Cash Back vs. Points: Are We Playing the Wrong Credit Card Game?

00:00:00.000 | For over a decade, I've racked up over 10 million points

00:00:03.040 | and taken so many vacations with those points

00:00:05.800 | that I couldn't imagine ever wanting to switch

00:00:08.120 | to a cashback strategy.

00:00:09.440 | However, three big things have changed recently

00:00:12.240 | that are making me rethink my whole credit card strategy.

00:00:15.400 | Have I been doing it wrong the entire time?

00:00:18.160 | You don't actually even need to have a points balance

00:00:21.160 | right now to take advantage of the arbitrage

00:00:23.680 | you can get booking a flight with points.

00:00:25.840 | The purpose of this episode is to make a steel man case

00:00:29.000 | for cashback.

00:00:30.040 | I really wanted to figure out

00:00:31.240 | if cashback was a better deal.

00:00:32.880 | So I went back to the card optimizer spreadsheet tool

00:00:35.440 | I built last year

00:00:36.600 | and I completely rebuilt it from the ground up.

00:00:38.920 | So spending money just like that

00:00:40.640 | would get you an effective 37.5% cashback on your spend.

00:00:45.640 | Hello, and welcome to another episode of All The Hacks,

00:00:49.000 | a show about upgrading your life, money, and travel.

00:00:51.800 | I'm Chris Hutchins, and I am a huge fan of points, miles,

00:00:54.880 | and all the amazing travel you can do with them.

00:00:57.480 | In fact, there are plenty of episodes on this show

00:00:59.960 | to help you do just that.

00:01:02.080 | But a few things have been happening lately

00:01:03.800 | that make me considering whether I might be better off

00:01:06.440 | just focusing on cashback.

00:01:08.800 | For long-time listeners,

00:01:09.840 | that might sound crazy coming from me, but hear me out

00:01:13.000 | and make sure you listen through to the end

00:01:14.640 | because there might actually be a third option

00:01:16.600 | that's even better.

00:01:17.800 | But no matter what strategy you want,

00:01:20.360 | I am confident this episode

00:01:21.920 | will help you dial in your setup even more.

00:01:24.680 | And I will also be giving you a little preview

00:01:26.960 | of an updated tool I built

00:01:28.720 | to help anyone optimize their credit card strategy.

00:01:31.840 | So let's get started right after this.

00:01:34.400 | Okay, for a little history, I love credit card points,

00:01:37.560 | especially with a kind that are transferable

00:01:39.960 | to different airline and hotel groups

00:01:42.000 | because you get so much more flexibility,

00:01:44.440 | and it usually results in a much higher ROI.

00:01:47.520 | And also, there is something amazing

00:01:49.360 | about travel feeling free.

00:01:51.600 | There's just less guilt than when you spend money.

00:01:54.120 | And if I just think about a specific example,

00:01:56.400 | spending 150,000 points

00:01:58.240 | on an international business class flight

00:02:00.200 | is nowhere near as hard as spending 1,500 to $2,000 might be.

00:02:05.200 | Also, it forces a type of luxury

00:02:08.160 | I'm not sure I would otherwise treat myself to,

00:02:10.760 | which maybe that's a good thing, maybe it's a bad thing.

00:02:13.160 | I'll let you decide.

00:02:14.400 | So for over a decade, I've racked up over 10 million points

00:02:17.840 | and taken so many vacations with those points

00:02:20.760 | that I couldn't imagine ever wanting to switch

00:02:23.120 | to a cashback strategy.

00:02:25.000 | However, three big things have changed recently

00:02:28.440 | that are making me rethink my whole credit card strategy.

00:02:32.320 | First, I look deeper at a few cards,

00:02:35.040 | notably the Bank of America Premium Rewards Card,

00:02:37.760 | the U.S. Bank Altitude Reserve,

00:02:39.680 | and the new Robinhood card

00:02:41.080 | that is gonna offer 3% cash back on everything.

00:02:44.800 | Though just to be clear,

00:02:45.680 | there are some skeptics of how long that will work for.

00:02:48.760 | However, right now, it is a 3% on everything card.

00:02:52.760 | The second thing is that I've been watching

00:02:54.440 | a bunch of points get devalued.

00:02:56.520 | So if you're sitting on Turkish Air points,

00:02:58.640 | they're probably feeling a lot less valuable,

00:03:00.760 | that happened to Alaska, it happens all the time.

00:03:03.520 | But when I look at the cash in my Wealthfront Cash account,

00:03:06.160 | it's going up by over 5% every year.

00:03:09.280 | So I've been reflecting on points getting less valuable

00:03:12.520 | and cash getting more valuable,

00:03:14.200 | and the fact that I haven't spent as many points

00:03:16.240 | as I've accumulated in the last few years,

00:03:18.520 | so that's been a big point.

00:03:19.920 | And then number three is a big one.

00:03:22.200 | I watched some points go on sale this year,

00:03:24.480 | and I realized there are a lot of different ways

00:03:27.160 | that you can get points

00:03:28.240 | than just by earning them on a credit card.

00:03:30.880 | For one, many airlines and hotel groups

00:03:33.120 | constantly have sales on points.

00:03:35.680 | For example, of my 12 favorite transfer partners

00:03:38.960 | from my credit cards,

00:03:40.280 | points go on sale for as low as 1.15 to 1.2 cents,

00:03:45.120 | and that's on Life Miles or Aeroplan,

00:03:47.320 | and on average across all the partners that sell points,

00:03:50.200 | they go on sale for about 1.5 cents per point.

00:03:53.120 | And depending on the partner,

00:03:54.280 | they go on sale as often as every one to three months.

00:03:58.200 | And then there's some points

00:03:59.600 | that I don't actually even like transferring to,

00:04:01.560 | though I do think they have good value,

00:04:03.600 | that go on sale for as little as half a cent a point,

00:04:06.880 | like Hilton or close to that for Choice Hotels and Marriott.

00:04:10.480 | So I just wanna bring an example here.

00:04:13.760 | I was looking at this United flight

00:04:15.440 | from New York to Geneva in business class,

00:04:17.880 | and it was about $5,000 if you paid cash,

00:04:20.920 | but it was only 63,000 miles with Avianca's Life Miles.

00:04:25.840 | Now, I assume very few people listening

00:04:28.120 | have a Life Miles balance,

00:04:29.840 | but you can transfer Amex, Citi, Cap One,

00:04:32.640 | Built, and Wells Fargo points to Life Miles,

00:04:35.240 | which means most of you listening

00:04:36.680 | actually do have access to Life Miles

00:04:39.080 | and could get almost eight cents per point with that flight.

00:04:43.280 | However, you could also just go buy 63,000 Life Miles

00:04:47.880 | right now while they're having a sale,

00:04:50.160 | which by the way, they did 13 different times last year,

00:04:53.840 | and those miles would be $825.

00:04:57.000 | So you don't actually even need

00:04:59.160 | to have a points balance right now

00:05:01.840 | to take advantage of the arbitrage

00:05:03.640 | you can get booking a flight with points.

00:05:06.160 | In fact, in this example,

00:05:07.880 | transferring 63,000 points to Life Miles

00:05:11.640 | when you could otherwise buy them for $825

00:05:15.120 | means you're only getting 1.3 cents of value,

00:05:18.240 | which is nothing like the eight cents

00:05:20.400 | you might be thinking when you go through this process.

00:05:23.640 | So to go one step deeper on this example,

00:05:25.920 | let's assume you earned those 63,000 points

00:05:29.000 | on a 2X points card after you spent $31,500.

00:05:33.800 | Well, to get the $825 you'd need

00:05:37.120 | to buy those same number of points

00:05:39.280 | with the same $31,500 of spend on a cash back card,

00:05:43.520 | you'd need to be earning at least 2.62%,

00:05:47.240 | which is really actually a funny number

00:05:49.080 | because it is almost the exact percent cash back

00:05:52.480 | you can get on all purchases

00:05:54.240 | with the Bank of America Premium Rewards card,

00:05:56.760 | assuming you have $100,000

00:05:59.240 | at a Bank of America or Merrill Lynch account.

00:06:01.880 | And if you had the 3% card with Robinhood,

00:06:05.120 | you'd earn even more on that amount of spend

00:06:07.600 | or you would need less spend to earn $825 of cash back.

00:06:11.800 | But don't jump to conclusions.

00:06:13.880 | I am not done with this episode

00:06:15.560 | and I'm gonna go a lot deeper on all of this

00:06:17.680 | and I might actually change your opinion

00:06:19.360 | a few times before I'm done.

00:06:21.520 | However, I was talking about buying airline

00:06:24.000 | and hotel points for less than one and a half cents,

00:06:26.880 | but having points in an airline or a hotel chain

00:06:29.960 | isn't necessarily as flexible

00:06:31.920 | as having them in Chase or Amex

00:06:33.720 | or somewhere where you can transfer them

00:06:35.120 | to lots of different partners.

00:06:36.880 | In fact, if you look at the value people give to Chase

00:06:40.280 | or Amex or BuiltPoints on the internet,

00:06:42.280 | you'll find that that value is actually higher

00:06:45.720 | than the value of any of the points

00:06:47.680 | you can transfer to individually.

00:06:49.520 | And that is because there is an inherent value

00:06:51.840 | in having that flexibility.

00:06:53.640 | Knowing that if one program devalues,

00:06:56.480 | you still have the access to all the other programs.

00:06:59.640 | However, Chase, Amex, Citi,

00:07:01.680 | none of these programs ever sell their points.

00:07:04.840 | But the more I thought about buying points,

00:07:07.080 | the more I wondered how much would it cost

00:07:09.000 | to buy them in another way, to effectively buy them.

00:07:11.600 | And I realized for anywhere from half a cent

00:07:13.800 | to one and a half cents,

00:07:15.320 | using your credit card to do things like pay taxes,

00:07:18.640 | buy gift cards, especially if you have to save for college

00:07:21.800 | or pay off student loans,

00:07:23.280 | or even just pay bills or send money to friends online

00:07:26.440 | when you have to cover the 2.9% fee.

00:07:29.280 | And I'm gonna do a whole episode on earning more points

00:07:32.320 | without needing to increase your spending soon

00:07:34.640 | where we'll go really deep on those

00:07:37.000 | and so many more options.

00:07:38.880 | But for that last example,

00:07:41.000 | if you were to pay a 2.9% credit card fee

00:07:44.480 | to be able to send $10,000 to a friend

00:07:47.560 | or pay a $10,000 property tax bill

00:07:49.840 | and put it on your card,

00:07:51.440 | and let's assume you're putting it on a card

00:07:53.240 | like the Venture X that earns two points per dollar,

00:07:55.920 | you would get 20,000 points for that $10,000 spend

00:07:59.760 | and you would pay a $290 fee.

00:08:02.720 | So that means you'd be getting 20,000 points for $290

00:08:06.800 | or paying 1.45 cents per point.

00:08:09.680 | Now, if you aren't able to get more than 1.45 cents in value

00:08:13.360 | for each one of your points,

00:08:14.920 | I wouldn't suggest doing this

00:08:16.480 | because cashing out those flexible points

00:08:18.480 | usually only gets you about one cent per point

00:08:20.840 | or $200 back, which is definitely less

00:08:24.120 | than the 290 you spent to get them.

00:08:26.160 | While that is more work

00:08:27.440 | than just earning and having those points,

00:08:29.840 | it also means that even if you can regularly find ways

00:08:33.400 | to get two or even 10 cents of value,

00:08:35.800 | booking, business class travel,

00:08:37.240 | staying at luxury properties,

00:08:39.440 | you probably shouldn't use those points values

00:08:42.040 | when you're comparing the points values

00:08:43.760 | you earned on credit cards with cash back

00:08:46.040 | because you can always find ways

00:08:48.080 | to effectively buy those same points,

00:08:50.400 | whether it's buying through airline and hotel programs

00:08:52.920 | when they go on sale

00:08:54.160 | or using kind of methods like I just mentioned

00:08:56.960 | to buy flexible points.

00:08:58.600 | And then you can actually get that same

00:09:00.120 | two to 10 cents of value.

00:09:01.240 | So this was a really big change

00:09:02.800 | in the way I thought about things

00:09:03.960 | because the reason I loved credit card points in miles

00:09:08.360 | was that they let you take travel

00:09:11.400 | that would otherwise be much more expensive

00:09:13.480 | and get access to it for much less,

00:09:15.440 | but it's not actually earning the points in miles

00:09:17.880 | that makes it the better deal,

00:09:18.960 | it's actually just having them.

00:09:20.520 | So if you could go out any time of day

00:09:22.440 | and just buy chase points for one cent per dollar,

00:09:25.120 | which you can't, but if you could,

00:09:27.800 | I wouldn't need to earn chase points at all

00:09:29.600 | 'cause I would just buy them

00:09:30.560 | right before I was about to book a flight.

00:09:32.520 | And if for some reason I wanted to take a trip

00:09:34.520 | and the points weren't an option,

00:09:36.560 | then I wouldn't buy the points and I would have to pay cash.

00:09:39.160 | So for the sake of comparing and valuing points to cash back,

00:09:43.280 | it really depends on how many of these different methods

00:09:46.280 | you could use to get points

00:09:47.880 | and the scale of the points you need.

00:09:50.080 | For example, if you have to make lots of tax payments

00:09:52.920 | each year where the fee to pay with your credit card

00:09:55.200 | is only 1.82%,

00:09:57.400 | which means you can actually effectively buy points

00:09:59.880 | for less than one cent,

00:10:02.160 | well, if that's you and you pay lots of tax payments

00:10:04.960 | and you're actively saving for kids' colleges

00:10:07.480 | or paying off student loans

00:10:09.080 | and you only think you really need 100,000 points a year,

00:10:13.200 | then yeah, maybe you probably don't need to value them

00:10:15.920 | at much more than one cent,

00:10:17.280 | in which case cash back might end up being a better strategy

00:10:20.040 | and we'll get there.

00:10:21.440 | But if those things aren't true,

00:10:23.440 | maybe the amount you should be valuing points at

00:10:25.880 | is probably closer to 1.5 cents

00:10:28.080 | or if you're spending millions and millions of dollars a year

00:10:31.240 | on a credit card and you're trying to rack up

00:10:34.200 | just a massive amount of points

00:10:35.800 | that you could never get in other ways,

00:10:37.880 | then maybe none of these tactics to buy points

00:10:40.000 | will work for you

00:10:41.120 | and you really need to pick something closer

00:10:42.960 | to the value you redeem them at.

00:10:44.440 | So maybe that's two or three cents a point.

00:10:47.040 | For the sake of this episode,

00:10:48.360 | I'll probably use a number about 1.5 cents

00:10:50.920 | 'cause it's kind of right in the middle.

00:10:53.640 | So in short, there is no debating

00:10:56.280 | that booking some flights and hotels,

00:10:58.360 | especially when you're traveling internationally

00:11:01.520 | or when you wanna stay at these aspirational vacations

00:11:04.320 | or fly in these aspirational premium cabins,

00:11:07.080 | doing that with points and miles

00:11:08.520 | will give you an incredible deal over booking with cash,

00:11:11.960 | assuming you're flexible enough to find the right inventory.

00:11:14.760 | But I want to explore whether it's a better deal

00:11:16.920 | to focus on earning cash back

00:11:19.080 | and buying those points when you find the right deals

00:11:21.760 | and if you never do,

00:11:23.200 | then you already have the money to buy those flights in cash.

00:11:25.960 | That's what I wanna compare.

00:11:27.200 | So the purpose of this episode

00:11:29.080 | is to make a steel man case for cash back,

00:11:32.200 | which just to be clear,

00:11:33.720 | doesn't necessarily mean as I'm making it

00:11:35.760 | that it's 100% my stance.

00:11:37.920 | I kind of feel like I'm in a debate club here,

00:11:39.960 | though I might actually end up convincing myself

00:11:42.400 | by the end of this,

00:11:43.480 | but I will make sure to include my perspective

00:11:45.880 | before we're done.

00:11:47.100 | So let's start with the basics.

00:11:49.260 | Just like points, cash back is tax-free,

00:11:52.020 | it's considered a rebate,

00:11:53.660 | so you don't have to worry about that.

00:11:55.920 | A great pro to cash back,

00:11:58.100 | you can invest all the cash back you get

00:12:00.220 | and earn 5% or more per year.

00:12:02.820 | It is totally flexible.

00:12:04.320 | You can use it to buy points,

00:12:05.540 | you can use it to pay for anything,

00:12:07.140 | you have ultimate flexibility and liquidity

00:12:09.380 | when you get cash,

00:12:10.580 | including, like I said, buying points.

00:12:12.980 | And there is no stress about not being able

00:12:15.540 | to find a good deal with points and miles on your vacation

00:12:18.740 | because you don't have a massive balance of points.

00:12:21.580 | It also means you don't need to keep paying annual fees

00:12:24.060 | on cards just to keep your points balance alive.

00:12:26.880 | So a lot of reasons to like cash back.

00:12:29.620 | Let me run through a few of the cash back cards.

00:12:32.380 | Actually, before we run through all the cards,

00:12:34.340 | there are timestamps in the show notes.

00:12:36.060 | So if you wanna jump ahead

00:12:37.720 | to go to the meat of the discussion

00:12:39.300 | and then come back later and listen to the rundown

00:12:41.340 | of the best cards in each categories,

00:12:43.160 | feel free to jump around.

00:12:44.140 | We always put those timestamps there

00:12:45.740 | to make it easy to find different chapters

00:12:48.000 | or sections of the conversation.

00:12:49.260 | For just general overall spend,

00:12:51.220 | right now, I can't think of any better card

00:12:53.340 | than the Robinhood card that's coming out.

00:12:55.060 | It's 3% on everything.

00:12:57.740 | I don't have it yet.

00:12:59.260 | According to Robinhood, if you use my link,

00:13:01.100 | which is allthehacks.com/robinhood,

00:13:03.340 | I will move up the wait list.

00:13:05.140 | It's not an affiliate link or a sponsor link

00:13:07.340 | or anything like that.

00:13:08.300 | It's just my referral link.

00:13:10.440 | So that right now seems to be the leader

00:13:11.980 | for overall everything spend.

00:13:14.160 | The leader before that

00:13:15.860 | was the Bank of America Premium Rewards card,

00:13:18.580 | which got you 2.625% on everything.

00:13:22.620 | And that is because they have this weird program

00:13:25.160 | where you earn 1.5 points that are all worth one cent.

00:13:28.660 | But if you have diamond or platinum honor status

00:13:32.260 | with Bank of America,

00:13:33.100 | which you get by having $100,000

00:13:35.740 | in a Bank of America or a Merrill Lynch account,

00:13:38.340 | and that doesn't even have to be managed by them.

00:13:40.140 | It can be self-managed.

00:13:41.440 | Then you get 1.75 times the number of awards,

00:13:44.920 | which is where you get to that 2.625% number.

00:13:47.500 | So that's previously been the best card.

00:13:49.760 | There are also a couple of cards that for your first year,

00:13:52.120 | you can earn 3% that Discover has a card.

00:13:57.020 | The Chase Freedom Unlimited had a promo

00:13:58.840 | where you normally get 1.5%,

00:14:00.820 | but at the end of the year, they would match it.

00:14:02.980 | And supposedly that went away,

00:14:04.780 | but the link we have in the show notes

00:14:06.460 | seems to still show it at least as the time of recording.

00:14:09.860 | So those are kind of the best everything cards.

00:14:11.940 | The next set is cards that give you higher cash back,

00:14:15.360 | but only on one or two categories.

00:14:17.240 | And depending on the card,

00:14:18.140 | you might have to pick the category in advance

00:14:20.520 | or it's your top spend category.

00:14:22.680 | And depending on the card,

00:14:23.880 | some of them are capped at $500 a month,

00:14:26.080 | some of them at 2,000 or 2,500 a quarter.

00:14:29.080 | But some of those are the US Bank Cash Plus card,

00:14:32.000 | the Bank of America Customized Cash card,

00:14:34.480 | the Citi Custom Cash card.

00:14:36.760 | Those are a few.

00:14:37.880 | And you basically get to either pick

00:14:39.680 | or spend in a category could be a 5% cash back

00:14:43.060 | on gas station card or restaurants or grocery stores,

00:14:45.780 | whichever one, but that spend is usually capped

00:14:49.140 | at somewhere on the order of six to $10,000 a year of spend.

00:14:54.140 | So if you spend $25,000 a year on groceries,

00:14:58.500 | you can't really call it a 5% grocery card

00:15:00.860 | 'cause you're only getting that premium return

00:15:03.340 | on the first $10,000 or maybe 6,000, depending on the card.

00:15:07.820 | There's two cards, the Discover It and Freedom Flex

00:15:10.020 | that do a 5% on rotating categories each quarter.

00:15:13.480 | So if you happen to line up the category

00:15:15.500 | with where you're spending, it can be good,

00:15:16.940 | but you don't know in advance what those categories are.

00:15:19.740 | Then if I run through different categories,

00:15:22.980 | there's some really interesting cards.

00:15:24.620 | So the Amazon card, it's the Amazon Prime card

00:15:27.540 | if you're an Amazon Prime holder,

00:15:29.140 | it gets you 5% back on Amazon and Whole Foods.

00:15:31.780 | Next is the US Bank Altitude Reserve card.

00:15:34.500 | And it gives you three X points, which are worth one cent.

00:15:37.460 | So 3% cash back on travel spend and on mobile wallet,

00:15:42.020 | meaning Apple Pay, Google Pay, all of that.

00:15:44.620 | I've been told that it also works

00:15:45.980 | if you use Apple Pay in the browser,

00:15:47.540 | but not Google Pay in the browser.

00:15:49.460 | So, but 3% back on Apple Pay is something I have never seen

00:15:54.420 | and didn't realize was there until a few months ago

00:15:56.980 | as I started digging into this topic.

00:15:59.140 | But US Bank has this program called Realtime Rewards.

00:16:02.500 | And how that works is if you spend money on your card

00:16:05.820 | in the travel category, that could be an Uber,

00:16:08.100 | it could be buying a ticket, they send you a message

00:16:10.300 | and say, "Hey, if you wanna redeem your points right now,

00:16:12.780 | "we'll give you one and a half times the value."

00:16:15.100 | So that means that assuming that you spend enough travel

00:16:18.460 | on the card such that you can use your points

00:16:21.380 | to cancel out that travel,

00:16:23.100 | which is different than a Chase bonus

00:16:25.380 | where you have to spend those points in the portal

00:16:27.420 | and book in the portal, US Bank also does that.

00:16:30.220 | But you can just book the travel

00:16:31.900 | and they'll let you credit it off your statement.

00:16:34.780 | So that makes mobile wallet and travel spending

00:16:37.040 | four and a half percent cash back,

00:16:39.320 | which is really, really amazing.

00:16:41.340 | I've actually heard people booking travel,

00:16:44.900 | redeeming the points to credit it off

00:16:46.740 | and then canceling it if it's a refundable airfare

00:16:49.260 | and then still being able to keep the points.

00:16:51.620 | But I don't think it would be that hard to make sure

00:16:53.800 | that however much you spend on the card,

00:16:55.540 | you put four and a half percent of your spending

00:16:57.900 | into the travel category.

00:16:59.260 | If you're listening to this show,

00:17:00.300 | you're probably someone that spends

00:17:01.540 | at least that much on travel.

00:17:03.980 | Now in the dining category, there are so many options.

00:17:06.660 | So I'll run through them quickly.

00:17:08.860 | The Capital One Saver is 4% on dining.

00:17:11.500 | The US Bank Altitude Go is 4% on dining.

00:17:14.660 | But now I'm gonna mention one

00:17:16.120 | that doesn't seem like a cash back card,

00:17:17.980 | which is the Amex Gold.

00:17:19.520 | And Amex Gold is 4X points on dining.

00:17:22.140 | And I wouldn't think of it as a cash back card,

00:17:24.600 | but you can cash out Amex points in lots of different ways

00:17:28.660 | that give you at least one cent of value.

00:17:30.900 | Some gift cards, booking travel in the portal,

00:17:33.780 | including, I've heard of booking things

00:17:36.020 | that are refundable and canceling them.

00:17:37.860 | You just get cash back instead of your points back.

00:17:40.660 | But even better, if you have the Schwab Platinum Card,

00:17:44.380 | you can actually take all of your Amex point balance

00:17:46.980 | and transfer it to a Schwab brokerage account

00:17:49.460 | and get 1.1 cents for all your points.

00:17:52.700 | So if you had the Schwab Platinum Card and the Amex Gold,

00:17:55.980 | you'd effectively be getting 4.4% cash back on all dining.

00:18:00.240 | There's a lot of other cards

00:18:02.700 | in the three and a half, 3% and down range,

00:18:05.020 | but that's a little overview.

00:18:06.940 | In the travel camp, on flights, again, the Amex Platinum,

00:18:11.740 | that Schwab Platinum, also 5X points.

00:18:14.740 | Or if you cash out to Schwab, 5.5% cash back.

00:18:19.740 | So I could think of the Amex Platinum

00:18:21.260 | as a 5% cash back card,

00:18:22.700 | or Schwab Platinum as a 5.5% cash back card.

00:18:26.520 | The new Wells Fargo Autograph Journey Card

00:18:29.460 | is 5% on hotels back and 4% back on airfare.

00:18:34.020 | The Altitude Reserve, like I said,

00:18:35.440 | four and a half percent back on travel.

00:18:38.100 | This Chase Sapphire Reserve,

00:18:40.020 | depending on whether you value the points

00:18:42.140 | at statement credit value,

00:18:43.900 | which is 3X points would be worth 3% cash back,

00:18:48.120 | or if booking in the travel portal

00:18:50.060 | means that you feel like you can consider those cash back

00:18:53.860 | because you could just buy a flight

00:18:55.180 | and you don't need to transfer it to airlines

00:18:57.100 | and find availability,

00:18:58.300 | then the Chase Sapphire Reserve

00:18:59.620 | is also four and a half percent back on travel

00:19:02.580 | and rewinding four and a half percent back on dining,

00:19:05.460 | because the Chase Sapphire Reserve card

00:19:07.500 | gives you points worth one and a half cents

00:19:10.020 | in the Chase travel portal.

00:19:11.780 | So three times one and a half,

00:19:13.540 | that's where I get the four and a half percent.

00:19:16.140 | Gas, I did a little bit of research.

00:19:18.180 | It seems like the best card

00:19:19.220 | is the Abound Credit Union Visa card,

00:19:21.360 | which has 5% back on gas with no cap,

00:19:24.860 | because we have electric vehicles,

00:19:26.120 | not a category I've spent a lot of time on.

00:19:28.460 | Groceries, big category for lots of people.

00:19:30.500 | The Amex Blue Cash Preferred, 6% back on $6,000 a year.

00:19:35.500 | The Verizon card, which only works

00:19:37.240 | if you're a Verizon customer, is 4% back on groceries.

00:19:42.240 | Then there is a AAA card that gives you 5% back

00:19:46.040 | up to $10,000 a year.

00:19:47.700 | And then, like I mentioned earlier,

00:19:49.260 | the Amex Gold, up to $25,000 of spend on groceries.

00:19:53.180 | You get 4% back, or 4X points that you can convert

00:19:56.280 | for one cent, or with that Schwab Platinum,

00:19:58.400 | it's like four and a half, 4.4% back.

00:20:01.120 | Last, in the kind of internet cable phone bill category,

00:20:04.760 | the Ink Cash is 5% back there,

00:20:06.720 | and then there's a BMO Cash Back card that's also 5%.

00:20:09.680 | Now that I calculated all the best Cash Back cards,

00:20:11.700 | I really wanted to figure out

00:20:12.920 | if Cash Back was a better deal.

00:20:14.880 | So I went back to the Card Optimizer Spreadsheet tool

00:20:17.480 | I built last year, and I completely rebuilt it

00:20:20.480 | from the ground up.

00:20:21.520 | I probably spent 40 hours or more on it

00:20:23.740 | and added so much functionality.

00:20:25.840 | So for those that don't have it already,

00:20:27.260 | here's how it works.

00:20:28.500 | You add roughly, or exactly, however much you spend

00:20:31.820 | in a bunch of different categories,

00:20:33.620 | and you check off all the cards you have,

00:20:35.900 | I think I loaded 42 in the system,

00:20:38.100 | and it will tell you the return you're getting

00:20:39.940 | on your spend, net of all the annual fees,

00:20:42.860 | but more importantly, it'll let you simulate

00:20:45.220 | what things would look like if you add or subtract cards,

00:20:48.460 | so you can find the best combo of cards

00:20:50.560 | for your spending pattern.

00:20:52.180 | And with the upgraded version, it does a lot more.

00:20:54.860 | Most importantly, it'll let you set a specific goal

00:20:58.060 | of whether you wanna earn points, Cash Back,

00:20:59.940 | or whatever maximizes your return

00:21:01.980 | based on how you value points.

00:21:04.500 | Then I added a bunch of the Cash Back cards,

00:21:06.700 | like I mentioned above, including adding spending caps

00:21:10.060 | and the ability to pick which categories you want.

00:21:12.760 | So if you pick the City Custom Cash,

00:21:14.620 | you can say, "Give me my 5% back on gas or groceries."

00:21:18.780 | And when it tells you which card to use for a category,

00:21:21.140 | it will tell you a backup if you spend more

00:21:23.980 | than the cap allows.

00:21:25.820 | I also added in some toggles,

00:21:27.200 | so if you choose a Bank of America card,

00:21:28.900 | it'll ask you what status you have or things like that.

00:21:32.540 | And finally, it shows you which card to use

00:21:34.880 | for every single category,

00:21:36.980 | and tells you how much you'll be spending

00:21:39.020 | on each individual card.

00:21:41.000 | So if you wanna follow along,

00:21:42.980 | you can access that tool as well.

00:21:44.860 | It's live on the site right now

00:21:46.900 | at allthehacks.com/cardtool.

00:21:49.800 | As for the impact this tool can have,

00:21:52.120 | I'll just give you my personal experience,

00:21:54.040 | because after all, I built the tool I wanted to use,

00:21:57.140 | and when I plugged in my own spending and my own cards

00:22:00.140 | and looked at the gaps I had,

00:22:02.020 | I found that by tweaking my spending

00:22:03.660 | and adding just one card to my lineup,

00:22:06.240 | I'd earn an extra $500 per year,

00:22:09.260 | and a second card would bring that up to $800 a year,

00:22:12.820 | which at least for me is a meaningful amount of money

00:22:14.980 | worth doing something.

00:22:15.940 | So like I said, you can get the tool today.

00:22:18.820 | There's a full video walkthrough on the website.

00:22:21.400 | It's $48, but until May 10th,

00:22:23.780 | you can use the code LAUNCH for $10 off.

00:22:26.580 | However, if you already bought the first version

00:22:29.180 | of the Optimizer tool,

00:22:30.420 | check your email,

00:22:31.460 | because you'll have a special coupon code

00:22:33.180 | that adds $10 off to however much you paid

00:22:36.220 | for the first version.

00:22:37.420 | So if you paid $10, your new code will be for $20 off,

00:22:40.740 | and everyone that paid more than $38 for the first version

00:22:44.580 | will have a coupon code to make it free.

00:22:46.780 | Or even better, if you're already an AllTheHacks member,

00:22:49.820 | you can get the tool completely free on the member site,

00:22:52.540 | or if you wanna join and get the member tool for free,

00:22:55.840 | you can do that at allthehacks.com/join.

00:22:59.500 | And as a member,

00:23:00.340 | you'll also get to join our monthly member calls

00:23:02.620 | and get access to all our member exclusive deals,

00:23:05.300 | like a free year of Kubera,

00:23:06.660 | 50% off Trust and Will, and a lot more.

00:23:08.780 | So two different ways to get access.

00:23:11.220 | And I really wanna know what you think.

00:23:12.940 | I spent so much time and energy building this tool,

00:23:15.620 | and it's been super valuable to me.

00:23:17.420 | I hope it's valuable to you.

00:23:19.020 | Of course, you can find the link in the show notes again.

00:23:21.300 | It's allthehacks.com/cardtool.

00:23:23.820 | And so after building it, I decided to use it,

00:23:26.580 | both with the Bureau and Labor Statistics data

00:23:28.700 | for a family in the top 10% of spending,

00:23:30.940 | which turns out is about $90,000 a year, and for myself.

00:23:35.100 | And here's what I learned.

00:23:36.220 | For most people, you actually get 90% of the value

00:23:39.620 | with just four cards.

00:23:41.180 | I know that sounds crazy.

00:23:42.460 | A lot of us, myself included, have more,

00:23:44.080 | but for the purpose of this comparison,

00:23:45.580 | I'm just gonna focus on four card combos.

00:23:48.100 | However, thinking about card combos gave me an idea

00:23:51.220 | to actually do an episode running through each issuer,

00:23:54.180 | so Chase, Amex, Citi, and talking about the best cards

00:23:57.420 | and the best card combos within each.

00:23:59.140 | So stay tuned for that.

00:24:00.140 | Obviously, your spending patterns

00:24:01.660 | might change the calculus.

00:24:03.260 | Fortunately, you could use the tool

00:24:04.800 | and go in and put whatever spend in cards you want

00:24:07.340 | and get an even more granular version

00:24:09.780 | of what I'm about to share.

00:24:11.360 | So four team points.

00:24:13.860 | The four cards were the Amex Gold, the Amex Platinum,

00:24:17.040 | the Sapphire Reserve from Chase,

00:24:18.880 | and the Capital One Venture X.

00:24:20.640 | And for team cashback, we've got the Amex Gold,

00:24:23.820 | the Schwab Platinum, the Altitude Reserve,

00:24:26.600 | and the Robin Hood card.

00:24:27.800 | Like I mentioned earlier,

00:24:28.800 | if you're thinking Amex Gold is a points card,

00:24:30.720 | that's not a cashback card.

00:24:32.400 | Yes, but you can redeem those points for cashback.

00:24:35.360 | If you pair it with the Schwab,

00:24:36.480 | that makes it a 4.4% dining and grocery card.

00:24:39.480 | So that's pretty cool.

00:24:41.120 | It also means flights is a 5.5% back.

00:24:43.800 | Now, I get it.

00:24:45.240 | Maybe you're on team cashback

00:24:46.700 | and you don't want the hassle

00:24:47.840 | of converting points back into dollars.

00:24:50.840 | So I'll give you a couple backups there.

00:24:52.840 | On the travel side, you could just do the Altitude Reserve,

00:24:56.120 | which is 4.5% cashback.

00:24:58.280 | On the dining and grocery side,

00:25:00.320 | I would say your best bet is probably either

00:25:03.200 | the Verizon card for 4% back on groceries

00:25:06.720 | or the Capital One Saver for 4% on dining

00:25:09.760 | and 3% on groceries.

00:25:12.100 | Those are a couple of good options as a fallback

00:25:15.120 | if you don't wanna assume that you can convert

00:25:17.680 | Amex points to cash through the Schwab Platinum card.

00:25:21.380 | So those are the main cards.

00:25:22.800 | Here's the analysis.

00:25:24.800 | If I ran about $80,000 of spending,

00:25:27.620 | then team cashback is at $2,965 of cashback,

00:25:32.620 | and the points would have been 210,652 points.

00:25:38.000 | So effectively, that trade-off means you're buying points

00:25:41.040 | for 1.41 cents.

00:25:43.640 | And for the sake of the example,

00:25:45.680 | I'll just round 2,965 to 3,000,

00:25:48.760 | 210,652 to 210,000.

00:25:52.320 | And when actually, when I went in with my own data,

00:25:54.680 | which was a lot higher spend

00:25:56.280 | in a lot of different categories,

00:25:58.200 | it was about the same at 1.45 cents per point.

00:26:01.940 | So you could argue right here

00:26:03.960 | that if you value transferable points at 1 1/2 cents,

00:26:07.380 | then you're still getting a better deal,

00:26:09.300 | but I wanted to dig in a little more.

00:26:11.580 | You could argue that if you value transferable points

00:26:13.780 | at 1 1/2 cents,

00:26:14.820 | then you're getting a better deal with the points,

00:26:16.920 | but I also wanted to look at the opportunity cost

00:26:19.620 | of if you chose one path and wanted the other.

00:26:22.400 | So let's say you went with cashback

00:26:24.780 | and you decided you later wanted points.

00:26:27.220 | Worst case, if you took out that $3,000 that you saved

00:26:30.860 | and you used it to pay a 2.9% fee

00:26:34.580 | to send money or pay bills,

00:26:36.560 | you'd be able to cover $103,000 of spend.

00:26:40.420 | So let's assume you put it all on a 2X card

00:26:42.680 | like the Venture X,

00:26:43.980 | you would end up with 206,000 points,

00:26:47.020 | which is just 4,000 points less than you would have had

00:26:49.820 | if you had gone for points from the start.

00:26:51.660 | However, a few notes.

00:26:52.860 | Like I said before,

00:26:53.780 | if you have less expensive ways to buy points,

00:26:56.100 | like let's say you're always making

00:26:57.420 | estimated payments on taxes,

00:26:59.420 | or you are finding deals on flights

00:27:02.280 | where you can buy points like you could Life Miles points

00:27:04.740 | for 1.2 cents,

00:27:06.180 | then you would actually end up with way more points.

00:27:08.700 | And also, if you don't need the points right away,

00:27:11.300 | you could be investing all your cash back,

00:27:13.700 | getting a 5% return,

00:27:15.560 | which in less than a year would grow to enough cash

00:27:18.660 | that you would end up with more points as well.

00:27:20.980 | However, I don't know anyone

00:27:22.920 | who has a $100,000 limit on their card.

00:27:25.740 | So actually turning $3,000 into over 200,000 points

00:27:29.740 | would take some time and some effort,

00:27:32.560 | but you would get back to about the same place

00:27:35.720 | if you had gotten points in the first place.

00:27:38.220 | So let's reverse that.

00:27:39.360 | What if you earned points and then later wanted cash back?

00:27:42.660 | Well, that 210,000 points,

00:27:45.740 | I looked at each one of the different types of points

00:27:47.760 | you would have earned and the best ways to cash it out,

00:27:50.500 | even if you're perfectly optimal,

00:27:52.020 | meaning you have the Schwab Platinum,

00:27:53.820 | you get 1.1 cents per Amex point,

00:27:56.420 | you consider booking travel in the Chase Portal

00:27:58.980 | as a way to cash out,

00:28:00.020 | so you get one and a half cents there,

00:28:01.940 | you end up at $2,300 in cash.

00:28:05.020 | So while transferring your $3,000 cash back

00:28:08.500 | gets you about the same number of points,

00:28:10.460 | transferring your points

00:28:11.500 | gets you about $700 less in cash back.

00:28:15.380 | So you're down about 25%.

00:28:18.000 | My immediate reaction to all of this was a bit of shock.

00:28:20.780 | Have I been doing it wrong the entire time?

00:28:23.740 | But it's not all or nothing.

00:28:25.380 | So I thought, what if I ran through

00:28:27.420 | what I was actually putting on these cards?

00:28:29.880 | So for dining, grocery, and flights,

00:28:31.940 | those were on the Amex Gold and the Amex Platinum.

00:28:35.260 | So that's what I'm already doing.

00:28:36.780 | So I guess, no, I'm not doing it wrong.

00:28:39.740 | If I actually just wanted the cash back,

00:28:41.560 | I could just cash out all those Amex points

00:28:43.900 | and I'd probably open up the Schwab Platinum

00:28:46.380 | so I could cash them out at one and a half cents.

00:28:48.020 | So if I wanted cash back for my Amex points

00:28:50.620 | in those categories, I'm doing a good job.

00:28:53.620 | Then on the rest of travel, in the points world,

00:28:56.180 | I would be building up a balance with a Chase Reserve card.

00:28:58.840 | And if I felt like booking in the portal was reasonable,

00:29:01.960 | then I would actually get about 4.5% cash back,

00:29:04.880 | which is the same as the Altitude Reserve.

00:29:07.100 | So, okay, travel category,

00:29:09.320 | what I would be doing for cash back or team points,

00:29:11.440 | it doesn't matter, it's all about the same.

00:29:13.480 | So no real issues there.

00:29:15.620 | And then let's move to the next one,

00:29:17.300 | which was a big category of spend for us, which was Amazon.

00:29:21.140 | The best points card for Amazon

00:29:23.700 | without going down the rabbit hole of cards

00:29:25.620 | with spending caps is a 2X card like the Venture X,

00:29:30.340 | but the Amazon Prime card is 5% back.

00:29:33.620 | So if you're earning points like this,

00:29:35.720 | you are effectively paying two and a half cents

00:29:37.980 | for each of them, which is definitely not a good deal.

00:29:41.700 | However, it turns out I've actually already

00:29:44.340 | evaluated this specific one in isolation before.

00:29:47.900 | And so I actually use my Amazon card

00:29:50.860 | for all Amazon and Whole Foods purchases,

00:29:52.940 | and I do not earn points there.

00:29:55.500 | I did dabble a little while ago in buying Amazon

00:29:58.740 | and Whole Foods gift cards at a grocery store,

00:30:01.920 | getting 4X points, which would probably push

00:30:05.020 | the balances here towards points a little bit,

00:30:08.580 | depending on how you value them.

00:30:10.200 | But I will just say that it felt like a little bit

00:30:12.620 | of a hassle and I was trying to both optimize,

00:30:16.220 | but not over optimize, because at the end of the day,

00:30:19.380 | time is also really valuable.

00:30:21.260 | And that's one thing that I'm trying to control.

00:30:23.820 | So now let's talk about another big category, mobile wallet.

00:30:27.940 | And this is where I'm probably doing things all wrong.

00:30:30.820 | By using a 2X card, every time I go to Costco,

00:30:34.060 | instead of the altitude reserve,

00:30:35.900 | where I could be getting four and a half percent back,

00:30:38.420 | I'm effectively paying 2.25 cents per point,

00:30:41.820 | which is not a good deal, right?

00:30:43.820 | We've already established that there's probably easy ways

00:30:46.420 | to buy points for anywhere from like one

00:30:48.640 | to one and a half cents.

00:30:50.100 | So paying 2.25 seems crazy.

00:30:53.260 | And honestly, this is where I think I need

00:30:55.020 | to make a change going forward.

00:30:57.260 | And then finally, it's the everything else category,

00:31:00.180 | which is a really big category for me

00:31:02.100 | and feels like a place where I've been getting

00:31:03.780 | two and a half points,

00:31:05.260 | where I could now be getting 3% back.

00:31:08.060 | And fortunately for a moment, I was like,

00:31:09.620 | gosh, if I've been doing it wrong here too,

00:31:11.620 | and then I realized no, this 3% back card only just came out,

00:31:15.340 | I don't even have access to it yet.

00:31:17.260 | So maybe I'm about to be doing things wrong,

00:31:20.120 | but I can't look at it in the past.

00:31:22.500 | But it effectively means that by using a VentureX

00:31:25.060 | instead of a Robinhood card,

00:31:26.500 | I'm paying one and a half cents per point.

00:31:28.780 | Now, this one's right on the edge,

00:31:31.020 | because yeah, you could maybe find a way to get points

00:31:34.140 | for a little bit cheaper than that.

00:31:36.000 | However, it would be a lot of hassle.

00:31:38.440 | Now, if you assume we're not using the Robinhood card,

00:31:40.500 | 'cause it's not out yet, or at least not for me,

00:31:42.500 | and you look at the Bank of America premium rewards,

00:31:45.300 | that 2.625% versus 2X is like buying points

00:31:48.980 | at 1.31 cents per point, which I'm actually fine doing.

00:31:52.700 | So this cash back category, it's a little bit of a mixed bag

00:31:56.380 | and I'll give you my opinion in a second.

00:31:58.260 | But my big takeaway is that doing the best option

00:32:02.180 | that maximizes your return on a category basis

00:32:05.740 | and gives you some flexibility is amazing.

00:32:08.660 | So the fact that using the Amex Gold and the Amex Platinum

00:32:11.880 | for flights and dining and groceries

00:32:13.580 | is the best for both worlds,

00:32:15.740 | but I have points that I could cash back,

00:32:18.340 | knowing that if I cash them out,

00:32:20.020 | I'd be getting just as good a value

00:32:21.820 | of using cash back from the start, makes me feel good.

00:32:25.180 | But I probably need to start tracking

00:32:27.500 | how many of my everything else purchases

00:32:30.220 | could be on Apple Pay,

00:32:31.820 | because getting four and a half percent back

00:32:34.280 | through the Altitude Reserve

00:32:35.620 | seems like a pretty meaningful option.

00:32:37.920 | And knowing that the browser might count,

00:32:40.120 | I'm gonna start paying attention there.

00:32:42.840 | I'm actually probably gonna go in and look into Copilot,

00:32:46.080 | which is the budgeting app I love,

00:32:48.180 | and look how many of the categories of things

00:32:51.380 | that are in that everything else category,

00:32:53.140 | I could have used Apple Pay.

00:32:55.240 | Obviously, if you love Copilot,

00:32:57.140 | you can get a two month free trial,

00:32:58.420 | just use the promo code HACKS2.

00:33:01.100 | And that's a number two.

00:33:03.780 | As for the Robinhood card,

00:33:05.900 | I think what I'm going to do is actually get the card.

00:33:10.400 | It seems so crazy counter to the last 20 years of my life,

00:33:14.220 | but in the spirit of experimentation, which I love to do,

00:33:17.460 | I think I'm gonna get it

00:33:18.900 | and just see what it feels like to earn cash back.

00:33:21.900 | Maybe the first time I swiped the card,

00:33:23.740 | my gut just can't handle it.

00:33:25.080 | And I put it back in my wallet

00:33:26.320 | and I start paying with the Venture X again,

00:33:28.480 | but I could be wrong.

00:33:29.380 | Maybe I'll give myself a month of what that felt like.

00:33:31.640 | How do I feel?

00:33:32.880 | I honestly don't know.

00:33:34.280 | I'll share about how that experience goes.

00:33:36.760 | If you wanna try the same,

00:33:38.120 | allthehacks.com/robinhood is my referral link

00:33:40.640 | because I cannot start this experiment

00:33:42.440 | until I get the card.

00:33:43.700 | In fact, this is probably a good time to remind you,

00:33:47.000 | if you're getting any card

00:33:48.640 | and you wanna support me in the show,

00:33:50.400 | we have links to many cards at allthehacks.com/cards.

00:33:53.880 | I would appreciate you using those links,

00:33:55.840 | but if the best deal is not there,

00:33:57.640 | please go to wherever you get the most points.

00:34:00.560 | Usually we have those best deals,

00:34:02.000 | but there are some cards that we don't have on that page.

00:34:04.560 | So I totally understand.

00:34:05.800 | I always want you to get the best deal possible.

00:34:08.240 | So my big takeaway before I throw a big wrench

00:34:13.080 | in all of this is that if you wanna maximize,

00:34:15.800 | the best path forward is not to think about cashback

00:34:18.600 | and points as an absolute decision,

00:34:21.040 | but rather to think about how you personally value points

00:34:24.240 | and make the best choice on a category

00:34:26.560 | by category level of where you spend.

00:34:29.160 | So I value points very highly.

00:34:31.360 | I think it would be a lot of hassle to have to go

00:34:33.680 | and send money to friends or pay bills to generate points

00:34:37.240 | so I could go on a trip,

00:34:38.480 | but that doesn't mean I value them enough

00:34:41.080 | that I'm gonna start spending money on Amazon

00:34:43.680 | on a Venture X and paying two and a half cents per point.

00:34:47.140 | Also, if you have spend in other areas,

00:34:49.200 | there might be other cards worth looking at

00:34:51.240 | on the office supply category, the Chase Inc cash,

00:34:54.040 | on the entertainment streaming category,

00:34:55.640 | the Capital One Saver or Saver One cards,

00:34:58.120 | drug stores, Freedom Unlimited, Freedom Flex,

00:35:00.580 | and obviously if you pay rent,

00:35:02.480 | then you definitely need to check out the built card

00:35:05.200 | where you can earn up to 100,000 points a year paying rent.

00:35:08.480 | allthehacks.com/built, B-I-L-T, card is the link there.

00:35:12.960 | It's also where you pay rent.

00:35:15.160 | That's also on the allthehacks.com/cards page.

00:35:17.880 | So check that out if you are a renter.

00:35:20.260 | So let's get to this big wrench

00:35:22.360 | that might throw all of this off

00:35:24.000 | and the wrench is welcome bonuses.

00:35:26.280 | And the reason it might throw all this off

00:35:28.000 | is that the return on spending

00:35:29.560 | when you're earning a welcome bonus is actually so big

00:35:33.120 | that it dwarfs pretty much every card out there.

00:35:36.120 | So let me paint this picture a little more clearly.

00:35:38.540 | I pulled up the 10 top signup bonuses

00:35:40.900 | that I've found in the last few years

00:35:43.160 | with the absolute best one

00:35:44.960 | being the Chase Reserve launch bonus,

00:35:47.220 | which you got 100,000 chase points,

00:35:49.900 | which are worth as much as an effective $1,500 of cash back

00:35:53.760 | if you just book travel in the portal

00:35:55.760 | for spending just $4,000.

00:35:58.520 | I mean, think about that.

00:35:59.440 | You get $1,500 for spending $4,000.

00:36:02.240 | So you're earning 25 points per dollar.

00:36:04.400 | So spending money just like that

00:36:06.160 | would get you an effective 37.5% cash back on your spend.

00:36:11.160 | And that's not even including the points you get

00:36:13.800 | on that $4,000 of spend.

00:36:15.620 | So it doesn't matter what category you're spending money on,

00:36:18.420 | whether you're getting 5% or 3% cash back

00:36:21.320 | or four X points or even six X points,

00:36:23.780 | the return on that welcome bonus is absolutely unrivaled.

00:36:27.320 | But I said that was the best bonus I've seen

00:36:29.580 | from an ROI standpoint.

00:36:31.080 | So what's the full top 10 look like?

00:36:32.960 | And keep in mind,

00:36:33.800 | I'm just limiting this to transferable points cards.

00:36:36.160 | So I'm not including some huge hotel bonuses.

00:36:39.160 | For example, right now the IHG Premier card

00:36:41.440 | will give you 175,000 points for $3,000 of spend.

00:36:45.120 | So you're getting 58 IHG points per dollar.

00:36:48.120 | But if I look at the top 10 cards all time,

00:36:52.180 | it was $71,000 of spend to get all 10 welcome bonuses,

00:36:56.820 | but you'd get slightly more than 1.2 million points,

00:37:00.600 | which is about 17.3 points per dollar on average,

00:37:04.820 | which is wildly better than any other card

00:37:07.880 | for any category of spending.

00:37:09.680 | And even if you just value points at 1 cent,

00:37:12.040 | which is really low and really easy to get,

00:37:14.560 | that's 17.3% cash back.

00:37:18.240 | And so my initial reaction was,

00:37:19.240 | hey, that's just the 10 best welcome bonus offers.

00:37:22.520 | So I just looked at the top 10 welcome offers right now.

00:37:26.720 | And slightly different, but it's $60,000 of spend,

00:37:30.360 | it's actually less spend to get 1 million points,

00:37:33.720 | so less points, but it still averages 17 points per dollar

00:37:38.320 | or an effective 17% cash back.

00:37:41.640 | So clearly that is the best ROI focusing on welcome bonuses.

00:37:46.640 | But there are a few reasons why that strategy isn't perfect.

00:37:50.600 | Well, the best ROI is often on cards

00:37:54.380 | that require an average of $6,000 to hit the bonus,

00:37:58.160 | which means that if you spend $60,000 a year on cards,

00:38:01.640 | you're gonna need to be opening up 10 cards a year.

00:38:04.920 | But if you spend $120,000 a year,

00:38:07.280 | that means you need 20 cards a year.

00:38:09.360 | Now, if you have a player two,

00:38:11.280 | which meaning a spouse who's also in this game with you,

00:38:14.600 | then 10 to 20 cards a year might not be impossible,

00:38:17.500 | but certainly takes a lot of planning and work

00:38:20.440 | and would be a tremendous amount more work

00:38:22.680 | to repeat four, five, six, seven, eight, nine years in a row.

00:38:26.360 | One alternative though, could be going after cards

00:38:29.040 | with a lower percentage return,

00:38:31.240 | but much higher spend bonuses.

00:38:33.360 | For example, the Venture X business card right now

00:38:36.080 | will get you 210,000 points after you spend $30,000,

00:38:41.080 | which is only an average of seven points per dollar.

00:38:44.120 | So shy of that 17 point limit.

00:38:47.280 | However, if you and your player two did that card each,

00:38:51.600 | it would cover the entire $60,000 of spend

00:38:54.640 | and still give you a better return

00:38:56.320 | than every single cash back or points card

00:38:58.600 | I know on any category.

00:39:00.760 | And by the way, it's much more manageable

00:39:03.540 | than opening 10 or 20 cards.

00:39:05.400 | Even if you do have a player two

00:39:07.020 | and are okay managing 10 card openings a year,

00:39:10.040 | the sequencing really does matter

00:39:11.920 | and that's important to figure out

00:39:13.380 | because every issuer and even every card

00:39:16.180 | has specific rules about when you're eligible to open it

00:39:19.200 | and when you're eligible for the bonus.

00:39:21.240 | For example, we've talked about the Chase 5/24 rule

00:39:23.960 | where you can't have more than five or more cards

00:39:26.880 | opened in the past 24 years

00:39:28.320 | to get approved for another Chase card.

00:39:30.280 | There's also this 2/90 rule

00:39:31.840 | where you can only get two Amex cards in 90 days.

00:39:34.840 | And then a lot of the Amex cards have rules

00:39:37.280 | about when you're eligible for different bonuses.

00:39:39.880 | I'm actually thinking I'll just do a whole episode

00:39:41.840 | on card approval rules.

00:39:43.320 | So you make sure you know when you're eligible

00:39:45.220 | for a welcome bonus

00:39:46.600 | and when you're gonna get approved for a card.

00:39:49.200 | But just to be clear, this is very possible.

00:39:51.600 | I remember this amazing post on Twitter

00:39:53.400 | that I'll link to in the show notes

00:39:54.920 | where this guy and his wife in 2017 opened 26 cards.

00:39:59.800 | And in one year, they easily earned over 2 million points

00:40:04.800 | and their credit scores went up the entire time.

00:40:07.960 | They started at 670 and 794 as their credit scores

00:40:11.480 | and actually ended up at 798 and 805.

00:40:15.040 | So it's not impossible to convert all of your spend

00:40:18.760 | to welcome bonuses.

00:40:20.160 | But for me, I'm probably gonna end up

00:40:22.380 | with a hybrid approach

00:40:23.800 | where I maximize my return on the spend from cards

00:40:27.640 | in line with what I've done in my card tool

00:40:30.440 | without focusing on welcome bonuses.

00:40:32.820 | But three to four times a year,

00:40:34.600 | when we see an amazing welcome bonus, we'll jump on it.

00:40:37.520 | Especially if it's one

00:40:39.240 | that might have a lower rate of return

00:40:40.880 | than 15 to 25 points per dollar,

00:40:43.560 | but that has a high amount of spending

00:40:46.260 | and even bigger bonus.

00:40:47.800 | So yes, you might get the best bonus

00:40:49.840 | for 25,000 points on $2,000,

00:40:53.720 | but I'm much more interested in a 250,000 points

00:40:57.000 | on $20,000 bonus because I get a similar return,

00:41:01.100 | but only having to open up one card

00:41:03.840 | to spend a lot more and get a much bigger bonus.

00:41:06.560 | So I'm gonna be focusing on the absolute point return

00:41:10.120 | instead of necessarily ROI for each welcome bonus.

00:41:13.300 | So my final summary and takeaway,

00:41:16.080 | here's how I'm thinking about things.

00:41:18.240 | I'm going to continue going after

00:41:20.400 | the biggest welcome bonuses three to four times a year

00:41:22.600 | that I find them.

00:41:23.540 | So in the categories where we talked about cash back

00:41:26.000 | being a better ROI,

00:41:27.280 | I'm probably gonna stop focusing on points.

00:41:29.400 | That's definitely the Amazon Prime card,

00:41:31.120 | probably the Altitude Reserve card.

00:41:33.040 | As for the big question,

00:41:34.080 | which I'm calling the battle of the everything else card,

00:41:36.880 | do I keep going 2X points or 3% cash back?

00:41:40.780 | Even just since I last said that I think I'm going to do it,

00:41:44.240 | I've been debating in my head,

00:41:45.920 | but I think I'm committed.

00:41:47.000 | I'm going to get the card.

00:41:48.320 | I'm going to see how it feels.

00:41:49.720 | I will share everyone how that goes.

00:41:52.840 | As soon as I get approved.

00:41:54.100 | Again, three links for you before we wrap,

00:41:56.320 | allthehacks.com/robinhood

00:41:57.840 | if you wanna help me move up that line,

00:41:59.720 | allthehacks.com/cards

00:42:01.400 | if you wanna sign up for any cards and support the show,

00:42:04.760 | and then allthehacks.com/cardtool.

00:42:07.720 | I really like it.

00:42:08.680 | I really want feedback.

00:42:10.080 | So if I missed anything in this episode,

00:42:12.180 | or if you're using the tool

00:42:13.320 | and you wanna share feedback or have questions,

00:42:15.640 | podcast at all the hacks.com is where you can get in touch.

00:42:18.880 | I will see you next week.

Cash Back vs. Points: Are We Playing the Wrong Credit Card Game?

Chapters