From the desk of the Devil’s Advocate…
The Conventional Wisdom in our community is that anyone can learn to play the points and miles game, and if you’re new to loyalty programs, you’re undoubtedly eager to be like folks you’ve heard about who travel the world for practically nothing.
But just because everyone can play doesn’t mean that everyone should.
For both beginners and experts, there are dangers lurking in the loyalty program forest, and not everyone is candid about them. Even the seasoned players can sometimes lose focus on the ultimate goal and get caught up in the points instead.
Exploiting loyalty programs is most definitely a game and it is most definitely not for everyone. So this week, let’s take a completely honest look at the pitfalls. Here’s three reasons you should skip playing loyalty program roulette…
Reason #1: You Lack Discipline
There’s currently a TV commercial for the Citi ThankYou Preferred card in which two ladies kvetch over a guy who they realize is “using” one of them by always taking her out for meals. The idea is that the guy is so eager for the double points from the card’s dining category bonus that he can’t resist repeatedly picking up the check.
Let me tell you something — if you want to pay for my lunch, you can have all the double points. Because I’d absolutely rather have a literal free lunch.
There is only one thing better than getting extra points for your spending, and that is not spending any money at all. The key to winning this game is to always remember that you should never buy anything that you wouldn’t have bought in the first place.
There are too many people who get excited by the allure of free travel and start overspending in an effort to rack up points. Rest assured that there is no way to win that version of the game. Going down that path only leads to high interest, crushing debt, and no easy way out.
Yes, credit cards are the most lucrative way of earning hundreds of thousands of miles with a minimum of effort. They are also extremely dangerous to anyone who cannot control their spending. We always hear the success stories of the traveler who opened a dozen credit cards and got a free trip around the world, but we almost never hear about the folks who found themselves buying more than they could afford and ending up deep in debt for years on end.
However, discipline is about more than just controlling your spending. It’s about knowing your travel goals and staying focused on them, not just applying for every new credit card with an enticing bonus just because the Conventional Wisdomers say it’s an unprecedented offer.
Recently there’s been a ton of talk about the limited-time signup bonus of 70,000 points for the Chase Ink Plus card. Sure, that’s a terrific bonus, but if you’re planning a trip in the near future to, say, Australia, then you’re going to have a ton of trouble trying to find availability on Star Alliance partners. You might be better off focusing on a way to accumulate — believe it or not — Delta SkyMiles, where you’ll find much better availability on Virgin Australia flights.
So do you have the discipline to skip that huge Ink Plus bonus and wait for a special (or even targeted) American Express Premier Rewards Gold or Platinum bonus instead?
Reason #2: You’re Bad at Math
It’s somewhat counterintuitive, but being good at this game is also about knowing when to pass up points.
Manufacturing spend is a popular method of quickly acquiring lots of points. But if you’re not carefully calculating the fees you’re incurring in the process (and yes, that means all the fees — gift card fees, ATM withdrawal fees, credit card annual fees, and so on), then you might actually be paying for more than you’ll get at the end.
You also have to be cognizant of when you’re trading a cash discount for points that aren’t as valuable. Perhaps you can get 3 extra points per dollar for a purchase by going through an online portal, but if you have to forfeit using a 10% off coupon in exchange, then you’re being points wise and pound foolish. It’s highly unlikely you’ll ever get enough value for those extra points to match the 10% reduction in price.
Often it’s the deal that might be worthwhile that’s the most difficult to pass up. For instance, the Chase Freedom has “department stores” as a 5x bonus category in the 4th quarter of 2014 and there’s at least one department store that regularly stocks $100 Visa and Mastercard gift cards. With the $5.95 purchase fee, that translates to a per point cost of 1.12 cents.
Are Ultimate Rewards points worth 1.12 cents per point? Yes.
Are they worth acquiring at that price? Questionable.
You’re never going to lose money buying UR points at 1.12 cents, since you can always redeem them directly for airfare at 1.25 cents each. In fact, you can likely get more value than that by transferring them to travel partners. But you’re spending a lot of time and effort to acquire them at not much of a margin.
Personally I wouldn’t pay any more than roughly 0.75 cents per UR point, but that’s my personal tolerance and how I value my time. Your tolerance may be different. So maybe you’re comfortable with paying 1.12 cents per point. That’s fine.
My question is… are you willing and able to do all the math needed to figure that out?
Sometimes you have to make these sorts of decisions on the spot, so it helps to be very good at math, though just being comfortable with numbers is usually enough. But if you struggle every time you have to balance your checkbook, then you should pass on manufactured spending — it’s not for you.
Reason #3: You Hate Homework
It takes a lot of work to succeed in this game, and many people won’t have enough time or interest to put in the necessary hours.
Homework includes getting organized and staying organized. Do you have a spreadsheet with all your open credit cards? Does it include all your monthly due dates and credit bureau inquiries? Do you know when your annual fees are going to hit?
If you want to manufacture spend, do you know how each credit card account is going to be paid at the end of the billing cycle? Are you keeping track of your Bluebird and/or Serve limits? Do you have a backup plan if one of your liquidation methods suddenly closes without warning?
When you’re ready to book your tickets, are you prepared to put in the hours that may be necessary to find the routing and dates available for the miles you have? Maybe you’re going to hand that task off to an award booking service like Tahsir’s Award Magic. That’s not a bad choice if your time is valuable, but have you included that additional cost in your calculations as well (see the discussion of “math” above)?
Sometimes it feels like we’re spending more time than it’s worth to accumulate millions of points. If this is your hobby and you love doing it, then I think time spent on something you enjoy is never wasted. Personally for me, the game itself is a huge part of the draw and the time spent on it never feels like work.
But if what I’ve just described sounds like homework more than a hobby, then you’ll be better off paying cash for your airline tickets and spending your time on something more rewarding to you. Skip the loyalty program game and focus on your love of painting instead. And don’t feel badly about it — everyone has their strengths and weaknesses. I can’t draw to save my life.
The Devil’s Advocate Says Some People Should Just Pass on the Loyalty Points Game
If any of the above sounds a little scary or makes you nervous, that doesn’t mean it isn’t for you. We all started by dipping our toes in the water until we got comfortable. If you’re still intrigued after all the warnings, then take a deep breath, start slow and see how it goes.
On the other hand, if this all sounds awful or just generally unpleasant, or if you don’t trust yourself to put in the time or have the discipline, you should look elsewhere for a hobby.
My goal here isn’t to scare you. Thousands of people have joined this growing community and been successful, each at their own level. Not everyone has to learn how to perform a quadruple dip in order to make points worthwhile. But with new folks jumping into the game every day, this is just a reminder that it takes a certain kind of person to pull off the tricks of our trade. So take a moment to decide whether it’s right for you before you start applying for all those credit cards.
Devil’s Advocate is a weekly series that deliberately argues a contrarian view on travel and loyalty programs. Sometimes the Devil’s Advocate truly believes in the counterargument. Other times he takes the opposing position just to see if the original argument holds water. But his main objective is to engage in friendly debate with the miles and points community to determine if today’s conventional wisdom is valid. You can suggest future topics by sending an email to firstname.lastname@example.org.
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