Category: Wisdom

Last week we had a brief interlude about how an unredeemed point is worth nothing. It’s definitely true, but there’s a corollary for travel hackers:

Outsized Value Requires a Baseline Stash of Points

Chapter 6 Title from MEAB’s fictitious book, “Churning, Travel Hacking, and Selected Croissant Recipes”

Most bank points can be converted to cash for around 1 to 1.5 cents each, and most airline points have a baseline value in the same ballpark too. With that metric it’s easy to say that a credit card sign-up bonus of 90,000 points is worth somewhere around $900 to $1,450.

When you get a stash of points, it’s almost never a bad idea to cash out, invest that cash or use it in your velocity roll, and start earning a new stash. Then the value of your cashed out points grows with other investments.

You can take cashing out too far though. What if, for example, you’re in Germany on vacation and looking to fly home in the nose of a 747-800 in Lufthansa First? You could buy a ticket for over $10,000, or if you’re lucky you can grab a First Class award ticket for about 90,000 points with Avianca Lifemiles; but only if you haven’t cashed out all of your points. That redemption is rather outsized at more than 10 cents per point in replacement cost value, obviously more than the 1 to 1.5 cents value on a cashing-out basis.

It’s easy to see a strategy emerge: Keep a baseline of points big enough to meet your short term travel needs, and cash out the rest. What does short term mean? That depends on how quickly you earn points I suppose.

Happy Thursday!

A sample recipe from “Churning, Travel Hacking, and Selected Croissant Recipes”.

Introduction

Since 2021 or so, an odd brokerage named Moomoo let crafty churners earn several thousand dollars with relatively convoluted promotions and bonuses, the kind that needed a few pages worth of text or 10 minutes worth of talking to wade through; also known as “A Churner’s Delight.”

Moomoo has now become semi-mainstream, so much so that they’ve appeared on DoC three times this year, with less convoluted promotions to bring more funds into the FinTech which is simultaneously part bank and part brokerage.

Safety

Churners are good at probing the most dank, web ridden, smelly corners of the financial world. They’re often emboldened to do so because they’ve got protections like:

  • CFPB for credit instruments
  • FDIC for deposit account insurance
  • SIPC for brokerage account insurance

For most financial products if everything fails, you’ll get everything you’re owed paid back in full thanks to the above.

FinTech Weirdness

FinTechs lean on the perceived safety to give you confidence in working with them, but as the Synapse shutdown and bankruptcy has shown, just because there’s an FDIC or SIPC insured account somewhere, you’re not necessarily protected in the event of failure. A few nuances that you should know:

Remember, “we keep all your funds in an FDIC insured account” doesn’t necessarily mean that you have any protection. Check the FDIC website to be sure.

Have a nice weekend!

Few know that the original Churner’s Delight recipe came from a cafe in Portland. (Thank to Elaine)

If there were a “Churning and Travel Hacking 101” textbook, one of the first chapter titles would be:

The Value of an Unredeemed Point is Zero

Chapter 3 Title from MEAB’s fictitious book, “Churning and Travel Hacking 101”

The reason this book doesn’t exist though is because I’m not sure what else to write about the topic; if you never redeem a point, it never had any monetary value and you probably should have earned cash instead.

Happy Wednesday! #tiniestblogpost

Shining example of a pulitzer class chapter title, for future reference.

Introduction

The Coase theorem, winner of the just made up MEAB award for “best theorem with the most obtuse Wikipedia description possible” award, says essentially that the value of something can be measured by what you’d have to pay someone to give it up. (Editor’s note: Take a couple of minutes and read the first paragraph of the linked Wikipedia article, wowza that’s bad!)

Example

Let’s illustrate with America’s favorite fruit, bananas. How much are bananas worth in your life? Would you give them up forever if I paid you $1? What if I paid you $10,000, or maybe even $40,000? The smallest number that causes you to swear off bananas forever is, according to the Coase theorem, their total worth.

Making it Real

When assessing how risky a manufactured spend stunt is, the Coase theorem gives a concrete way to assess whether or not one should attempt the stunt, knowing that it might lead to a bank shutdown.

Let’s say, for funzies, that there’s an opportunity to earn 7-8x transferrable points for a cost of ~3%, with effectively unlimited capacity (yes, this has happened, and yes, more than once; no, sorry, I can’t share a play like that right now). If a manufactured spender went as hard as possible with 8x earn on 3% cost, most banks or credit unions would axe that account within weeks or months, and the relationship with that bank would likely also be fried for at least 7-10 years if not forever.

So, can that manufactured spender earn enough in weeks or months to make the play worth frying the relationship? If yes, LFG I guess.

A Case Study

What’s MEAB’s Coase theorem valuation for a few things?

Have a nice weekend friends!

Honorary MEAB award for Wikimedia, Inc.

It’s extremely common for people to arrive as early as possible to visit an airport lounge. Since we’re often gamers and manufactured spenders around here, and since we’ve talked about a minimum monetary value for our time, we should apply the same logic to airport lounges when we’re departing from our home airport.

Specifically:

  • If you’re an in-person spender, a few trips to Kroger, Staples, your local grocer, and Walmart can be done in a couple of hours and earn you (hopefully) a few hundred bucks or the equivalent in points
  • If you’re an online spender, the time value of money probably varies a lot more, but a couple of hours of investigation might open up a new channel that’s worth thousands

So, if you’re showing up to a home airport lounge three hours before you’re flight, I’d suggest you consider how much the cheese cubes, bottom shelf gin, and chewy slightly-overcooked chicken breast are actually worth to you. Look, I don’t want to yuck your yum – I get that a mental break might be worth the spoils from days of gaming. But, if you find yourself in the lounge saying “now what?” after you’ve been sitting for 10 minutes, perhaps consider using the early lounge time to earn something or learn something instead, and you can use some of that to buy yourself a nice meal that hasn’t been sitting under a heat lamp for six hours.

*None of this advice applies if you live in Tokyo and regularly have access to the JAL F lounge, you’re in Frankfurt and regularly flying Lufthansa F, or you live in LA and have regular access to the Qantas First lounge. All of you get a pass.

Concept for new AA Admiral’s club pre-flight meals at the future, Lubbock TX club.

Very few companies have a monolithic technology stack. That means you’ll often find different behavior with:

  • Mobile apps versus a website
  • Older terminal hardware versus newer hardware
  • Android apps versus iOS apps
  • Version 1.0 versus version 1.1

Ok cool. How about a few specific examples?

  • FlyingBlue will show different pricing and availability on AirFrance’s site than KLM’s
  • Turkish Airlines fails to ticket some itineraries on desktop, but they’re easily bookable in the app
  • Older Walmart terminals behave differently than newer terminals
  • Some Kroger registers auto-drain cards, others won’t
  • Old school bill payment platforms charge different fees based on what you use to start a payment

Ok, cool again. Now why should you care?

  • Different technologies get different results, which leads to conflicting data points. Not all conflicts are easily explained by different technology stacks, but a surprising number are
  • Fees, funding methods, and functionality often differ. Can’t get that payment to go through on the desktop? Maybe hit up the mobile app. Mobile app doesn’t work? How about the prior version?

Good luck, and have a nice weekend!

Even shoes have different technology stacks.

One of the common questions I got routinely when American Express had a referral bonus for 10x on up to $25,000 in dining spend was: How risky is maxing out 10x multiple times? My answer was typically something like “I don’t have any special insight into American Express’s RAT and fraud teams, but my guess is the risk is relatively very low”. What gave me the confidence to say that? Two things:

  • Unchecked bravado and unsubstantiated sense of self worth
  • Knowing who was paying

Without trying to go into boring accounting stuff at big companies (or exciting accounting stuff if you’re the approximately 20% of churners who made a career in accounting): not all expenses are created equal. Roughly speaking, you can classify most expenses in two-ways:

  • Variable costs (electricity bills, Membership Rewards payouts, STK Dining expenses)
  • Fixed cost (lease, advertising campaign, salaries, etc)

American Express’s RAT and fraud teams are trying to combat variable cost spikes caused by card-member usage patterns, and causing those spikes is usually what gets you in trouble. On the other hand, promotions like 10x on dining for up to $25,000 in spend is a marketing promotion with a (presumably) fixed / maximum budget attached to the marketing department. RAT and fraud teams, for better or worse, just aren’t looking at what happens to marketing’s fixed cost budget. Ergo, low risk.

We’re always playing a game with imperfect knowledge about the other side’s motivations and desires, but thinking about who’s paying for a particular play is a good proxy for risk in a game filled with imperfect knowledge.

The official MEAB coffee mug.

One of my favorite sayings is “there’s always somebody hitting a deal harder than you”. Of course logically this can’t be true because there’s a heaviest hitter for everything, but it’s right for all but one of everyone so it’s close enough, the same way that in physics, π = 3 is close enough for most estimates and assuming the shape of a cow is roughly spherical is usually good enough.

I’d like to offer a corollary to the heavy hitter hypothesis:

There’s always a better version of deal than the one you’re hitting.

You can sometimes find these deals by stacking things in a line, like by earning 2% for buying something with a Citi Double Cash and earning additional spread by paying your bill using a spread on a payment service or by getting even trickier. Other times, you can find these deals at your local credit union; they may offer a grocery card that earns better than an American Express Personal Gold card, which would be enough at face value. Bot sometimes the credit union also lets you pay your bill with a HELOC, and lets you pay your HELOC with a profitable bill pay service, and maybe has a transfer bonus too.

Always be probing!

There’s always better pizza than the one you’re eating too. Not pictured: Literally any other pizza.