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| 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.
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.
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.
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