The_Credit_Card_Points_Game_Isnt_Worth_It
00:00:00.000 | Welcome to Radical Personal Finance, a show dedicated to providing you with the knowledge,
00:00:02.880 | skills, insight, and encouragement you need to live a rich and meaningful life now, while
00:00:06.880 | building a plan for financial freedom in 10 years or less.
00:00:09.680 | My name is Joshua Sheets.
00:00:10.680 | I'm your host.
00:00:11.680 | Today, we're going to dip our toes over into the more seductive, more alluring, the sexier
00:00:20.000 | side of personal finance.
00:00:22.520 | In that, we are going to speak today about credit card points and mileage games and hotel
00:00:29.680 | points, etc.
00:00:30.680 | I'm going to share with you why I think that for most people, this credit card points game
00:00:37.520 | is basically worthless, and in some cases, worse than worthless.
00:00:44.240 | I am, however, going to tell you the specific people for whom not only is this credit card
00:00:50.100 | points game not worthless, but in fact, it's extremely profitable and it is well worth
00:00:55.880 | considering.
00:00:58.440 | Let's begin with a little bit of background.
00:01:01.200 | In order for you to understand the current iteration of the credit card points game,
00:01:06.340 | etc., you need to understand the history of the industry.
00:01:10.680 | I'm not going to lay out a hardcore history of the credit card industry, but rather just
00:01:15.640 | start by the integration of credit cards with airline mileage point programs, etc.
00:01:23.240 | First, businesses have, for a very long time, understood the power of some kind of loyalty
00:01:29.000 | program.
00:01:30.000 | One of the four ways that a business can increase its revenue is to increase the number of purchases
00:01:37.320 | from a specific customer per year or per month or whatever.
00:01:41.700 | If you have a customer that ordinarily comes into your business once or twice a month,
00:01:46.240 | and you can instead get that customer to come in three or four times a month, that makes
00:01:50.540 | an enormous impact on your revenue over the course of the business.
00:01:58.960 | Businesses have figured this out.
00:02:00.920 | We've all seen very simple loyalty programs where you get a little card from your favorite
00:02:04.880 | local submarine sandwich shop, and they say, "Buy 10 subs, get the 11th free," or your
00:02:11.320 | local car wash will give you a card and say, "Get 10 car washes, get the 11th free," things
00:02:18.000 | like that.
00:02:19.000 | These are all basic forms of loyalty programs, and these made their way into the airline
00:02:23.160 | industry at the very end of the 1970s, beginning of the 1980s, when airlines figured out if
00:02:28.880 | we could somehow figure out how to incentivize people to fly with us on our airline, then
00:02:37.400 | we could get them to more frequently choose us instead of our competitors.
00:02:41.880 | You have the concept of a mileage account, and with the early airline programs, it was
00:02:46.800 | relatively simple and straightforward.
00:02:49.120 | Let's say you flew 10 different 1,000-mile flights.
00:02:52.640 | That earned you 10,000 miles, and they would have a chart that says, "Once you've accumulated
00:02:57.800 | 10,000 miles on our airline, that qualifies you for a free ticket, and you can redeem
00:03:02.800 | your 10,000 miles balance with us for a free airplane flight or a couple of free airplane
00:03:09.000 | flights."
00:03:10.000 | I think these became very popular and were promoted significantly by the business community
00:03:16.560 | because they formed a really nice perk, a non-taxable job perk.
00:03:22.480 | You might have a businessman who flies constantly for work.
00:03:25.280 | His employer is paying for all of those trips, but every mile he flies for work, he gets
00:03:30.600 | points in his mileage balance because those points are awarded to the actual flyer who's
00:03:37.600 | on the airplane, not to the payer, the business, who pays for the flight.
00:03:42.760 | Due to a nice little loophole in the internal revenue code in the United States, these are
00:03:47.860 | just free non-taxable job perks.
00:03:50.760 | For a lot of guys, especially some guy who might be a road warrior in many cases, he
00:03:55.400 | could send his entire family on a luxury airplane flight vacation with luxury hotels based entirely
00:04:02.000 | upon the points that he earned from flying and staying in hotels on his business trips.
00:04:09.160 | As airlines were looking for a pathway to increase their revenue, and the credit card
00:04:15.000 | business itself started to grow, then in about the mid to late '80s, you started to see an
00:04:19.920 | integration of part of airlines and hotels partnering together with credit cards.
00:04:27.360 | They would offer people the ability to purchase an airline-branded credit card or the ability
00:04:32.280 | to sign up for a credit card and get a certain bonus.
00:04:36.080 | Today, these credit card programs have fundamentally transformed the entire airline industry in
00:04:42.800 | the United States, where not only does the company itself generate an enormous amount
00:04:49.080 | of revenue from these credit card programs, but also the entire airline has been restructured
00:04:54.780 | to cater to these programs.
00:04:57.160 | I follow a guy who has traveled enormously, is in the midst of starting an airline, etc.,
00:05:05.960 | and he's a European guy.
00:05:06.960 | One of the things that's interesting is every time he's in the United States, all he wants
00:05:09.560 | to do is complain about how the entire experience of first-class travel in the United States
00:05:15.320 | has been destroyed by the credit card system, because what has happened is instead of you
00:05:22.840 | gaining access to a first-class lounge or a business-class lounge because you paid for
00:05:26.640 | a proper first-class or business-class seat, now those lounges are jam-packed with aspirational
00:05:32.200 | travelers who are in there because of their American Express Platinum card or their status
00:05:37.400 | based upon a credit card purchase, and it's completely transformed the entire experience
00:05:42.520 | of travel, especially first-class and business-class travel.
00:05:46.080 | I'm not here to partake in that whining and complaining.
00:05:51.140 | After all, with the number of airplane tickets that I buy, I wind up on more budget airlines
00:05:54.680 | than I would prefer sometimes, but the point is that these credit card programs have experienced
00:06:01.640 | an enormous – have had an enormous impact on the industry at large.
00:06:05.400 | Now, when I first started to pay attention to this myself was at the early days of the
00:06:10.120 | credit card hacking industry, and the Internet enabled us to communicate about all kinds
00:06:13.600 | of esoteric topics, and because of my interest in personal finance, I was always attracted
00:06:18.480 | to this one, and I was an early subscriber to Chris Guillebeau's newsletters and – I
00:06:24.460 | mean, there are a lot of people before him, but that's just the name that I remember
00:06:28.920 | from back in that era, and basically, people would come together and they figured out how
00:06:32.880 | to game the system a little bit, and gaming the system, putting it very simply, involves
00:06:39.920 | signing up for lots and lots of credit cards in order to get substantial sign-up bonuses,
00:06:47.120 | spending lots of money on those credit cards in order to satisfy the minimum spending requirements
00:06:51.680 | of your initial sign-up bonus, as well as to accumulate points in an advantaged way,
00:06:58.320 | and then exploiting those points and redeeming them for first-class flights, really wonderful
00:07:05.800 | peak experiences, things like that.
00:07:07.920 | And because of the ability of these communities to share information, the tactics and techniques
00:07:12.800 | advanced very quickly.
00:07:15.280 | Just by way of illustration, there was a time where there was a very short window when there
00:07:19.280 | were people that were buying coins directly from the U.S. Mint on their credit cards,
00:07:24.200 | and they're spending hundreds of thousands of dollars on their credit cards in order
00:07:27.840 | to generate points, and then getting those coins and then, I guess, reselling them – I
00:07:32.560 | can't remember what they did with them – but putting them in the bank, et cetera.
00:07:35.960 | And so there have always been ways to basically game the system, and those ways have been
00:07:40.840 | shared around these Internet communities very, very quickly.
00:07:45.160 | And today, the tactics and the techniques are quite advanced.
00:07:49.440 | There are many, many educators out there who have large, thriving brands of content and
00:07:56.960 | education devoted to teaching people how to maximize these programs, what cards to sign
00:08:02.080 | up for, how to make the whole system work, how to redeem them, et cetera.
00:08:08.200 | There's many different angles to it.
00:08:10.400 | And this is something that has always been an interest of mine.
00:08:12.960 | After all, it's perfectly congruent with my brand.
00:08:17.960 | This is radical personal finance, how to get free stuff.
00:08:21.180 | And I have partaken of this off and on throughout the years to different levels, and it is this
00:08:29.640 | experience that has led to my forming the perspectives that I'm now going to share
00:08:35.320 | with you.
00:08:36.320 | The problem is that I don't think that most people really are served by these programs.
00:08:42.160 | There are some obvious objections.
00:08:43.960 | For example, the most obvious objection is if you find yourself carrying credit card
00:08:48.760 | balances and paying significant amounts in interest, then these programs are never going
00:08:53.760 | to pay off for you.
00:08:55.400 | And most of the educators in this space, people who have large brands, say that up front.
00:09:00.720 | If you're the kind of person who carries credit card balances, don't do this because
00:09:03.760 | it's going to wind up getting you into trouble.
00:09:06.320 | And I think that's good advice.
00:09:07.320 | So if you're the kind of person who carries credit card balances, you will not make up
00:09:12.520 | for the amount of money that you spend in interest with some free points and free hotel
00:09:19.640 | stays.
00:09:20.640 | That's the first thing.
00:09:22.080 | There are other objections though that don't apply.
00:09:27.080 | So for example, some people think, "Oh, it's all a scam."
00:09:29.480 | It's not a scam.
00:09:30.920 | It is absolutely something that works.
00:09:34.240 | You can take free flights.
00:09:35.920 | I have booked various free flights.
00:09:37.960 | You can take free hotel stays.
00:09:39.720 | I've stayed in free hotel stays, et cetera.
00:09:42.280 | Those things are there.
00:09:44.080 | The biggest problem that I have with it is that there is an enormous amount of learning
00:09:50.120 | that has to be done in order to exploit these programs at the highest possible level.
00:09:56.120 | And this learning is really significant.
00:10:00.640 | It's very, very time consuming.
00:10:03.040 | I'm not an ignorant person in the world of personal finance.
00:10:07.160 | I grasp most things related to personal finance pretty quickly and I learn things fairly easily.
00:10:15.080 | Over the last couple of years, as I have dug back into this space and as I do with all
00:10:19.840 | of the stuff that I talk about, really worked hard to test everything for myself.
00:10:25.920 | As I started hacking the credit card game and applying for new offers and accumulating
00:10:30.440 | points and et cetera, I was amazed at how complicated this space has become.
00:10:36.760 | Because there's this constant cat and mouse game between the credit card offers and the
00:10:41.080 | world of credit card hackers.
00:10:43.680 | And the offers are designed to appeal to as many people as possible, but then the hackers
00:10:48.280 | come along and abuse the offers until they have to make the offer a little bit less sweet.
00:10:55.640 | And so the value of my observation is that the whole industry is not nearly as easy as
00:11:01.040 | it was 10 years ago.
00:11:02.280 | It's not to say it can't still be done, but it's not as easy as it was 10 years ago.
00:11:07.560 | The signup bonuses are, even if the nominal value point, the number of miles that you
00:11:15.240 | receive on a nominal basis may be large and higher, the actual value of those miles has
00:11:20.880 | changed dramatically.
00:11:23.000 | And the airlines are always jiggering with their mileage award charts, and they're always
00:11:27.360 | jiggering with their alliances, and they're always jiggering with their dates and the
00:11:30.640 | tools et cetera to use it.
00:11:32.800 | And so it's extremely complicated.
00:11:35.200 | And what most people don't understand is that accumulating the miles is the easy part.
00:11:41.040 | It's not difficult if today you wanted to go and join the airline miles game, it's not
00:11:46.760 | difficult for you to go and by three or four months from now have a few hundred thousand
00:11:52.040 | miles in your accounts as long as you have an adult sized financial life and you can
00:11:57.720 | meet the minimum spending requirements.
00:12:00.240 | However, that's only half of it.
00:12:03.360 | The other half of it is the redemption.
00:12:06.160 | And this for me has been the biggest disappointment for my own situation.
00:12:10.640 | For example, when I fly, I don't, generally if I'm flying alone, I'm flying on business.
00:12:16.520 | And so ordinarily I wouldn't use award travel for that, rather I would just book flights
00:12:21.160 | and deduct them as business expenses properly.
00:12:24.680 | So if I'm going to use award travel, I generally want to do award travel with my family.
00:12:29.500 | But due to the size of my family, it's often difficult to find the appropriate number of
00:12:34.040 | award tickets.
00:12:35.920 | Now I understand that I have an unusually large family in today's world when I'm buying
00:12:40.860 | seven airplane tickets, but even if you're buying four airplane tickets, you still have
00:12:45.640 | a similar problem.
00:12:47.320 | And the biggest, like the most advantageous redemptions with using miles usually comes
00:12:57.000 | with purchasing business class or first class travel.
00:13:00.840 | That's where most of the best, that's where you get the most attraction.
00:13:05.160 | If you go on and you try to find somebody who's teaching you about the mileage and points
00:13:08.560 | game, what's going to attract you I think is the idea that look, you can get two business
00:13:13.060 | class seats to the Maldives and you can fly all the way there and back in business class
00:13:18.100 | with look at this great deal I got and look at this amazing over the water bungalow that
00:13:21.560 | I booked for X number of thousand points, and isn't this an incredible experience?
00:13:26.360 | Well yes, it is, if you are one person or two people flying together, because you can
00:13:31.720 | frequently find one or two seats in business class as award travel.
00:13:37.280 | It's much more difficult if not impossible to book seven business class seats on one
00:13:43.200 | airplane ticket or one flight.
00:13:45.720 | I have not been able to successfully do that.
00:13:48.160 | I have with some of the new tools that are now available, have been able to find seven
00:13:55.440 | seats and get seven seats on economy class, but not on business class.
00:14:01.840 | Speaking of tools, there was one tool that was an incredible value for me, and that tool
00:14:07.200 | it may be for you as well, because I accumulated massive numbers of points.
00:14:13.240 | And then I could not figure out how to redeem them properly, and I signed up for various
00:14:17.680 | courses and various educators and whatnot.
00:14:19.920 | It wasn't until sometime back I discovered the tool of seats.aero, s-e-a-t-s.a-e-r-o,
00:14:28.760 | seats.aero, which is a little web tool that somebody has built that allows you to find
00:14:32.760 | award travel seats that are available from all the different airlines systems.
00:14:39.240 | And that saved me, because now I was able to, using that tool, I was able to search
00:14:45.360 | for seven airline seats and only look at the airlines that had the appropriate amount of
00:14:53.280 | space.
00:14:54.280 | And that's what allowed me to start using points on airline travel.
00:14:58.280 | By the way, even this tool, if you go to seats.aero, you can use some of it for free.
00:15:03.160 | I have a paid account, paid subscription to it, but you can use a lot of it for free.
00:15:08.120 | And one of the things that you'll quickly find out is you'll see the complexity of it.
00:15:13.680 | For example, in order to properly redeem your points, one of the tools and tactics that
00:15:18.840 | you need to learn is that you frequently need to redeem your points with a partner airline
00:15:24.640 | of the airline that you actually want to fly on, and it's not on the airline that you're
00:15:28.800 | redeeming them for.
00:15:30.320 | So recently I was redeeming some points, let's see, what was it?
00:15:35.440 | I was booking for an Air France flight on Delta, which is a pretty simple example.
00:15:40.600 | I was booking on Delta for an Air France flight, and then I was booking on Air Canada for a
00:15:47.440 | Turkish Airways flight.
00:15:49.000 | Things like that are very normal.
00:15:50.720 | And so you frequently have to book on an alliance partner in order to get things, and it takes
00:15:56.080 | quite a lot of time to figure this stuff out, figure out where would I like to stay, what
00:15:59.840 | would I like to do, et cetera.
00:16:03.720 | The next thing that's a limitation for a lot of people is it's going to be very difficult
00:16:07.980 | for you to use these travel experiences for their maximum value if you have any kind of
00:16:14.120 | constraints on your schedule.
00:16:16.180 | So what really works the best is if I'm one or two people, and I'm open to any kind of
00:16:22.840 | peak experience, and I can just browse around using a tool like seats.arrow, and I can see,
00:16:28.700 | hey, where can I get great redemptions, and oh, that'd be fun.
00:16:31.500 | Let me go and fly to that place, and let's go and fly business class there.
00:16:36.460 | And that's perfectly fine, by the way.
00:16:38.140 | That's what I teach.
00:16:39.140 | If you want to travel the world for cheap, then one of the basic secrets is figure out
00:16:42.940 | where it's cheap to go, and then figure out what's interesting to do there.
00:16:46.940 | And the same principle applies to booking award travel, figuring out where you can get
00:16:50.820 | a great redemption for a great experience, and then figure out what you want to do there.
00:16:54.900 | What's much more difficult is to book a specific place on a specific schedule.
00:17:01.460 | So I want to be at this city on these dates, and I want this hotel to work out, and I want
00:17:05.860 | these airlines to work out.
00:17:08.020 | Very rarely are you ever going to be able to accomplish the full booking process all
00:17:13.260 | based on your points.
00:17:14.900 | Very rarely are you going to be able to get the airline reward redemption on the date
00:17:19.380 | that you want, in the class of travel that you want, to the specific place that you want,
00:17:23.660 | and the hotel that you want as available, and have it all line up.
00:17:26.780 | So frequently, you're going to be using your points to fill in one or two of those pieces,
00:17:31.220 | and then you're going to put one or two of those pieces just under normal, normal constraints.
00:17:36.740 | And okay, that's not such a terrible thing, but it's annoying and frustrating.
00:17:42.420 | And those are some of the biggest issues that I've had.
00:17:45.160 | Similar thing, by the way, to booking airplane seats occurs with booking hotels.
00:17:50.060 | Let's say I want to book a hotel reservation.
00:17:52.340 | I find it incredibly easy to use up all my hotel points when I'm traveling by myself.
00:17:57.700 | That's no problem.
00:17:58.700 | Or if I'm just traveling with my wife or one or two people, no problem, because then everything
00:18:03.060 | works easy.
00:18:04.060 | I want to book a reward.
00:18:05.060 | I need a standard room.
00:18:06.060 | If the standard room has a bed with, you know, it's a double room for two people, sometimes
00:18:14.140 | four people, et cetera, then that's no problem.
00:18:16.660 | I can book it with points frequently.
00:18:18.540 | Problem is that a lot of times, again, those are business trips, and those are trips that
00:18:21.580 | I would prefer just to pay for, and I'd like to save my points for my personal consumption.
00:18:26.960 | But then when we go to personal consumption, then I need multiple rooms, and it can be
00:18:31.580 | difficult on various hotel platforms to book multiple rooms, or they're not available on
00:18:36.220 | the dates that I want, et cetera.
00:18:37.900 | And so it's just very difficult for my logistics to make that work.
00:18:42.740 | And sorry, it sounds like I'm whining.
00:18:44.340 | I'm not whining.
00:18:45.340 | I'm just sharing with you what I've learned, because this does kick in at anywhere.
00:18:50.500 | If you have two children and you're a family of four, I think you'll experience these same
00:18:54.140 | things.
00:18:55.220 | I have not found – I'm sure they're probably out there, but I haven't looked for them either.
00:19:00.180 | But very frequently, the most active teachers on this subject are usually a single guy or
00:19:06.980 | gal or a couple.
00:19:08.760 | And so all of their travel is done as two people, where the world is very – the world
00:19:13.140 | of mileage, redemption awards, et cetera, is very friendly to them.
00:19:17.660 | When I've had to figure out how to make some of this stuff work with many more people,
00:19:21.060 | I've found it much more difficult.
00:19:23.300 | Doesn't mean that it's not possible.
00:19:24.580 | I've learned a lot.
00:19:25.980 | I mean, I've considered making my own course on the subject, and someday maybe I will.
00:19:31.980 | It's not the highest priority for me, but who knows.
00:19:35.300 | It can work out and it can provide some cool ways to get some peak experiences, but it's
00:19:40.980 | difficult.
00:19:41.980 | Now, what's the biggest problem with it?
00:19:43.460 | My biggest problem with the whole system is the opportunity cost.
00:19:47.180 | And lest I sound like an endlessly scratched record, I am, because the biggest problem,
00:19:55.140 | the biggest cost for most of the things that we do is the opportunity cost, and I think
00:19:59.300 | that mileage hacking and mileage, et cetera, the whole deal, it's very much associated
00:20:07.180 | with this.
00:20:08.180 | So recently, I booked a very complicated trip that I'm planning to take, and I'm going
00:20:15.820 | to not share any of the details for the moment, but a very complicated international trip.
00:20:21.860 | And I spent, in order to book that trip, I had all the miles, trying to use the miles,
00:20:27.460 | et cetera.
00:20:28.460 | It took me something like 18 hours of work over the course of about two or three weeks
00:20:35.860 | to get this done, 18 hours just to book this trip.
00:20:41.900 | And I think I said it was a complicated trip.
00:20:44.020 | I booked it as a complicated trip, but it was complicated because it took so many iterations
00:20:47.900 | to figure out a version of the trip that I was happy with, of the destinations that I
00:20:51.820 | wanted to visit, all of the accommodations, et cetera.
00:20:55.500 | And that was just 18 hours for one trip.
00:20:58.580 | Now what is the cost to me of that 18 hours of time versus the benefit?
00:21:03.500 | Well, the benefit is I was able to use my points.
00:21:06.940 | Great.
00:21:07.940 | But were the points free?
00:21:09.340 | No, they certainly weren't free.
00:21:11.220 | There's a cost to accumulating the points, et cetera.
00:21:14.580 | And then using them, it was such a frustrating experience that it just made me wish I'm
00:21:20.180 | just going to pay for everything.
00:21:22.460 | And when I think about the amount of time that I've spent investing into the redeeming
00:21:29.020 | the stuff, figuring out the rules, figuring out the airlines, checking here, checking
00:21:33.140 | there, trying to get the best deal, the best value, et cetera, I just look at it and I'm
00:21:37.940 | pretty scandalized by it.
00:21:39.420 | And I think, Joshua, just make more money.
00:21:41.760 | What an idiot you are for spending all this time trying to play this game.
00:21:44.640 | Just make more money.
00:21:45.920 | And make more money and afford to go and buy yourself seven business class seats because
00:21:49.820 | you can buy seven business class seats, you just can't redeem seven mileage award seats.
00:21:56.860 | And that, I think, is the biggest thing that most people don't reflect on.
00:22:00.260 | The time commitment for this world of mileage hacking, et cetera, is enormous to learn it
00:22:07.180 | and to do it and to practice it on an ongoing basis.
00:22:10.400 | It has to be genuinely a hobby that you enjoy.
00:22:14.780 | Going and searching for flights and checking this website, that website, this tool, that
00:22:18.620 | tool, et cetera, figuring out where could I go this month, where could I go next month,
00:22:22.340 | and just doing that, it has to be something that you enjoy, something that's relaxing
00:22:28.400 | to you, sitting on the couch watching TV and you're just goofing off on the laptop looking
00:22:33.140 | for valuable redemption awards.
00:22:36.120 | The average person who doesn't have that kind of interest and isn't going to do it, I don't
00:22:39.920 | think is well served by this system because it's too time consuming for you to go and
00:22:44.560 | accumulate the knowledge necessary and then to know how to even go through and accomplish
00:22:50.360 | the redemptions.
00:22:51.640 | The complexity of the whole system, the complexity of accumulating the points and doing this
00:22:57.560 | program and tracking my minimum spend, okay, where can I get another $3,000 of spending?
00:23:02.400 | And then I'm going to put this into this program, I'm going to have my American Express points,
00:23:05.560 | I'm going to have my ultimate rewards points, I'm going to have my Capital One points, I'm
00:23:08.840 | going to have, okay, this is going to go to this program, now there's a mileage bonus,
00:23:11.840 | let me go ahead and, the complexity of it eats up enormous amounts of time and it has
00:23:16.840 | to be a hobby.
00:23:17.840 | And if you actually look at the actual value that you get from it, is that really a good
00:23:23.680 | value of the time?
00:23:25.120 | What if you had something better to do with the time?
00:23:27.820 | What if you had some way to invest that time to make more money, to do something more interesting
00:23:32.560 | with your time and with your ability?
00:23:36.520 | In addition, there is, and I'm going to quickly come to who this is right for, but one more
00:23:43.520 | thing to point out.
00:23:46.600 | Frequently you're dealing with, because you're going after the luxury experiences in many
00:23:52.320 | cases, frequently you are dealing with not the best option.
00:24:00.760 | What I mean is, let's say you go to, I don't know, booking.com, you're going to travel
00:24:05.640 | to Paris, France, and you go to booking.com and you are going to choose a hotel.
00:24:10.360 | Well, a site like booking.com will serve you thousands and thousands of different options,
00:24:15.600 | from the most luxurious to the least luxurious, et cetera.
00:24:19.160 | You can choose among those options.
00:24:21.340 | If you've got your credit card points, then you are restricted to the partner to which
00:24:27.040 | you can transfer those points.
00:24:29.200 | Maybe it's Hyatt or Hilton or Marriott, those are the big ones, Hyatt, Hilton, Marriott
00:24:33.480 | and IHG are your big ones.
00:24:37.040 | Don't get me wrong, I really like these hotel chains.
00:24:39.680 | One of the things that in my own travel planning, whenever possible, I avoid flying on American
00:24:46.320 | flagged carriers.
00:24:48.000 | I avoid Delta and United and American Airlines whenever possible in favor of some foreign
00:24:54.200 | brand.
00:24:55.200 | I'd rather fly on Korean Air or Singapore Air or Turkish Airways, et cetera, because
00:24:58.600 | I find that you get better service on non-American flagged airlines.
00:25:03.520 | However, I personally prefer to stay at American flagged hotels.
00:25:08.080 | If I have the choice, I'd rather stay at a Marriott or at an IHG or Hyatt or something
00:25:13.680 | like that, in many cases, rather than a small independent hotel, because you get a different
00:25:18.800 | level of service.
00:25:20.640 | I don't know why there's that difference, but at least it's something I've noticed and
00:25:24.120 | I would bet other people have as well.
00:25:26.320 | That I would rather fly on a non-American flagged carrier in order to stay at an American
00:25:31.120 | flagged hotel chain versus the opposite.
00:25:35.480 | But still, you're just getting one certain thing.
00:25:37.760 | Now with the portfolio of brands that each of these companies has, you can often find
00:25:43.960 | the kind of experience that you're looking for.
00:25:46.680 | But the point is that you're often locked in and the same thing happens with airlines.
00:25:51.160 | If you are flying for money, you have all the same searching ability that you can do
00:25:55.760 | and you can often find all kinds of inexpensive fares that are available for you, either due
00:26:00.040 | to better competition on that route and/or etc.
00:26:05.720 | Just better competition on the route or more mistake fares or their sales.
00:26:11.920 | All the same things apply to finding great airfare deals.
00:26:16.280 | It's just a simpler, more straightforward system to spend less time finding a good deal
00:26:21.240 | on the kind of hotel that you want to stay at and the kind of airline that you want to
00:26:24.320 | fly on, rather than spending all the money and the time to deal with the points.
00:26:30.360 | So who is a good fit for these mileage programs?
00:26:35.360 | Well, as far as I'm concerned, there are a few no-brainers.
00:26:38.440 | So the first one that's an absolute no-brainer is simply this.
00:26:43.120 | If you have some kind of significant ongoing expenses, usually expenses associated with
00:26:49.920 | your business, and you can pay for those expenses with a credit card, and there's no cheaper
00:26:55.200 | way for you to get those expenses covered with another form of payment, well, then you
00:27:00.680 | are a perfect fit for a mileage program.
00:27:04.780 | So if you buy hundreds of thousands of dollars per year of Facebook ads and Twitter ads and
00:27:10.360 | things like that, or if you run a contracting business and you spend hundreds of thousands
00:27:15.440 | of dollars a year renting equipment, things like that, or if you purchase supplies for
00:27:21.200 | customer projects, you're renovating houses and you purchase tens of thousands of dollars
00:27:26.280 | of building supplies, which you then bill your client for, you are a perfect fit for
00:27:31.640 | a points credit card, because you'll have so much spending that just the natural value
00:27:37.200 | of the points, you'll accumulate enormous quantities of them.
00:27:40.400 | And if you have enormous quantities of the points, and it's basically "free," then you
00:27:45.760 | don't have to spend all your time going through and trying to figure out how to maximize every
00:27:50.620 | single redemption.
00:27:52.440 | It's perfectly reasonable for you.
00:27:54.140 | If you earn hundreds of thousands of points per year just naturally, it's perfectly reasonable
00:27:58.600 | for you to pop open Delta Airlines and say, "I want to go here on those dates.
00:28:02.800 | Oh, look, pay with points."
00:28:04.440 | And it's perfectly reasonable for you to pop open Marriott.com and, "Hey, look, I want
00:28:09.680 | this number of rooms," and boom, pay with points, done.
00:28:12.480 | It works fine.
00:28:14.080 | You're not in any way maximizing the system, but you are a good candidate for those kinds
00:28:19.640 | of programs, just because your built-in spending to the business allows you to accumulate points.
00:28:26.360 | And those points are probably more valuable to you for those luxury experiences and those
00:28:31.720 | tax-free perks and things like that than would be something like a cashback option that just
00:28:36.880 | adds a little bit more profit that you probably don't need.
00:28:40.120 | The second person for whom this is really appropriate is somebody who's an aficionado.
00:28:47.200 | So if you are a single person or a couple or maybe a family of three and you really
00:28:52.280 | enjoy this and it's something that you do as kind of a relaxing thing, then yeah, this
00:28:56.920 | is a good fit for you because you'll go through the learning process, you'll learn all the
00:29:01.500 | ways to exploit it, maximize it, you'll learn all the loopholes to redeeming them, and you'll
00:29:06.860 | be able to create some luxury experiences that you wouldn't otherwise have.
00:29:12.680 | That really is true, and it is possible for people.
00:29:16.200 | But it needs to be your hobby, and this leads me to kind of the cross between the second
00:29:20.080 | and the third person.
00:29:21.080 | I think the third person for whom this is a good fit is somebody who just doesn't have
00:29:27.280 | other money-making opportunities.
00:29:32.560 | Let's say, for example, that you and your wife are both college professors, and you
00:29:40.120 | just love it.
00:29:41.120 | You love teaching, you like your lifestyle, and this is what you're going to do, and you
00:29:46.400 | don't have any interest in trying to do a side business and becoming the next Andrew
00:29:50.360 | Huberman or something like that.
00:29:53.000 | You're just focused on, "We like teaching our classes, and this is what we do."
00:29:56.920 | Well, in that situation, your income is not infinitely scalable.
00:30:02.040 | You're not going to go out and spend your time working on a side hustle to make more
00:30:05.040 | money.
00:30:06.040 | You're not an entrepreneur.
00:30:07.040 | You have a stable, fixed income and a good lifestyle associated with it.
00:30:10.520 | Perfectly fine.
00:30:11.520 | There's nothing wrong with that.
00:30:12.880 | But the acknowledgement is, unlike me, who if I had invested those 18 hours into something
00:30:17.240 | else, I certainly could have made a lot more money than redeeming my points made for me.
00:30:21.600 | You have a different system.
00:30:22.800 | You have a different set of constraints.
00:30:25.240 | If you have that, and you earn enough money to cover your expenses, and you're not going
00:30:32.300 | to go into debt, and you have a kind of a stable lifestyle, then this may be a way for
00:30:36.640 | you to just systematically acquire some points so that you can have some cool peak experiences.
00:30:47.420 | It doesn't become that difficult if you have a little bit of basic knowledge.
00:30:51.780 | In essence, let's say quarterly, you're going to sit down and you're going to subscribe
00:30:55.420 | to a couple of newsletters or check out a couple of forums or subscribe to some various
00:31:00.460 | teacher's premium program.
00:31:02.660 | Every few months, you're going to make a credit card application, take out a new card, you're
00:31:06.060 | going to move your spending to that card for a few months, and you're going to accumulate
00:31:10.020 | quite a lot of points that way, and that can work well.
00:31:14.340 | That's the crossover between kind of the person for whom it's a hobby.
00:31:17.540 | If this is really a hobbyist of yours, okay, you can do well at it.
00:31:21.000 | But I'm skeptical that most people are really getting all that much benefit from it compared
00:31:26.020 | to what is possible.
00:31:28.020 | Because for most of us, what we're giving up to engage in that world is many more lucrative
00:31:36.460 | opportunities.
00:31:37.460 | It doesn't have to be a side hustle, it doesn't have to be entrepreneurship.
00:31:40.620 | But the problem with becoming an expert in the credit card points game is, unless you're
00:31:45.060 | going to build a business around being an advisor to people on credit card points, you're
00:31:49.500 | probably neglecting something else that would enhance your career more effectively, something
00:31:54.300 | that would allow you to improve your job skills.
00:31:59.120 | With the amount of time that you spend playing with the credit card points game, you may
00:32:02.860 | be able to code, learn to code, and go into a completely different setup, or become the
00:32:07.940 | expert on artificial intelligence at your company, guiding your company to more profitability,
00:32:12.700 | or becoming world-class at some other thing.
00:32:16.020 | And that's what we need to be really cautious of, is we need to be careful that we're not
00:32:19.420 | paying a higher cost with our opportunity cost than we are aware of it.
00:32:25.260 | If you enjoy the hunt for the deal, go for it.
00:32:28.060 | I think in many cases, you probably should focus out more on making more money instead.
00:32:33.420 | Great.
00:32:34.420 | And if you have high consistent expenses that can go on credit cards, go for it.
00:32:38.420 | But remember that these things may be a distraction.
00:32:42.020 | And as I've said previously, as I reflect on 10 years of radical personal finance, one
00:32:48.660 | of the regrets that I have is that I spent a lot of time getting distracted with things
00:32:54.540 | that were…they seemed alluring, because they seemed like I was going to live the lifestyle
00:33:01.500 | of a millionaire without being a millionaire.
00:33:04.940 | They seemed like things that I should go after, because look, I can exploit this, I can maximize
00:33:09.940 | this little loophole, I can save a little bit here, etc.
00:33:13.940 | And I've just come to see a lot of that as wasted time and effort.
00:33:19.180 | It's not a matter of…really great personal finance is not built upon a lifestyle of clipping
00:33:25.840 | a coupon here and saving a little bit there and finding some way to live like a millionaire
00:33:31.540 | without being one.
00:33:33.680 | The most effective pathway is the direct one.
00:33:38.500 | It's the direct pathway to becoming a millionaire, to making a million dollars a year, to building
00:33:44.740 | a business that can comfortably buy you all of your first-class travel and put you up
00:33:49.240 | at the first-class hotels and things like that.
00:33:52.580 | I'm always conscious that that may not actually be open to everybody.
00:33:59.860 | I'm not making fun of clipping coupons.
00:34:03.220 | They serve a value.
00:34:05.660 | But truly, we are more capable than we realize.
00:34:11.680 | And if I had stopped years ago chasing down little things to find a loophole and get something
00:34:21.020 | for nothing and go a little farther, etc., and just focused on the fundamentals, then
00:34:28.260 | it would not be necessary.
00:34:31.100 | None of the little deals and things would have been necessary.
00:34:34.580 | And as I try to learn from the last 10 years and make a better plan for the next 10 years,
00:34:40.180 | this is at the core of where I'm at in my own business, my own personal finances, etc.
00:34:47.140 | And I don't think I have anything to apologize for in terms of the content that I've made
00:34:55.580 | or anything like that.
00:34:56.580 | I don't think I've steered anybody wrong.
00:34:58.260 | I just didn't realize how time-consuming a lot of those things really were and how much
00:35:05.420 | better it would have been to focus on the fundamentals.
00:35:09.300 | And a more straightforward focus on the fundamentals would have, I think, more fully paid off.
00:35:14.860 | So now when I see people who are really interested in the credit card game, etc., I just ask
00:35:21.980 | myself, again, unless they're making money on it and they have a coaching business or
00:35:25.460 | whatever or programming some tool that works out and pays them money, I just ask myself,
00:35:30.460 | "Wouldn't you be better off doing something else?"
00:35:32.100 | And the answer almost every time has been yes.
00:35:35.820 | I've never met a wealthy person who got rich because of their credit card points.
00:35:41.140 | There are a significant number of wealthy people who have gotten rich talking about
00:35:44.740 | credit cards, selling credit cards, etc., and no problem with that because there are
00:35:50.140 | a number of people who've been able to take a once-in-a-lifetime trip, a really peak experience
00:35:54.060 | because of it.
00:35:56.540 | But on the whole, I've never met anybody who's become wealthy accumulating credit card points.
00:36:03.960 | And even if you go to those peak experiences, you know, I watch their YouTube videos and
00:36:10.220 | whatnot, you're sitting in business class or you're sitting at the fancy oceanfront
00:36:14.580 | resort, it's not a sustainable thing.
00:36:18.300 | You're out of your league.
00:36:19.380 | You're out of your depth.
00:36:21.260 | And if you can use credit card points to put a little fire in the belly and say, "I want
00:36:24.940 | to fly like this every time," great.
00:36:26.860 | Go for it.
00:36:27.860 | But at the end of the day, I think credit card points and the whole game is much more
00:36:32.460 | of a distraction than many people realize.
00:36:35.920 | They're not that hard to accumulate, although it does take a little bit of practice and
00:36:40.180 | a little bit of learning, but they are difficult to redeem.
00:36:43.700 | And the time-consuming nature of it is something that I think would send most of us in another
00:36:49.860 | direction.