you get the ultimate benefit—flexibility.

Posts: 389
Joined: Tue Jan 29, 2013 3:40 pm

Re: 2.5% Cash Back or Points? Spending Strategy

Post by Chicago60 » Wed May 16, 2018 6:11 pm

If you use the Amex Plat, you are basically getting 5% back, no? 5 points per dollar spent when purchasing airline tickets directly through airline or Amex website.....assuming you calculate an AmEx point is 1 cent, which I think most travel blogs say is the very low end of calculations.

Posts: 745
Joined: Fri Apr 08, 2016 12:41 pm

Re: 2.5% Cash Back or Points? Spending Strategy

Post by GAAP » Wed May 16, 2018 6:19 pm

In general, I've found little true value in points. A point system that gives you one free flight for 30,000 points is basically valuing that flight at around $300. If you're staying primarily on the west coast, that may be more than you need to spend for the flight.

One possible exception would be if you used the Alaska Airlines card, and had good choices from Alaska on the routes you fly -- especially if you're Seattle based. It happens to work for my brother -- wouldn't do much for me. Southwest also has a card that could make sense in the west.

There's a fairly popular ongoing post about this topic -- may be worth reading.

Posts: 25
Joined: Fri Mar 16, 2018 9:44 pm

Re: 2.5% Cash Back or Points? Spending Strategy

Post by PressIt » Wed May 16, 2018 8:02 pm

I think it will depend on what you anticipate using your points for. For example, I use the chase sapphire reserve because I like to transfer the points to my Hyatt rewards (they transfer at a 1:1 ratio) 5,000 points, which equates to $50 cash back, gets me a free night at a category 1 property, weekends included. I view it as getting the hotel for $50, which is generally way less than what I would pay. Hotels paid with points usually don’t have resort fees either. So not all points are created equal. You really need to research how you can redeem your points based on your use.

That being said, 2.5% on everything is a great card. There’s a reason they don’t offer it anymore. I’ve done the cash back chasing with the rotating 5% category thing. Life is a lot easier if you use one card for everything. Personally it wasn’t worth the constant card shuffling and thick wallet to me. I would stick with your Usaa card and be glad you signed up when it was available.

For those that point chase using a bundle of cards, I don’t blame you. You’re definitely leaving money on the table by not taking advantage of 5% categories. Just made our finances simpler using one card.

Posts: 51
Joined: Sat Oct 24, 2015 11:22 am

Re: 2.5% Cash Back or Points? Spending Strategy

Post by DrGrnTum » Wed May 16, 2018 11:02 pm

If you are traveling strictly on the west coast you may want to check out using Southwest airlines and signing up for their two cards.

The two cards at different times have had different bonus. Right now, the two cards each have a 40K bonus. At one time the bonus on each was up to 60K.

What you can do is combine these two cards with either a Chase Sapphire reserve or a Chase Preferred. These two cards each come with 50K bonus points that you can transfer to Southwest.

Since you are Military I believe you will also get a pass on $450 annual fee for the Reserve. Others here will correct me if I am wrong. The Reserve also comes with an annual $300 travel credit that you can also use to buy Southwest plane tickets.

Since you have an Amex Platinum, this card also comes with an annual $200 travel credit. You must declare an airline on the Amex Platinum site and then you can only use the credit on that airline. You could declare Southwest. You can then go online to the Southwest site and purchase $200 worth of E-GiftCard. You could also use these gift cards to purchase plane tickets. The trick to get the travel credit is to purchase E-GiftCards in small increments. I buy four separate ones for $50.00. I have twice now gotten the credit.

As a couple, you can play this game in a two-player mode. One of you can sign up for the Reserve and the other the Preferred. Each one of you can then apply for one of the Southwest cards.

I’ll let you do the math on how much value you will get out of all the combination of bonus points and credits.

Check the Southwest airline site. Check the “wana get a way” tickets. Check if the Southwest routes will fit into your travel plans and then check how far your points and credit will take you. You also need to check your budget to see if you can meet the minimum spend on each card.

Post Reply