Why To Avoid Cash Back & “No Hassle” Credit Cards
In the past I have talked about both the United Choices program and the Chase Ultimate Rewards 20% Bonus, and how there are certain times where you should buy Airline Tickets on your Credit Card and then have your Credit Card reimburse you by paying with Points. Normally this is when the cost of the Revenue Ticket is less than the value of the Miles / Points. Similarly, this can be especially useful when there is no Award Flight availability or the Award Flights don’t match your schedule.
This idea of getting reimbursed for your travel purchases is how most of the “No Hassle” Capital One, Discover Cards, etc work. Instead of giving you Airline Miles with United, Delta, or American, these Cards instead give you 1 Point per $1 you spend. When you go to redeem your Points, they allow you purchase whatever Airline Ticket or Hotel Room you want on your Credit Card and then reimburse you at a rate of 1 Cent per 1 Point you redeem, or basically 1% cashback.
The benefit of these programs are that you can purchase any ticket from any airline, and you will also earn miles on the flight because it is a Revenue Ticket. The disadvantage of these programs are that your Points are worth a fixed amount of 1 Cent per a Point.
If you spent $100,000 on a Capital One Card in 1 year, you would have 100,000 Points which would be worth $1,000 towards a free ticket. Whereas if you spent $100,000 on a true Airline Credit Card like the United MileagePlus Explorer or Chase Sapphire Preferred, you would have 100,000 Miles that don’t have a fixed value. So you could easily redeem those 100,000 Miles for a Business Class flight to Europe that would normally cost $5,000+.
It is for this reason that I HIGHLY suggest if you currently are using a “Cash Back” or “No Hassle” Credit Card, for your own sake, please switch to a true Airline Card that earns actual miles. I cannot tell you the amount of emails I get from Small Business Owners that spend $100,000+ annually on Business Expenses and tell me they have been putting it on their Capital One Business Card.
The neat thing about many true Airline Credit Cards is that now most of them allow you the kind of “No Hassle” reimbursement that Capital One offers. This is on top of being able to redeem your Miles for actual Award tickets. This reimbursement benefit can provide you with a ton of added flexibility.
The Alitalia New York to Madrid mistake fare is a perfect example. A normal Economy Saver Award Ticket on American Airlines or United would cost you 60,000 Miles. With the Alitalia mistake fare, the cost of a Revenue Ticket was only $280. Therefore if you wanted to, you could purchase the Alitalia Ticket with your Credit Card like the Chase Sapphire Preferred for $280, and then get Chase to reimburse you at 1 Cent per 1 Ultimate Rewards Point. So instead of 60,000 Miles for an Award Ticket, you would only have to pay 28,000 Ultimate Rewards Points which is obviously a steal!
While this sounds great on paper, mistake fares like the Alitalia example are so rare that more than likely you won’t find yourself in such a situation. However the dilemma whether to redeem Miles, get reimbursed by your Credit Card, or pay out of pocket for a ticket, happens almost any time you need a Domestic Airline Ticket.
Example Booking Las Vegas Flights
For my 25th birthday, my Friends somehow talked me into going to Las Vegas. I haven’t been to Vegas since I was in high school when I went with my Parents. Needless to say that experience was exactly like that Hangover movie if you subtract out the bachelor party, gambling, alcohol, Mike Tyson, drug use, women, or the part where they wake up hungover…
My birthday falls around Martin Luther King Day, so Monday, January 21st most people have off for the holiday.
I was expecting Vegas to be cheap because it is Winter, but then I forgot it is a long weekend and will be 0 degrees in Chicago, so people will be trying to head somewhere warmer.
That being said, if anyone has any suggestion for Vegas Hotels or is a Big Fish and has any Hotel hook ups, please leave a comment or email me. I currently looking at Aria or Cosmopolitan, but I am not a Vegas pro, so please leave me any other suggestions or deals you might know of!
For the flights to Vegas from Chicago, as usual, I first pulled up Kayak.com to see how much the fares were. The plan is to fly out to Vegas after work Friday and preferably come back Monday night, so the cheapest fare I could find was on Spirit for $338 which I passed on.
After realizing that purchasing a Revenue Ticket was off the table, I next searched for Award Tickets by pulling up British Airways, United, and Southwest in that exact order.
British Airways had nothing available for Award Flights on American. As for United, all the Saver non-stop flights after work on Friday were sold out. There were flights with a connection in SFO for 25,000 Miles Roundtrip but because of the connection, it would be 7 hours total travel time.
Finally, I checked Southwest and once again they came to the rescue! I was able to find 2 non-stop tickets from Chicago Midway at 7PM after work on Friday. Since it was non-stop, the flight time was only 4 hours instead of 7 hours on United. Coming back I was able to get another non-stop flight. As usual, what makes this even better is that on Southwest checked bags are free, the flights are non-stop, the tickets are fully refundable, and for the 2 tickets it was only 20,340 Southwest Points each. That is a savings of 10,000 Miles total had I transferred my Ultimate Rewards Points to United and booked the same tickets. The face value of these Southwest flights is $799 total, so we saved a decent chunk of change.
Since there wasn’t really an option to purchase these ticket or get reimbursed with Miles, it was a fairly easy decision to use Ultimate Rewards via Southwest. That being said, some of our Friends are also flying in to Las Vegas from Boston that weekend. A few months ago I had them sign up for the Chase Sapphire Preferred, so their Las Vegas flights are going to be free it is just a matter of figuring out how to get them there.
When I searched Kayak.com for them, I was surprised to see a United flight that left Friday after work and a red-eye back to Boston Monday night for only $252. This is amazing considering the cheapest United flight to Vegas out of Chicago was $464.
When I checked British Airways for Award Flights on American Airlines, there was nothing. On United.com, there were no Award Flights that worked with my friend’s schedule. I thought Southwest might come to the rescue again, but there were no non-stop flights and the tickets also cost 25,000 Points.
So the options for my Friend was to either pay $252 out of pocket for the above United flight, pay $252 for the above United flight and get reimbursed by Chase, or transfer 25,000 Ultimate Rewards Points to either United or Southwest for an Award Ticket.
To anyone who has been doing the Mileage Game for a while, you probably quickly picked up on opportunity, but for Beginners I will explain.
Chase Ultimate Rewards reimburses you at 1 Cent per 1 Point you redeem. That being said, the above $252 United Revenue Ticket would only cost 25,200 Points to get reimbursed. Whereas if you transferred 25,000 Ultimate Rewards to United, you could also get an Award Ticket. Although the amount of Points needed is basically the same for both options, by purchasing the United ticket and getting reimbursed, my friend will earn United Miles on the flight!
To further maximize this discrepancy, I tried logging into Ultimate Rewards and seeing if you could book the $252 United Flight via their travel engine for an additional 20% off, but the flight for some reason wasn’t showing up.
Ultimately I directed my Friend to purchase the $252 United ticket with their Chase Sapphire Preferred Card. If they would like, they can then choose to get reimbursed for the ticket by redeeming 25,200 Ultimate Rewards Points. However since the cost of this ticket isn’t terrible, it might make sense for them to pay for the ticket out of pocket and save those Ultimate Rewards for a more expensive flight down the line.
Anyways unlike my Vegas ticketing situation, there are a few things that are really awesome about my Friend’s ticket purchase:
- Earn Miles For Purchase – For purchasing the United ticket on their Chase Sapphire Preferred, my friend will get 2x Points for Travel purchases. So the $252 purchase should yield 504 Ultimate Rewards. If they were to use a Chase Freedom, this Quarter they would earn 5X UR or 5% Cashback on Airfare, so potentially 1,260 Ultimate Rewards Points.
- Earn Miles For Flying – Since the flight is a Revenue Ticket, they will earn Miles on the flight. Boston to Las Vegas via SFO / LAX is 5,949 Miles or 4.2 CPM.
- Earn Aegean Silver Status – As I talked about last week, if you fly 2,000 Miles on any Star Alliance partner, you can earn Aegean Blue aka Star Alliance Silver Status. This United flight clearly passes over that threshold but because Aegean only gives 50% mileage credit on discounted United fares, this United flight would only earn 2,500 Miles. That would still surpass the 2,000 Miles needed, however for those of you with shorter flights, Aegean is really generous with their Minimum Miles per a Segment. Every Segment (or Stop) you have with United, Aegean will give you 500 Miles. So in my Friend’s case, there is a stop in SFO going to Las Vegas and a stop in LAX going back to Boston. That makes 4 stops total which means 2,000 miles, so either way she will get Star Alliance Silver Status after this flight!
So for $252 or 25,200 Ultimate Rewards Points if she chooses to get reimbursed, my friend is going to earn 504 – 1,260 Ultimate Rewards Points, and either 6,000 United Miles or 2,500 Aegean Miles which will get her Star Alliance Silver!
Although this blog is targeted towards Beginners, when earning and burning frequent miles, you always want to try and see if you can take it to the next level.
In this example of getting flights to Las Vegas:
Level 1 – Getting A Free Flight to Vegas Using Miles
90% of people would be happy with getting a free flight to Vegas and could care less if it was an Award Ticket or Revenue Ticket, as long as it was free. In my case, getting an Award Ticket on Southwest was the most economical option available, so it wasn’t possible to go any further. At the end of the day I saved $799 so I was happy and called it a day.
Level 2 – Earning Miles On The Award Ticket By Purchasing It On A Credit Card & Getting Reimbursed
This isn’t something that most people even think about because they aren’t even aware it is an option. However by simply checking what other redemption options your Credit Card offers, for the same cost (25,000 Miles) of getting an Award Ticket to Las Vegas on United or Southwest, my Friend was able to purchase a Revenue Ticket that fit her schedule, get reimbursed, and earn some Miles in the process.
Level 3 – Earning Status
99% of people would be happy with purchasing a ticket, getting reimbursed, and earning miles, however by changing one tiny variable of which airline the United Miles are getting credited to, my Friend’s free flight to Las Vegas will now also earn her Star Alliance Silver Status!
Of course, to move from Level 1 thinking to Level 3, you have to know all the loopholes, however that is what I am here for.
Just the other day, I had a Reader who goes to Cornell ask how the free checked luggage works with the United MileagePlus Explorer Card. That simple question quickly morphed into me asking if it was a Revenue or Award ticket. Once I realized it was a Revenue Ticket, I instructed her to credit her flight to Aegean to get Silver Status in the future so she wouldn’t have to ever have to worry about paying for checked bags on United again.
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