Category: Wisdom

EDITOR’S NOTE: The feedback I’ve gotten for guest post Saturday has been resoundingly positive. I’ve got a few posts left to publish, but I’m running low. If you’re interested in a guest post, please reach out!

Perhaps the most basic level of credit card churning involves getting a new credit card with a sign-up bonus every time you hit the spend requirements on the last one, putting you into a state of perpetual 10%, 25%, or even 50% return on your spend. This is great until:

  • You’ve gotten all the cards you can reasonably get
  • Your monthly spend exceeds 3 to 4 times the average sign-up bonus minimum spend

When you hit the above, sign-up bonuses are interesting but they’re a small blip on a profit or return chart. As you spend even more, the percentage of your profits that consist of sign-up bonuses gets proportionally smaller.

To illustrate, let’s assume that you signed up for the recent 200,000 Membership Rewards bonus American Express Business Platinum card with $15,000 in spend, and all of your spend after that goes on a 2.625% cash back everywhere card, and we’ll look at how much of the money you earn comes from the bonus. For simplicity, we’ll assume American Express points are worth 1.1 cents because that’s a generally available cash out price.

Monthly Spend
(USD)		AmEx Bonus
(1.1 cents per point)		Other Card’s Rebate
(2.625% back)
$15,000Bonus: $2,200 (14.6%)
Regular: $165 (1.1%)		Regular: $0 (0%)
$100,000Bonus: $2,200 (2.2%)
Regular: $165 (0.165%)		Regular: $2.231 (2.23%)
$500,000Bonus: $2,200 (0.44%)
Regular: $165 (0.03%)		Regular: $12,731 (2.57%)
$5,000,000Bonus: $2,200 (0.04%)
Regular $165 (0.003%)		Regular: $130,856 (2.62%)
Dollar (Percentage) return on various levels of spend

Put succinctly, that sign-up bonus is nice, but after you hit $5M in monthly spend, even the large American Express Business Platinum bonus makes up a very small portion of overall return on monthly spend at just 0.043%; meanwhile one of our favorite Unsung Hero cards returns 2.62%, or more than 98% of the total rebate on your spend.

The takeaway? As you advance your manufactured spend career, worry a little less about those sign-up bonuses.

Have a nice Wednesday!

Next up on Wednesday Interlude with MEAB: Does the second law of thermodynamics apply to spend?

EDITOR’S NOTE: The feedback I’ve gotten for guest post Saturday has been resoundingly positive. I’ve got a few posts left to publish, but I’m running low. If you’re interested in a guest post, please reach out!

Airlines and hotels universally have at least two main interfaces; banks also have both, FinTechs usually do, and well, you get the idea. The interfaces:

  • Mobile app
  • Desktop website

For reasons known only to Chuck Norris and Taylor Swift, many software development shops choose to use a different back-end implementation for each. Because the implementations are functionally different, things often don’t quite behave the same between the two. This is especially true around edge conditions. A few concrete examples:

  • Some Turkish award flights only ticket with the mobile app
  • Some banks only accept money order deposits via the mobile app
  • Same day change on Delta behaves differently on mobile than desktop

That’s just scratching the surface. So, for today let’s change “always be probing” to “always be probing, double style”.

Happy Monday!

Always be probing, double style.

Introduction

“The squeaky wheel gets the grease” plays a big part in the soft-skills needed to unlock huge velocity in manufactured spend, but it can also blind us. Today, I’d like to offer a corollary:

You tend to forget about the quiet wheels.

– Some lunatic who goes by MEAB. How do you even pronounce that?

The Squeaky Ones

Monday, Tuesday, and yesterday brought waves of PayPal shutdowns in the community, and just about every forum loosely related to manufactured spend is talking about it. We’re seeing shutdowns of:

  • Main accounts with big volume
  • Secondary accounts that share targets with shutdown main accounts
  • Secondary accounts that share names with shutdown main accounts
  • Newly created secondary accounts with even moderate volume

If you were affected, that sucks and I’m sorry. But on the flip side, what use is PayPal in 2024 for things other than manufactured spend anyway? I mean really, literally what use is it? Yes they own Venmo, but a PayPal shutdown doesn’t equal a Venmo shutdown.

The Not Squeaky Ones

There are plenty of users that aren’t shut down with PayPal yet, but that’s hard to see because they’re not jumping up and down in chat rooms and forums saying “I’m not shutdown, what do I do next?” because there’s no urgency. So, we end up hearing from a much larger proportion of squeaky wheels than silent ones.

We could leave it there, but a logical question then becomes:

What are the non-squeaky wheels doing, and what lessons can we learn from them about not being shutdown? There are a lot of answers to that question, and they probably hover around volume, dodging the ban hammer, the types of targets they choose, how often they use those targets, and the volume sent to those targets.

Bonus: Repercussions

One of my P2’s favorite manufactured spend jokes is to call the app that shouldn’t be named the floosie app (she calls all of its users floosies too, naturally). I know nothing about the current financial state of our collective floosie overlords, but I do know that mass PayPal shutdowns kill a popular liquidation channel for its users, and that means that they’re going to see a big drop-off in daily volume and probably daily profit in their ledger. Will it matter? I have no idea, but I’d suggest that now’s a good time to evaluate your risk profile for your floosie shenanigans.

Double Bonus: Brian M Brings us Back to Reality

Brian M, possibly the most cited contributor here, let me know that Southwest is opening its schedule for travel between October 3 and November 2 this morning. Booking early is a statistically better than average way to get the lowest fare possible on popular travel days with Southwest, though of course ymmv.

Next up: What about donut wheels?

EDITORS NOTE: In 2024, I’m going to try and have a guest post on Saturdays. Today’s guest post is from prolific miles and points burner and host of the Churn and Burn podcast, James. He’s probably tied in fourth place for the most number of shared Telegram and WhatsApp groups with me too, so you know he’s legit.

Cents per point.  It’s a fallacy that we’ve all fallen victim to.  To feel so desperately that you’re right, only to realize you’ve been led astray.  

All of us have been there: “Well, this is a $1000 restaurant purchase, so obviously, I want to put it on my Amex Gold card for 4x, right?  On paper, it makes sense.  TPG values Membership Rewards at 2 cents per point.  That’s 8% back on every restaurant purchase, right?

If you’re rolling your eyes, you should be.  Even when cashed out via Charles Schwab, it’s a $44 money maker.  Contrast that with throwing the same $1000 spend on a Chase Sapphire Reserve: it’s 3000 points earned, which when transferred to Hyatt, is arguably worth the same in value for many people.

Some of you are probably saying “Wait!  When redeemed via Aeroplan, my Membership Rewards are worth 7 cents per point if I book Lufthansa First Class!”  

There’s two problems with this line of thinking.  1. My guess is that no one currently reading this is going to pay $15,000 for a one way ticket on a seven hour Lufthansa flight.  If you are, I’d seriously consider scheduling a cat scan next week.  And 2. Not everyone wants to fly Lufthansa First Class.  Most of you are already familiar with #1 already, because TRUE cents per point is not based on the actual cash value of the ticket/hotel, but the cash value that you were willing to pay in the first place.  

Think of it this way.  There’s a Hyatt Regency in Jersey City that currently goes for an average of 15,000 Hyatt points per night or $250.  Alternatively, for 40,000 points or $931, you can book the luxurious Park Hyatt New York City.  Some of you are already doing the table math in your heads.  The Regency gives a cool 1.6 CPP valuation.  Meanwhile, the Park Hyatt is a whopping 2.3 CPP.  Easy decision, right?  Of course, not.  Because many people in the game (myself included) would never pay $931 for a night at the Park Hyatt.  Alternatively, I probably would spend $250 a night for the Regency, especially if I was getting free breakfast and Hyatt Globalist benefits on top of that.  In reality, I might be comfortable paying $450 for the Park Hyatt, which amounts to a measly 1.12 CPP value.  Yikers!

We can use the same logic on an Air France fare.  I just booked my father in law on a flight from RDU to CDG for 12,000 Virgin miles + $155 in taxes.  The actual cash price of the fare was $1668.  So, subtracting the taxes from the ticket, the CPP is 12.6 cents per point.  Some might even say that I saved my father in law over $1500.  But I didn’t, because there is no world where he would have paid $1500 for that flight.  “As cheap as humanly possible” were the words he said to me.  Myself?  I’d have ponied up an extra 36,500 points + $127 and splurged for business class.  Of course, I offered up this option to him, and he scoffed at it.  What I saw as a no brainer, he saw as unthinkable.  

The point is: all the blogs and trip reports have us using inflated fat cat valuations for our treasure troves of points. In reality, it’s the price you would pay for the experience you want that matters. Don’t fall victim to the same logic that leads people to list their Pokemon memorabilia on Ebay for the price of their mortgage because they saw an episode of Pawn Stars once where the “expert” told Chumlee that a 1st edition Charizard card was worth $300,000 at auction.

– James

Yes, you earned 4,124 Membership Rewards, but would you really have tipped $1,000 if you didn’t? Don’t answer.

Introduction

An important aspect of offsetting an annual fee on premium American Express cards is creative use of credits like:

  • $400 annual Dell Credits (Business Platinum)
  • $200 annual airline incidental credits (all Platinums)
  • $10/$15/$35 monthly Uber credits (personal Golds and Platinums)

The calculus for me on the on an annual fee’s effective credit offset involves a discount factor representing what the credit is actually worth based on whether I can resell something, whether I’d actually spend that money either way, and how much work I have to put in to liquidate the credit. It also involves the credit face value, and considerations like a double or triple dip.

Let’s walk through a concrete example with the Business Platinum card, assuming we opened it in late November or early December. For a single year’s annual fee, the main credits are:

  • -$695 annual fee (no discount) = -$695
  • +$800 Dell credits (25% discount) = +$600
  • +$600 Airline incidental credit (20% discount) = +$480
  • Net: -$695+$600+$480 = $385

Ignoring things like Adobe, Indeed, and Clear credits, which are harder to game, the card’s fees are net positive.

News

Two news items came up over the last week that conspire to change this calculus:

  1. Dell, Adobe, and Indeed credits now show an end date of 12/31/2024
  2. AmEx announced a refresh of 40 products globally next year in Friday’s earnings call

Combining the two and reading the between the lines, I think it’s safe to say that the likelihood of Dell, Adobe, and Indeed going away in 2025 is at least 2/3. Updating the above math for a triple dip in December 2024 to subtract 2/3 of the Dell credits in 2025 and beyond (given that it’s likely going away) gives a net annual fee of -$695 + $200 + $400 * (1/3) + $480 = +$118. So, the value from those credits with today’s lens has fallen, though remains positive.

Predictions

Yogi Berra famously said “It’s difficult to make predictions, especially about the future.” He’s right, and I think my crystal ball is at least as opaque as average so, yeah. Nonetheless, I’m going to predict with broad strokes based on the previous news items:

  • Credits that don’t have an analog on other premium credit cards from Chase, Capital One, Bank of America, Citi, or US Bank are going to get the axe for 2025
  • Credits that are almost certainly paid for by a retailer that don’t lead to additional purchases will be refreshed away, like Saks, for 2025
  • Credits that bring new incremental revenue to a retailer will stick around, like Uber and Equinox
  • We’re going to see more monthly or quarterly credits, and fewer annual or semi-annual credits

Will the cards still be worth it? It depends on what kind of AmEx user you are: If the annual credits represent a significant source of value for premium cards, you’re in a tougher spot. If they don’t because you’re taking advantage of category bonuses, employee cards, offers, and other games, then it’s annoying but not a game changer.

Good luck!

2025’s refreshed American Express Green card monthly coupon credit.

One of the tenets of common sense that transcends travel hacking, miles and points, and churning is “if something seems too good to be true, it probably is“. To an untrained eye, it’s good advice and will probably keep you out of a tight spot.

If however you’re skilled in a particular field, the general advice can fall flat on its face and hold you back. In travel hacking and churning, there are currently and there have been plenty of examples that you’d miss out on if you thought they were too good to be true, like:

– Earning 24% back when buying Visa gift cards at home
– Earning tens of millions of Delta SkyMiles for buying money orders with a real bank debit card
– Getting enough cash to buy a new Subaru for adding employees to your account
– Paying a credit card’s bill with another credit card
– Flying to Europe in business class for 15,000 miles
– Buying airline miles at or below 0.5 cents a piece, in seemingly unlimited quantities
– Getting millions of AA miles with rapid card churning without paying annual fees

So, don’t let the idea of too good to be true prevent you from running a few tests when you’re a subject matter expert, instead, protect yourself and always be probing. Also, try not to visibly wince like I do when someone says “if a deal is too good to be true, it probably is”, it’s bad form.

Frat boy Chad said that Flamin’ Hot Cheeto cheeseburgers were too good to be true, and this, err, exists.

EDITORS NOTE: In 2024, I’m going to try and have a guest post on Saturdays. Today’s guest post is from the always helpful and funny SideShowBob233, who can apparently be reached at SideShowBob233.com.

The Amex financial review team (henceforth referred to as the FR team because I am lazy but you knew that already because of the private investigator you hired to follow me) is one of the most feared teams at everyone’s favorite points and miles cash cows, probably more than the RAT team since the FR can actually shut you down (I’m not clear if the RAT team gets involved in shutdowns although it’s possible they do for blatant abuse such as obviously paying Amex with Amex). 

Generally, to get noticed by the FR team (and their Top Notch Never WrongTM algorithms – note I trademarked that because how gullible are you anyway) the easiest way is to spend a lot of money (more than you usually spend) and not pay right away.  The TNNW algorithm flags you as a bust-out risk and sends your name, phone, card portfolio, and stool sample to the FR team for the preferential – bordering on gentle – possibly even lover-like treatment only they can provide (sue me Marvel). 

Once the FR team gets involved, they will generally suspend all your cards (block new charges on them) and call you, causing you to need to change your underwear – please tell me you wear it – actually don’t tell me I don’t want to know).   They sometimes will want bank statements, sometimes tax transcripts, occasionally a urine sample but in most cases despite scaring the life out of you the result is not the worst case (shutdown or card closure).  Generally, the worst-case outcome is limits on your cards – barring any major lies on your part like a declared income of $1M and you are making minimum wage working at McDonald’s AND eating their food 3 times a day while wearing the Grimace costume and ONLY the Grimace costume. 

This is generally common knowledge SideShowBob233 you say (once again you say the 233 out loud as only you can, which is different than how everyone else says it because face it, you’re weird) so why are you wasting our time with this besides shamelessly stealing quotes from Deadpool? 

The reason is there is a different kind of FR which has been showing up more frequently of late and I want to warn you about it.  Also because sometimes I tuck my knees into my chest and lean forward, that’s just how I roll.

This new type of FR can be triggered the same way as I boringly detailed above (this is your cue to go back and re-read and actually pay attention this time) but sometimes it can be triggered by a returned payment or possibly by linking a new payment account to Amex.  In this new type of FR they are concerned about the ownership of the account(s) you are paying them with.  This is a variation on the fear you can’t pay them as payments from an account you don’t own could be fraudulent and eventually returned.  They will ask you for proof of ownership of the accounts you’ve been paying them with.   If you cannot provide the requested proof, they will close your cards (they want actual PDF statements from the bank).   If you can provide the documentation but your name is not on the accounts there are several outcomes – one is they will ask you for a third party authorization form filled out by the account owner, sometimes they will let you add a new account in your name and pay from it then provide a statement, but sometimes you get a jerk and (s)he says no to all of that and you have to provide a statement on an account (from the past) with that name on it. 

So you’re all saying to yourselves thanks SideShowBob233 (this time you skipped saying the 233 out loud because my laziness is contagious) you’ve scared me a little, but what can I do?  The answer is always have at least one account in the cardholder’s name linked to at least one card.  Ideally every cardholder should be paid from an account they are an authorized signer on to avoid any issues.  Is there a guarantee they will find you?  No, nothing in life is guaranteed except death, taxes, and rakes.  But why mess around with the potential to get the FR team involved. 

Finally, I know you’re thinking “I’m not lazy like you SideShowBob233 so I am going to use my photoshop skills and give Amex a fake bank statement and go on my way” but let me overcome my innate laziness and explain why that is a terrible idea.  First, that is basically financial fraud, and unless you’re a billionaire you can go to jail doing things like that.   Churning has a lot of gray lines and I’d like to stay on the safer side of that one.    

Second, there are systems like ChexSystems and EWS (see my other post) that track ownership (ever wonder why some banks can instantly verify account ownership?) and if Amex sees a document saying SideShowMel is an owner but pulls a Chex report or EWS and sees the account is actually owned by SideShowBob233, they are not stupid and will not take kindly to being lied to (plus they will obviously know it’s a lie and won’t accept that doctored statement/artwork as proof).   And to be honest when they are asking you for proof they generally already know the answer in most cases – but it’s possible Chex/EWS is wrong so they are asking you to verify, but don’t FAFO with the FR team.  

As a final sendoff here’s an animation of me setting up all my family members to make sure they pay their cards from accounts in their name to avoid this risk in the future:

As a final, final sendoff, here’s me on vacation because you didn’t really want to keep your breakfast down anyway:

– SideShowBob233

Comenity Bank probably doesn’t qualify as a FinTech given that they’ve been around since the 1980s and have major co-branded card contracts like AAA, Victoria’s Secret, the Texans NFL card, and the Houzz (?) Mastercard, but they do provide an object lesson in how FinTechs and some banks can provide unique backdoors into the financial system. Specifically, today we’ll focus on the Comenity Shopping Cart Trick.

The Shopping Cart Trick

It’s probably already familiar to seasoned churners that sometimes you’ll get a better offer for an airline credit card when you’re making a dummy booking or when you’re applying for a card from an in-flight application. What’s probably less obvious is that sometimes your account or credit profile will be impacted differently based on how you apply too. Specifically:

With Comenity co-branded cards, if you add a dummy item or two to your shopping cart and then apply for the card during check-out, they’ll almost never perform a hard-pull of your credit report.

Of course if you have bad credit or no credit, this is an enticing proposition. For most of you reading the blog, at face value there’s not much there other than as a mental insight into bank processes.

The Lesson

The public facing side of credit cards, like lifetime language, sign-up bonus terms, and which card has the worst design, aren’t the only aspects of a card and its impact on your finances. Instead, credit reporting, unregulated debit payments, and pseudo-loan like products play a role in the immediate enduring value of a card too. Always be probing!

Happy Monday!

Pictured: SideShowBob233 attempts the Fluz shopping cart trick.