The best value for credit card spending

Discussion in 'General Discussion | Miles/Points' started by bsaced, Mar 29, 2011.  |  Print Topic

  1. bsaced
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    bsaced Silver Member

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    Let me preface this analysis with two huge assumptions that I realize many people will disagree with:

    1) The SPG is the best travel credit card for use for your daily spending.
    2) I am not willing to spend more than $2,500 on average for a single airline ticket.

    I realize that many people disagree with one or both of these points. So if you do, this probably is not worth reading. But if you're like me and routinely use your SPG to the tune of around $25,000+ in spending a year, I thought it worth it to break down the best use of this earning.

    The best use of 25,000 Starwood Points (SP)
    Hotels:

    4800 SPs generally saves me on average $180. So a $240 hotel room when 4800 SPs are used in cash and points will require a $60 payment thus making it $180 in savings.

    4800 X 5 = 24,000

    $180 X 5 = $900

    So 24,000 SPs gets you $900 in saving when used for hotels (remember this is on average and not when these points are maximized on a great deal on a luxury suite etc.)

    Airline Miles (economy class):

    25,000 SPs translates to roughly 31,000 airlines miles with a partner airline

    25,000 airline miles is good for a domestic coach ticket. If redeemed during a summer peak time, you on average will get $500 transcon ticket as a decent value. tack on the extra value of the other 6,000 miles ($100 because 6,000 miles is roughly 1/5 of 25,000 and 1/5th of $500 is $100) and 25,000 SPs when used for airlines is worth $600 on average (again this is on average not when these points are used for a crazy redemption or with biz or upper class redemptions cause those are impossible to value as the price is inflated and everyone values them differently).

    A 2% cash back card:

    $25,000 when used on a 2% cash back card nets $500 (plus approx 6,000 miles when the 500 is spent on a mileage earning ticket) if we said 6,000 miles is worth $100 above then $25,000 spend on a 2% card is worth $600 on average.

    Synopsis:
    Given that many people generally get a ton of miles on credit card sign up bonuses and that 24,000 SPs averages $900 in value. Hotels would seem to be by far the best use of SPs for anyone that even occasionally finds themselves needing a hotel room when they travel. Further given that $500 cash from a 2% cash back card is worth the same as 25,000 SPs transfered to airline miles but also offers flexibility in spending, it strikes me as far better to use a 2% cash back card rather than an SPG card for airline miles. The only argument I can think of for the use of SPs for airline miles is to build toward a larger more lucrative award (e.g 1st class to europe or asia). But the amount of SPs needed to do that is 80,000 - 100,000 and 100,000 SP spending on a 2% card instead is worth approx $2400 (600 X 4) which goes back to assumption #2 and is more than many people would spend on a first class ticket anywhere.

    Did I sum this up right?
     
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  2. techboyds
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    techboyds Silver Member

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    Yes, unless you value Starpoints at 2 cents or more per point, a 2% cash back card is a better deal.

    Of course, there are few still in the wild, and with the new regulations making rewards cards less profitable for the banks, informed speculation is that even those won't last, so the equation might be changing in the not too distant future...
     
  3. PedroNY
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    PedroNY Silver Member

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    I think there are a few people who would say AMEX Hilton card is a better card when it comes to spending on gas/grocery/bills/pharmacy as you get 6 points per $1 spent and even if you value thes points at $.005, it is still a great deal.
     
  4. mrredskin
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    mrredskin Gold Member

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    i just got the Venture card and it is essentially 2% back on most all things travel related. the incentive i see is earning FF miles at the same time. works out well for when you can book cheaper airfare and not burn through miles. i do have an SPG, as well. cash and points is great, altho it sucks that those stays don't count towards status
     
  5. Toula
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    Toula Gold Member

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    I actually believe that the AMEX Gold is probably one of the better AMEX cards.

    2x points on Gas
    2x points on Groceries
    3x points on Flights

    After you spend $30k in a year you get a bonus 15k points.

    Based on my personal spending pattern I earn 60k points before transferring to an airline. With something like the recent British Airways promotion those 60k because 84k, more than enough for 1 business class tx to South America. Not a bad reward for spending $30k.
     
  6. gleff
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    gleff Co-founder

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    What i don't get about folks who use the Capital One Venture card, why not just get a 2% cash back card?

    For some folks, e.g. living on the East Coast and wanting business class tickets to Europe, the Asiana American Express will be the best card ($40k in spend for business class travel up to 10k flown miles, incluidng 4 stopovers in addition to destination).

    Someone living in Chicago, say, or Dallas flying a bunch of short-haul non-stop flights on American would probably want to convert their SPG points to LAN at 1:2.

    But I agree certainlythat the Starwood Amex is an excellent card, and that hotel stays are often a very good use of points. I use the Starwood Amex heavily myself, and use the points frequently for hotel redemptions.
     
  7. MSPeconomist
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    MSPeconomist Gold Member

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    In this analysis, don't forget that some of these cards can affect status. In particular, holders of the SPG AmEx are automatically credited with some nights and stays (IIRC, 5 and 3) toward each year's status so that, for instance, if you would otherwise end the year at 22 stays with Starwood and want to maintain Platinum, it saves you from paying for 3 stays (3 nights), perhaps at a cost otherwise of $225. This assumes that you would be at this point at the end of the year and do the extra stays/nights for status. For many people, the extra credits are just a sort of insurance policy.

    A similar reasoning should be performed when evaluating credit cards that give EQMs for airline FF accounts, for example the DL AmEx Plat and Reserve charge cards. Whether DL/AmEx will continue the MR to skypesos with some MQMs offer remains to be seen.
     
  8. techboyds
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    techboyds Silver Member

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    Few are still available to the general public, and the only one I know of (FIA Fidelity AMEX) is just that. Having a VISA that pays 2% (like my now not available formerly Schwab card) could be handy for places that don't accept AMEX.
     
  9. sunspotzsz
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    sunspotzsz Silver Member

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    "4800 SPs generally saves me on average $180. So a $240 hotel room when 4800 SPs are used in cash and points will require a $60 payment thus making it $180 in savings."


    You call that $180 value? I most likely can get your "$240 hotel room" or similar room for much less. And I don't call that $180 value!
     
  10. mrredskin
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    mrredskin Gold Member

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    as techboyds already stated, good luck trying to find a 2% card these days. and, as i stated before, you still earn miles/points towards status if you use the venture card. SPG Amex is still my top choice, but Venture will be my non-Amex preferred card.
     
  11. gleff
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    gleff Co-founder

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  12. chemist562
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    chemist562 In Memorian

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    My wife used the cash & points option for the Sheraton at MXP. (Milan airport). The rate was 130 euros and it was 35 Euros plus 2800 points for the one night. We opted for the cash & points option. In our case, 2800 pts covered 95 Euro of the room cost. In our case, each point was worth 4.7 cents. :) Decent use of points. The airport Sheraton is quite nice & new. Not to mention very convenient since it is in the airport.

    We used priceline for the 3 day stay in Milan. We got the Westin Palace for $80/night base on PL. ($93 ai/night w/all fees/taxes). The cash & points option would have been 4800 pts plus $95. In our case, regular PL listed only two 5* hotels in Milan & the other 5* was over $600/night. We thought it was very likely that the Westin would be the winning hotel & that was the case.

    Bottom line: Cash & points are a great use of Starwood points.
     
  13. MSPeconomist
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    MSPeconomist Gold Member

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    Just remember that cash and points does not earn night or stay credits with SPG; neither do priceline stays.
     
  14. mrredskin
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    mrredskin Gold Member

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    unless you're trying for plat status, that really doesn't matter. you could get gold after 2 stays last year. you get preferred about 103952 different ways which is essentially gold. if you have amex plat you get gold.
     
  15. MSPeconomist
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    MSPeconomist Gold Member

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    True, but I'm SPG Plat and I hate to lose stay and night credits early in the year until I see whether I'm likely to need them. Also, some of the promos can lead to enough points (or free nights) not to want to lose.
     
  16. mrredskin
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    mrredskin Gold Member

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    i'm not, so it often doesn't concern me too much ;)
     
  17. Kaanapali
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    Kaanapali Gold Member

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    Then bank the points on the SPG card (which also gets extra points for each dollar spent at a Starwood hotel) and then treat yourself once you have done the 23 stays/46 nights.....for those extra stays/nights you would have had to pay for to get/remain Plat :)
     
  18. MSPeconomist
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    MSPeconomist Gold Member

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    This is generally what I do, although if I can get a good deal on points or cash and points instead of a very expensive leisure stay early in the year, it's of course tempting to save the money and hope that I have enough stays without needing to grab a few more in the fall.
     
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  19. Kaanapali
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    Kaanapali Gold Member

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    I think this strategy makes sense - especially if you have a couple of nearby Starwood brands you can do local/quick MR's if needed at end of year...
     
  20. Gary Steiger
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    Gary Steiger Silver Member

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    The 5% cash back for gasoline Visa card is still available from Pentagon Federal Credit Union. I carry it for that sole purpose. I would never pay 5 cents for a mile. You can read about the card on my website below in the Credit Cards > Free Cards > Cash Back Cards section.
     
  21. Your analysis is very strong, and in your situation it makes sense. However, when you include some other potential card perks like free companion pass travel, lunge access, and free checked baggage, there are some other cards that have great value. Generally speaking the AMEX Premier Rewards Gold competes very favorably with the Starwood if you spend more than $30,000 in a year. There is a very cool calculator you can use at www.marscreditcards.com that will show you exactly which card will give you the most value. MARS only deals with domestic cards. For international cards you can also look at nerdwallet which is a good site.
     

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