Learn Why My Miles are Jealous of My Cash Back Strategy

Recently, I’ve been giving a little extra attention to earning cash back instead of miles.

This issue (cash back vs points) came up when a reader said he was glad to know (from this post) that he could get an extra 2 Ultimate Reward miles per dollar by shopping at Staples through the Ultimate Rewards Shopping Portal.  My strategy doesn’t include earning 2 miles per dollar, but using Upromise.com to earn 5% cash back.

Why Is Cash Back Getting All the Love?

1.  The Actual Value of a Mile or Point

There’s about a million ways to determine how much a mile or point is worth.  True, I typically can get more than 2 cents per point value out of a mile or point, but for bonus point purchases, I usually only value them at one penny each.  It’s better to be conservative with my math.  When the cash back amount is worth more than the miles, I’ll go with the cash back.

2.  I Can Buy Points Cheaply

Consider again the strategy for buying $100 Visa Gift Cards from Staples.  I can basically buy an unlimited number of points for .18 of a cent each.  I’d rather get the cash and use that to buy more miles at a cheaper rate.

There are also events like the Daily Getaways (each summer) where you can buy really cheap points.

3.  Points Spend Differently than Cash

This is going to be hard to explain without sounding greedy.  We enjoy using our points to give to or book travel for family members.  However, it’s easier to spend points than money.  I.e.  I might be willing to use 50,000 points so my parents can fly down to see us (or even to help us out), but I don’t know that I’d spend $500 out of my pocket for those flights.  Since we spend points more freely, that makes cash a more valuable commodity.

4.  The Cash Portion is Usually Short, Not the Points Portion

When we book award travel, we pay the airline taxes and fees.  My most recent trip cost about $200 in taxes and fees.  I had lots of miles left over, but the cash came out of my pocket.  However, if I were earning cash back, I could use that cash to offset the $200 fee.

5.  Travel Frequency Breaking Point 

Since I once again live in a normal world where I get four weeks vacation, I’m not going to be taking dozens of trips a year.  As such, the miles I can earn through credit card sign up bonuses are enough to keep me traveling as frequently as I’m able.  As such, I’d rather earn cash back instead of miles on certain purchases.

6.  The Barclay Arrival Factor

A few months ago I got the Barclay Arrival World MasterCard.  Since then I’ve put over $10,000 worth of spending on the card.  Essentially, the card gives 2.2% cash back when you use the points for travel. 

To make matters even better, Barclay has its own shopping portal called “RewardsBoost”.  Through the award’s boost portal, you can buy American Express Gift Cards and get a 4% bonus.  

Earlier this month, I bought a $3,000 card for $3,008.95 (with shipping and free purchase fee code).  I was awarded 11,984 points (not sure why $2996.05 is the eligible expense, but I’m guessing it still subtracts the purchase price of the card).  Since I used my Barclay Arrival Card, I also received 6,018 points for the card.  Thus, the total earning was 18,002 points for buying a $3,000 AMEX gift card.  Those points are worth $198 when redeemed for travel ($180 travel reimbursement for those points, plus an extra 1,800 points worth $18 rebate).

When buying a gift card that I can use anywhere (like paying my taxes) and I’m getting 6.6% cash back, it’s hard to justify using a credit card that gives 1 mile per point.

My Cash Back Strategy:

If shopping through an award earning portal, if the payout is the same (3 miles or 3% back), I’ll choose cash back.  When making a purchase, if I can use my Barclay card indirectly through an American Express gift card, then that’s what I’ll do.  Of course, the goal is still free travel, I’m just finding a cheaper way to travel.

Comments

  1. says

    Shirley,
    They cannot be deposited directly into a Bluebird account – because they don’t have a PIN number. There is the option of using them to buy Vanilla Reload cards with them (some people have reported success, but I’ve never tried). I’ll probably use it for everyday spending when I’m not trying to reach a minimum spend. Also, I’ll use them to pay my quarterly taxes online and pay the 1.89% fee. Still puts me ahead.

  2. rob black says

    Opening new credit cards for the signup bonus is the fastest way to accumulate miles. If after your minimum spend you then do not use the card ( using the cash rewards instead ) then how will banks view your next churn?

    • says

      Rob,
      There are a lot of variables in play, but I don’t know of any bank that has a way to penalize anyone who doesn’t use a card after the minimum spend. The only exception may be Barclaycard which will sometimes close a card if you don’t ever use it. Also, sometimes they won’t approve you for a new card if you haven’t been using an existing Barclay account.

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