Chase Freedom Rewards Poor Values

The Chase Freedom card is my oldest credit card because it has no annual fee and provides consistent value.  The 5% bonus categories are usually great deals and Chase will send me a check (or statement credit or direct checking account deposit) with my rewards.  The program also lets you destroy value with gift card rewards.  3,000 points earns a $30 check or a $25 gift card.  Even if gift cards were 2,500 points, you still lose out because you aren't earning points on that purchase.

Cash Back Via Check or Direct Deposit

Gift Card Values

Tips for Reaching the Minimum Spend for a Credit Card Sign Up Bonus

The fastest way to boost your mileage balance is with credit card sign up bonuses.  I get three or more every year and it helps me travel as often as I do.  The problem here is that some cards have a minimum spend before the miles are awarded.  Hitting $500 in three months isn't a problem, but $5,000 in three months (Chase Ink) is a serious challenge.  Here are some tips to boost your credit card spending, without buying anything more than you would already purchase.

• Use your new card whenever possible.  The more you spend with it, the faster you reach the minimum spend mark.  Simple first step that may be all you need.
• Prepay your cell phone / internet / cable / etc. bills for a month or two.  AT&T et al won't mind if they get your money early.  This lets you move spending forward; you aren't spending more.
• Buy gift cards to places you shop regularly to move spending forward.  Grocery stores and other retailers with large gift card displays are great locations to pick up a bunch of cards in one stop.  Safeway lets you buy gift cards with Safeway gift cards, so you can retain some flexibility.
• Car insurance is an opportunity.  If you are up for renewal, pay the six month rate; it is usually cheaper and you bring all that spending forward.
• Buy American Express Gift Cards.  Accepted everywhere Amex is taken.  Some cards don't have a purchase fee.  It works out as and even trade, so you are just turning part of your savings account into Amex gift cards while earning points and moving closer to the minimum spend mark.
• Do your Christmas and birthday shopping early or treat yourself to that thing you want, but are waiting for.  If you were going to buy it anyway, it's not really an extra cost.
• Put dinner with friends on your card.  Lots of people just toss down cash for their part of the check, you can put the bill on your card and pocket the cash.  It also saves on trips to ATMs. (I also hate to see those potential points vanish)

Keep track of how close you are to the spending mark.  Returns are deducted from your total, so remember to subtract that from your tracking spreadsheet.  Remember, if you carry a balance on your credit cards, this game is not for you.  Rates on rewards cards are much higher than other cards.

What is a Point or Mile Worth?

What is a point / mile worth?  It’s a simple question with a complex answer.  A mile or point in every program will have a different value too.  Also, miles might not have any value until a certain number are collected.  Ultimately the value is different for each person, but here are my answers and how I got to them.

Jets Lined Up at FRA

Miles and points are a currency that can be exchanged for goods and services.  These goods can also be purchased for cash, making it a simple equation: Total Value / Total Points = $x.xx per point.  If a flight to Europe is $1,000 or 50,000 miles, then each mile is worth 2c.  The denominator will always be known, but the numerator gets fuzzy when you are buying awards that you would never buy with cash.  A first class trip to Europe costs $13,000 or 135,000 miles; yielding almost 10c per mile in value!  But I would never pay $13,000 to fly to Europe, so what is it really worth?  Priceless is the best answer, but it doesn’t help with the math.  I just total the perceived value of the experience and that’s the value.  The means a first class award is more like 3-6c in value; still a good deal.

Do the math for yourself and use your answers to decide if to spend miles or cash.  For example, I would use miles to book a $450 domestic round trip, but use cash for a $300 ticket.  It’s a gray area for borderline redemptions.  I’ll lower my threshold if my balance still has a large number of miles.  Also, if your credit card doesn’t earn at least 2c in value for every dollar spent, just use the fee free Fidelity Amex. It has 2% cash back on every purchase and cash is accepted by any airline.

Sun Rise at ORD

SPG – 3c

Starwood Hotel (SPG) points are my favorite.  With the Cash & Points redemption option, SPG points are consistently worth about 4c each, while full points awards run 2-3c.  The SPG Amex (business card has the better sign up bonus) earns one point per dollar and two points for spending at SPG hotels.  Points can also be transferred to about 30 airline programs with a 25% bonus for every 20,000 points transferred.  This makes the SPG card better for earning American or Delta miles than the airlines’ own credit cards.  SPG is my favorite program and currency because of its high value and flexibility. 

W South Beach Miami Hotel View

Drawbacks: There aren’t SPG hotels everywhere and the top level hotels cost too many points to have any value.  The cobranded credit card is an Amex and not everyone takes those (like my local liquor store).  Mile awards with United and Southwest are poor value. 

Minimum balance of 4,000 needed to achieve top value.

United – 1.75c

United miles are the best in the air.  They are part of the Star Alliance (25 airlines and growing) and have a few other strategic alliances for miles redemption (Aer Lingus has great availability to Europe).  Their reservations people are very good and the website can be used to find and book complicated award trips.

Minimum balance of 12,500 needed to achieve decent value.

United Airlines Jets at EWR Sunrise

American – 1.5c

American is a oneworld partner and doesn’t charge excessive fuel surcharges on awards.  They allow one way bookings and have a decent award chart.  American availability, coach and first, to most places not over the Atlantic, is second to none.  Good off season discounts and a cheap oneworld partner chart (80,000 miles in first London to Australia).  oneworld coverage is spotty and fuel surcharges pop up on European carriers.

Minimum balance of 12,500 needed to achieve decent value.

Delta – 1c

Delta has a three tier award chart and every time I want to redeem, my flight is in the second or third tier, destroying the value of my miles.  They are a Sky Team partner and Virgin Australia partner, so It’s best to redeem miles with Air France/KLM or Virgin Australia.  I wound up cashing in my miles for Economist subscriptions, 3,200 for a year or 3c in value.  Not bad considering my options.

Minimum balance of 25,000 needed to achieve decent value or 3,200 for a year of The Economist.

Not Every Trip Is Glamours

Alaska Airlines – 1.6c

I credit my Delta and American flights to Alaska.  Alaska isn't part of an alliance, but are partners with most airlines you would want to fly not in the Star Alliance.  The award chart is downright cheap in places too.  The flexible earning and redeeming of miles makes Alaska a great program to have miles in.  One ways are allowed and there is a cash and points option.  Partner awards have to be a single carrier plus Alaska to get you to the gateway city.  Not Star Alliance good, but close.  Other than flights and credit card spend (not a good deal), it’s hard to earn miles with them (SPG transfers mostly).

Minimum balance of 12,500 needed to achieve decent value.

US Airways – 1.7c

Star Alliance member with a reasonable award chart (more reasonable than UA to Asia in business).  Only allow round trips.  Can’t book partner awards online, so be prepared for an hour long call with reservations.  Great deals on off peak awards.  The Mileathon promotion runs annually and is a great way to stock up on miles.  US Airways also runs frequent mileage purchase promotions.   I constantly fear award chart devaluation. 

Minimum balance of 25,000 needed to achieve good value.

Use BA Miles to Fly LAN Around South America

British Airways - .5c or 2c

BA is great for short one segment trips on American or LAN.  BA has a distance based award chart, allows one ways, and has partner booking online.  For long flights (less generous pricing), connections (each segment is charged, not total distance), premium cabins (x2 for business, x3 for first), or trips in Europe (steep fuel charges) don’t bother.  Good deals are found mostly in the America’s. The scary high fuel charges take the value out of any BA, Iberia, of Finnair award.

Minimum balance of 4,500 needed to achieve decent value.

Other Carriers – 0-10c

Southwest will sell any seat at 60 points per dollar so they have a fixed value of 1.67c per point (not bad really).  Other airline programs can be anywhere.  My Frontier miles might only be good for a magazine subscription.  Foreign carriers could have no value or tons of value, depending on if you need to use those airlines.  If you are going somewhere only Emirates flies, then those miles will be worth much more.  It’s too subjective for me to give a definitive value.

Southwest and US Airways Jets at ABQ

Chase Freedom vs. Amex Open

Chase Freedom is offering 5% back this quarter on Amazon.com and gas.  Sounds great, but my SPG Small Business Amex (same cost as the personal version, but more rewards) offers me 5% back on Amazon.com plus SPG points all the time.  The Open Savings program gives me a 5% rebate (posts in a few days) on my spending at Office Max on purchases over $100.  Office Max sells gift cards for Amazon.com, eBay, and many other retailers.  I also earn SPG points like usual on my purchase. There is an Office Max a short walk from where I work, so its no trouble at all to grab some gift cards (and office supply stores are fun to wander around). Chase Freedom is not looking that great this quarter, but it picks up next quarter.