Cash or Miles Rebates for Credit Card Expenses. Which is Better? - Part 1

Flying with redeemed United flight ticket from Chicago airport

"Is it time to switch back to use cash-rebates credit cards instead of miles-rebates credit cards?"  

There have been devaluation of reward miles and points, more restrictions and higher minimum spending requirement to receive card sign-up bonus.  We love traveling.  Intuitively for myself, using miles-rebates credit cards still makes sense.  Let's see a quick estimation


Our Annual Vacation Plan:

2 international trips (7 to 9 days each)

3 US-domestic weekend-trips (1-night 2 weekend days each)

Needed Vacation Budget:

International travel, 7 nights 8 days, for two persons,

• hotel: $150 per night = $150 x 7 = $1,000
• flight: coach-class tickets for two = $1,200 x 2 = $2,400
• dining: $100 daily = $100 x 7 = $700
• car rental: $250 for 7-days

Total = $1,000 + $2,400 + $700 + $250 = about $4350 or

2 vacations for $8700

US-domestic trips, 3 hotel nights total,

• hotel: $150 per night = $150 * 3 = $450 for 3 trips
• dining: $100 daily = $100 x 2 = $200 (three trips = $600)

Total = $450 + $600 = $1,050

Adding up, a total budget for vacation is $8,700 + $1,050 = $9,750.  Annual budget for flight and hotel stays is: ($1,000 + $2400)*2 + $450 = $7,250.

An objective is to have this portion of expense taken care of by either reward miles/points or cash rebates. 

Scenario #A: Cash-rebates credit cards

Typically, cash-rebate credit cards sign-up bonus is between $150 and $400, or an average of $275 ~ $300, plus an average of 3% cash-rebate on expenses paid by credit cards.  Assume I apply for 8 cash-back credit cards per year, the total sign-up bonus would be

$300 x 8 =  $2,400

Since we want the $7,250 expense to be covered, $5,000 expense would be covered by %3 rebate return if 

• $5,000/0.03 = $167,000 spending via cash-rebate credit cards.
• $5,000/0.03 = $100,000 spending via cash-rebate credit cards.

$100,000 normal spending on credit card per year is not feasible for us.


Scenario #B: Miles-rebates credit cards

The following sign-up bonus offering have been available from time to time,

• United Airlines (UA) miles for international flight ticket: 80,000 UA miles for one round-trip coach-class.
• Southwest Airlines Rapid Reward points for US-domestic flight ticket: Rapid Reward points is about 30% discount Southwest ticket price.
• Hilton HHonor points for hotel night stays: 175,000 HH points + 2 Hilton Reserve nights + 5th night stay is free for Hilton credit card holder.
• Marriott reward points for hotel night stays: general public offer of 50,000 points or target offer of 70,000 points.
• There are also Hyatt Hotel program, Sheraton Hotel (SPG) program, Holiday Inn (IHG) reward program.  

Average minimum spending requirement has been about $3,000 for the first 3 months, or $1,000 per month, to earn 50,000 miles/points.  In 2014, Isa and I were able to earn together 500,000 miles/points to redeem for flights and hotels via card sign-up bonus, in addition to the 100,000 United Airlines miles from Fidelity.  Miles/points are not taxable.  The frequent flyer miles earned cover four round-trip coach-class flight tickets between US and Asia, or US and Europe.  Two Chase IHG cards cover 4 nights of IHG hotel nights anytime anywhere.  Two Citi Hilton Reserve cards cover 4 weekend nights.  Two Barclay Arrival cards cover $600 hotel night spending.  We are still short of points to cover four hotel nights.  That is fine, because we have left-over SPG points from last year.

If you do not like travel, cash-rebate credit cards is the choice.  Otherwise, use miles-reward credit cards to pay for your expenses.  If points earned one year is not enough, then save two-years.