How to get 17.5% return on a dollar spent on your travel credit card, with -0- risk!
I wrote the first sentence of this article to get your attention. For many people travel hacking is not just a way to travel for free, it is also a hobby. Today, in the spirit of a hobbyist I’m going to develop a hypothetical use of awards that will help our readers understand some of the nuances of building and spending their rewards.
I’m going to start by apologizing, but this article will have a lot of math, but the math we will be using should be used by every serious travel hacker before they burn their hard earned travel rewards.
In this hypothetical we will be buying a one-way business class ticket from Miami, FL to Charlotte, NC, on April 4th, 2018.
My hypothetical travel hacker has my favorite travel credit card, the American Express, Every Day, Preferred card. I love this card because it gives me 3X American Express points for all my “grocery” purchases and if I make 30 or more purchases in a month I get 1.5 X additional point bonus. YES! My $1 grocery purchase will now net me 4.5 ( 3 X 1.5) total Am Ex points. The normal value of an Am Ex point is ~ 1.7, giving me a 7.65 cents return on every dollar I spend on groceries.
Luckily for us, there are two parts to maximizing the return you get on your dollar spent. The first side is the actual point accumulation described above. The second side is the way you use the points. This is where the hobby of travel hacking becomes an art.
My first move in this hypothetical is to maximize my Am Ex points by taking advantage of a common Am Ex point deal. About once a year Am Ex runs a special with British Airlines and does a 1000 Am Ex point transfer for 1300 BA Avios miles. So based on the Am Ex bonus I made a transfer and my 4.5 Am Ex points converted to 5.85 BA miles. So after my transfer my reward for spending 1 dollar at the grocery store using my EveryDay Preferred card is now 5.85 BA Avios Miles.
Most travel blogger are now having a heart attack because an Am Ex point has a general value of around 1.7 cents and the BA miles have a general value of .75 cents. So in my transfer from Am Ex Points to BA miles, if I use the generally accepted value of these points, lost me money. Go to RewardStock.com to review reward values.
Don’t panic. The art to travel hacking is how those BA miles are used. BA miles are unique in that they are priced by the distance flown instead of segments. This little nuance means that very few BA miles are needed to fly short hop flights. In some instances a flight that will cost 12,500 American Airlines miles will only cost 4000 BA miles. This is the sweet spot I will be using to maximize the value of my Am Ex points in this example.
Remember my hypothetical? We are trying to acquire a one-way, first class ticket on the short hop from Miami to Charlotte North Carolina on the 4th of April.
A quick search on Google.com/flights shows that the cheapest ticket available for this flight is $449 and just happens to be on American Airlines.
If I go to the BA Avios site and search for one-way business class flight from Miami to Charlotte I discover that BA has a flight for 15,000 Avios miles. In this hypothetical each B.A. mile is worth right at 3 cents ( $449 / 15,000) so my dollar of spend on groceries is now getting me a return of approximately 17.5 cents (value per BA mile X 5.85 number of BA mile per dollar of spend on groceries).
I admit this is a cherry picking circumstance but these types of deals exist every day by the hundreds all over the planet. accumulating travel rewards is a process and by using fairly simple strategies you can build your points. Using your points to realize your maximum benefits is far more challenging but can be a very rewarding “hobby”.