What is wrong with me?
Last week I applied for 3 credit cards. No, that’s not the weird part, though most people outside the points and miles community would be shocked to hear that one can apply for 3 credit cards in one day. And most people in the community would be shocked to hear I kept it to only 3.
Actually, I rarely do big app-o-ramas anymore (if you want to know why, check out my post “App-O-Ramas Are Your Father’s Oldsmobile“) and 3 cards is about the most I’ll apply for in one day. So the number of cards isn’t what’s making me question my current state of sanity.
It’s the fact that all 3 cards I got last week were cashback cards.
Conventional Wisdom says that in many cases, cashback is superior to loyalty points. After all, cash is king. Everyone takes it. You don’t have to worry about seats or rooms being available for cash. And airlines and hotels don’t have complicated “cash redemption charts.”
So what’s better about points? Why do I currently have over a million points in loyalty currencies but seem to have misplaced my million dollars in cash? And if points are so great, why did my recent churn have such a major cash focus?
Is it all about those wonderful lie flat seats?
There’s a simple but unfortunate fact about cash — it just never goes far enough. As much as we might argue that these points are worth 1.4 cents each or those points are 1.8 cents, the fact is a 2% cashback everywhere card isn’t going to get you those Lufthansa First Class seats or that Singapore Suite. Unless you’re super rich, only points can do that.
We can go back and forth about what award tickets are worth, and it’s not my place to judge whether you should base your redemption value on what a premium fare costs in cash (correct) or instead use the price you believe you would have paid (wrong). Reasonable people can disagree on this point and still respect each other’s opinion, unless you think we should use the latter method, in which case I question your sense of decency and love of America.
But there’s no arguing that, if your goal is premium international travel, there’s no better way to do it than via loyalty points. In fact, there’s probably no other way at all.
But it’s not just premium redemptions.
There’s a major advantage to travel rewards cards that doesn’t appear on cashback cards. With the exception of the current Discover double cash promotion (which is way too good to be more than a one-time thing), you’re not going to find bonus categories on the major 2% cashback cards, such as the Fidelity Investment Rewards Amex or the Citi Double Cash.
But bonus categories are one of the best methods to truly rack up the points. Keep yourself organized using the right card at the right time, and you can easily be looking at 2x, 3x, or even 5x points for many transactions. Even if you value your points at just 1.3 cents per point (I’m looking at you as usual, Delta), with a 2x bonus category you’re getting 2.6 cents per dollar spent, which beats a 2% cashback card by 30%.
Or let’s say you’re into manufacturing spend and you focus your gift card purchases on those bonus categories. In that case, you’ll pick up more points to offset your fees than you can ever get with cashback. Without a doubt, bonus categories are the best bet for maximizing those Bluebird and Redbird and Serve cards.
So what’s up with all my new cashback cards then?
If I believe so strongly in the value of points, then why did I do a 3-card cashback churn then? Well, if you already have a million points, there’s definitely something to be said for diminishing returns, and that’s one thing that cashback does have going for it — you can never have too much of it.
But in this case, the 3 credit cards that had the current offers I wanted most all happened to be cashback cards. First I picked up a Discover so I could participate in the double cashback promotion. Then I added a Citi AT&T Access More card because it’s time for me to get a new iPhone 6S and that’s a nice piece of change I can save by not having to spend cash on a phone. And finally, I wanted to grab a Fidelity Investment Rewards card while it’s got a $50 signup bonus and before it potentially gets turned into a Visa or Mastercard in the near future.
Which goes to show that, in the end, the debate between miles versus cashback might be less important that picking up the right cards at the right time, when you can maximize signup offers and pick the cards that work best for your particular circumstances. So keep that in mind the next time someone swears to you that “the best card for travel is…”
Devil’s Advocate is a bi-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 following him on Twitter @dvlsadvcate or sending an e-mail to dvlsadvcate@gmail.com.Recent Posts by the Devil’s Advocate:
- Is The Amex Platinum $200 Credit Truly Dead For Gift Cards?
- While Chase is Tightening Approvals, Ultimate Rewards is Slowly Dying
- Do I Even Have To Ask Whether 5,000 Extra SPG Starpoints Are Worth All This Fuss?
Find the entire collection of Devil’s Advocate posts here.
