Talk Your Book: Optimizing Your Credit Card Points

0:04Welcome to Animal Spirits, a show about markets, life and investing. Join Michael Batnick and Ben Carlson as they talk about what they're reading, writing, and watching. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast.

0:34Welcome to Animal Spirits with Michael and Ben. We're joined today by Chris Hutchins. Chris is a former fintech founder. He's worked for fintechs. He's invested in fintech startups. He's more knowledgeable about credit cards than anyone that I know. When I needed to get a credit card in recent months, I asked him which one I should get. He has a great podcast called All the Hacks. Did I forget anything there, Chris? I mean, there's probably a million things I've done, but that's my thing. I love credit cards. I love points. I love miles. I love deals. Thanks for having me. All right. Here's where we're going to start.

1:03We've noticed this too. Someone sent us a question last week. Are we seeing outrageous inflation in the value of your points? Another would ask this, do your points not go as far with many credit card operators now? It feels like they've been jacking things up. It costs more points to stay at hotels or buy airline tickets. Is this a trend or is this just certain carriers? It's a trend, right? Just a few weeks ago, United started adding 30 % more miles to go on flights. Coach, economy, international, everything. Hyatt raised the number of points you need for different hotels this year. Last year, Marriott did it.

1:39Delta's done it basically every year the last three or four years. We switched to this thing called dynamic pricing. So it used to be like a domestic flight is 25 ,000 points. And now it's kind of like if it's at the lowest availability, it's 25. And if not, it could be any random number of points based on the actual dollar cost. The only good news, the Senate Commerce Committee is actually proposing a piece of protection for consumers. that would require frequent flyer programs to give you 90 days notice of devaluing your points. Okay, so you could get ahead of it a little bit and book some stuff.

2:09The banks always win is really the bottom line here, unfortunately. Yeah, I think the takeaway I have is that there's really two kinds of ways to earn points. You can earn a specific point, like you can earn a United point, you can earn a Delta point, or you could earn points in one of these flexible programs. Chase has ultimate rewards, Amex has membership rewards, Capital One, Citi. That's like hedging your bets, right? If you earn all your points in United and all of a sudden United says you now need 30 % more, you're kind of screwed. But if you had chase points, you could say, okay, well, now I'm just going to transfer my chase points to Air Canada and book that same United flight for less points.

2:44So the way to hedge against devaluation of your points is two things. One, use them. Don't just sit on them forever. And then the other is try to get them in a place that they're as flexible as possible. And the third is we need interoperable points on the blockchain. Oh, man. Well, to your point about using them, I had some friends this weekend say, hey, we have like 240 ,000 Marriott points. We've never used them. Not to brag. But they've been sitting on them for like seven years. And I thought, too, like I kind of get mine and use them relatively quickly because I'm worried about the inflation.

3:16So like they've been sitting on them. They probably missed out on a few good deals over the years. For sure. Yeah. If you, I mean, I've been sitting on points for a long time, especially last, between the pandemic and two kids under three. Like we've just been not using the points. I think there's an interesting case to be made for cash back if you're just not going to ever use your points, right? Like if you're not sure, you could get a lot more value from points than cash back, but if you're not going to use them, all of a sudden they devalue, you know, it's not really as compelling of a narrative, I think.

3:44So I saw somebody say that points back or I'm sorry, cash back is not a taxable, is not taxable income. Yeah, neither are points. So basically rebates are not considered taxable things. And so the credit card company, it's classified as a rebate technically is why you're not taxed on your cash back or your points back. But if you refer people and you get some referral bonuses, those are taxable. So I got some 1099s. So what do you think it is about the rebate? If you frame it through that lens, you're basically paying yourself right now. A lot of these fees are generated through customers that don't pay their bill.

4:19That's where the balance comes from. We'll get into that later. But there's a huge psychological dopamine hit when you book something through rewards, even if so. I would say I'm almost the opposite of you, Chris. I was listening to you on Making Media, which was awesome. And at the end, one of the guys was saying, I don't optimize for anything and I'm sort of the same way. But there's a big benefit. I feel great about using my points, even if it's total bullshit or they're getting like more expensive. Like, what do you think it is about rewards that people love so much? Is it just, it feels free.

5:01Yeah, people love getting something for free. People, you know, hate the banks, right? Like the lowest satisfaction of anything. So the fact that you're getting a little bit of extra free, it just makes people so happy. I remember talking to a friend that worked at Credit Karma and he was saying, they're trying to get people to get lower prices on their car insurance. And they were trying to figure out what copy you could show them that would get them to like check their car insurance rates. And he was like, what they found was they find out what the DMV has on you, did the best. People just wanna like stick it to someone.

5:30They wanna understand how the system works. They wanna get a deal. I know people that will charge thousands of dollars to run like a sponsored post on their social media accounts, but like we'll run a sponsored post for free if they get like a dinner. You know, like it makes no sense. Like they're willing to do all kinds of crazy things for free. Well, the epicenter of that sort of psychotic behavior about what things people will do to get free shit is at a sporting event where people will facepalm a grandma to get a free T-shirt, like a nighttime T-shirt. People go nuts for free shit. Yeah. And every time, if anyone runs a business that accepts credit cards, you know you've got to pay probably around 3 % to take a credit card.

6:16So we've all been to the store where they're like, oh, if you pay with your credit card, you need to spend$5 or we're going to tack on a fee, which technically some of those things are not allowed in their merchant terms, but I wouldn't pick a fight with the store owner. And so it's like, if I know I'm going to be paying this fee indirectly, why not get something back? Like at a bare minimum, if you're not getting 2 % back on everything you spend, you're doing it wrong. It feels to me like there's collusion going on where one airline or credit card company will like jack up their points needed to get something and then they all kind of do it.

6:48Are there any cards or providers right now that are still like the best bang for your buck or do you kind of get the feeling that most of them fall in line and devalue when the other ones devalue? So I think almost all of my spending is on a card with these flexible points. So one of the Chase, Citi, Capital One, Amex or the Built card. And the reason why is because it doesn't really matter. You're getting a Chase point. Chase is never going to necessarily devalue the point, but the places you can use it might get devalued. So I think that's the hedge. The hedge is don't try to put all your eggs in the United basket, the Delta basket, or Hyatt, or American.

7:25It doesn't matter. Just make sure you put it somewhere where you have a lot of options. And in that case, I haven't seen a lot of devaluation. If anything, there have been a bunch of bonuses for some of these transfer bonuses. So it's like, oh, if you transfer your Chase points to Air France this month, you get 30 % more points. So you've got a lot of options there. And I have this page. If you go to allthehacks.com slash TP or slash transfer partners, you can see all the airlines and which transfer to which cards. And you can see why it's a lot better option to have a card that gives you flexibility.

8:01Is there, so we'll link to that in the show notes. That's great. Is there a service where you can link or you could check a box to say that you have the following three cards and I want to take a trip? Where's the most bang for my buck? Like, should I use my Amex points? Should I use my Chase points? Is there any site that offers that service? There's two tiers of the services you're talking about. So one is like a search tool. So there's one called Point Me. There's one called Roam Travel. There's one called Seat Spy. They all have their individual nuances that make them better or worse for certain scenarios.

8:37But they require you to say, I want to go here. I want to go from San Francisco to Tokyo. And they'll say, your best use is transfer your chase points to Air Canada and book that flight. That's how those sites work. And they all have a different kind of cool thing. So Seatsby will show you a year of availability at once. And Point.me will search like, but they'll only search one route and one airline. And Point.me also only search one route and one date, but they'll show you 35 different airlines. So that's one option. Yeah, what's the other? The other option is to go and just pay someone to do the search for you.

9:15Whoa, is this like a points broker? I need one of these. So you basically, the cost is somewhere between$25 and$50 as like a down payment, just like a good faith commitment. And then if they find something for you, it costs somewhere between$150 and$200 a passenger. And so you figure, why would anyone do this? You can do all the searching yourself. Yeah, it sounds like a lot. If you're trying to take your family, let's say, to Europe. So we took a trip to London and Paris last year with two little kids, which I don't necessarily recommend. But we did it in business class, and it was 420 ,000 points round trip for four people.

9:56Those tickets, had I used 420 ,000 chase points to just like give myself cash back or something, maybe I'd get four grand. If I booked in the travel portal, maybe I'd get six grand towards flights. But four business class tickets in December were something like seven grand each. So it was like$28 ,000 worth of flights. Now, if I was someone who wanted to do that anyways, I'd be better off paying someone$800 to set that all up for me because I'm gonna, the delta between those two things is over$20 ,000. So I'd say if you have a lot of points and your alternative is redeeming them, why not spend the 25 or$50 to see if there's an option?

10:34And if there is, you're going to save a lot more in the long run. So that's the other option. You mentioned transferring your Chase points to an airline. So when I use my Chase points, whether it's the reserve or the preferred, I go in through Chase and I go to like redeem and I go to the flight through there. Is that what you're talking about? Or is there something else that I'm not aware of? this is like the meta hack is Chase, Amex, they all have these travel portals. And if you book through the travel portal, you get some value. So in Chase, if you have a Chase reserve, you get one and a half cents per point.

11:06We want to talk about that too after this. So keep going. Yeah. So the travel portals are like the easiest way to use your Chase points. You always get one and a half cents with a reserve. You get 1.25 cents with a preferred. And you can book most flights. The backend is powered by this company, CX Loyalty, but it used to be powered by Expedia. in general, you're getting the same prices you're going to get if you search online for flights. The interesting thing is there are some sweet spots where if you just take those points and you say, let's move them over to British Airways, let's move them over to Air France and book directly with their mileage program, you can get crazy deals that are much, much better.

11:42Often, if you're booking last minute or you're booking in a premium cabin or you're booking like kind of some obscure routes that sometimes are just really, really expensive, like my in-laws live in a ski resort and sometimes it's really expensive to pay with dollars and it can be pretty cheap with miles, that kind of stuff. The value you can get there on a cent per point basis can range from terrible, like the same one, one and a half cents you'd get anywhere else, all the way up to 10, 14 cents per point. Those are extreme examples. But I'd say on average, most of the redemptions I'm doing are in that like two to four cents per point range.

12:19So if you got a card - Do you go through Chase or do you go to the airline and then - So you go to Chase's website and you say transfer points and it'll say, which airline do you want to transfer it to? You put in your Air France number and you transfer there. So when we did it - That's a hack. When we did it, we booked, we transferred Capital One points to Turkish Air. I'm not flying Turkish Air. We used Turkish Air to book a United flight from London back to San Francisco, but it was 45 ,000 points, which in the portal would have gotten you like 600 bucks, 700 bucks. but it was an international business class flight from London to San Francisco.

12:51And like, we all know that you can't get that for 600 bucks. So that's the way to do it. And you can either learn how to do it. You can go play with these tools. You can go to United's website. Just pretend you have United miles. And if it's a good deal, then go transfer your chase points to United. Does your wife get excited by this? Or is she like, just leave me alone, dork. The searching, no. But when we like hop on a plane and we have four business class seats and she knows we didn't pay for it. and we go stay at the St. Regis in Bora Bora and she knows that we didn't pay for it, she's pretty stoked.

13:22So she's like, yeah, take your time and go do all the searching. But if I was like, you have to search, she'd say, just let me pay someone$200. I don't want to deal with this. Do you think that it still makes sense to book through the Chase or Amex or whoever? Does that still make sense beyond getting the points? Because a lot of people have asked us, I feel like I used to get a better deal going through them and now it feels like you just pay the same price but you can use your points. Is there any benefit to still doing that? I would say the exact opposite is probably true. We went on this trip a couple of weeks ago with a bunch of guys and we were going down to Cabo and everyone booked a different way on the exact same flight.

13:58We show up at the airport, the flight's like three hours late and they're like, our plane's not here. We're gonna send a plane up from LA. We're like, this isn't gonna go well. And we looked online and United had the same flight for the exact same price we all paid for it. So we're like, everybody cancel your Alaska flight. We'll walk over to the other terminal. I booked two one ways on Alaska. So I just called Alaska said, Hey, your flight's delayed. And they canceled it refunded. One guy booked in the Amex portal and he booked a round trip flight. And they're like, well, one, we can't cancel one leg because it's round trip.

14:26And two, we can't really do it because it's Alaska's fault. So you got to call Alaska. And he was on the phone for like, up until the door closed, he was trying to negotiate with Amex to get his flight canceled. And so in general, if you want to book anything, flight, hotel, you got to book it direct, unless the deal is so much better. And the only reason the deal would be better is, you know, Capital One gives you a$300 travel credit with the VentureX. If you could book a flight on their portal and the flight's free because you have$300 of credit, great, that's awesome. But I would never book in any of those portals if I'm just paying dollars.

14:59So this is really important because I always book through the portal. Now, when I'm using points, I always book through the portal. Are you saying like, don't even do that? Are you saying to transfer your points and then book it through the flight directly? or not? I'm mishearing you. Transferring your points is definitely like a level two thing that's going to take work and time and you might not want to play that game. So if you're able to use your points, get one and a half cents, book in the portal, that's not the end of the world. But if you've used up all your points and you're just like, I need to buy a flight to Miami, definitely don't just randomly book in the portal.

15:31There are a lot of people out there that book their flights on Amex travel just because they think it's like a better place to book flights. actually what we're on this what bad move what do you think about using sites like expedia versus going directly to the airline is there anything that we should know about that aspect of it i love google flights they have like the best search and you can search i don't know that was a thing airports google flight it's it's amazing google flight that's what i use too i used to be a kayak guy but now i'm all google flights so let's say you live in new york you go to Google flights, you type in, you know, LGA comma JFK comma EWR, and then you can leave the destination empty.

16:07And you can say like July 15th to 20th search. And it'll just show you a map of the whole world. You could filter the world and say, I only want nonstop flights and I want it to be less than 600 bucks. What? Now, once you found that book with the airline, I'm never booking anywhere except with the airline, because when something goes wrong, you've got to go deal with whoever you booked with. And I'd much rather deal with the airline. And most of the times it gives you the option, like book through this airlines.com or whatever, or straight through Delta. And yeah, you can just click from Google right through Delta.

16:38This is, this is, I'm learning a lot, Chris already. Thank you. I wish I, I wish we did this a couple of weeks ago. My wife and I are going away next month. We haven't been away since before Logan was born. Actually, that's not true, but it's been a few years. Uh, and so I just start randomly entering destinations in the Caribbean, like, oh, no direct flights there. Oh, nope, this doesn't work either. Had I known what you just said, I could have just done JFK LaGuardia this day. I don't care where I go. I'll go anywhere. But anyway, great, great tip. Yeah. Flightconnections.com or flightsfrom.com or two other sites, they don't let you search for prices, but you can put an airport and it'll just say, here are all the nonstop flights.

17:15If you're just like, where can I fly from JFK nonstop? If you're just curious, just brainstorming, you could do that. Google flights will do it more from a pricing standpoint. Yeah, I don't search for flights anywhere except for Google Flights. Or if I'm trying to use my points, I'll go to airlines websites because Google Flights just shows the dollar amounts. Ben, why have you never told me about this? I feel like you're in the go. Who doesn't know about Google Flights? Really, you didn't know this? But is it also better to go, I've heard too that it's better for most hotels if you're not using points to just book directly through the hotel as well, right?

17:50That can offer you a better deal? Here's the hack. So one, book directly with the hotel. Email the hotel. Assuming it's not like, you know, just a one night where it doesn't matter at like a small, like, you know, cheap hotel. Email the hotel and say, hey, I'm really excited to stay with you guys. If you're celebrating something, let them know. But you have to book direct. That's the trick. And then maybe three or four days before, follow up and say, hey, just want to remind you I'm coming this week. I'm really excited. That's all you have to do. I have had hundreds of listeners email me and say, we've gotten a free upgrade.

18:22We've gotten free breakfast. They paid for our parking. Someone, and this is, I can't tell if this was awesome or weird, but they embroidered their initials on their pillows, which I thought was kind of weird. I would have taken champagne over embroidery. But yeah, you can get a lot because hotels don't know really anything about you when you book through Expedia or Kayak or anything. So they can't really build that relationship. But when you book directly with them, they're like, oh, this person like took the time to come to the Marriott website. They probably created a Bonvoy account. We can try to build a relationship with them.

18:51Let's treat this. Like they're still in the hospitality game. And so I would always book direct. Also, a lot of the portals that you book through, you might not earn points. It's like a mixed bag of whether if you book on kayak, whether you're always gonna earn Marriott points if you stay. So I always book direct. You know what I've learned is disappointing? So I have a Hyatt card and a Marriott card. And oftentimes, a lot of their hotels just don't take points, period. Yeah, so there's another site. It's called a Waze, A-W-A-Y-Z. if you go to all the hacks.com slash deals I tried to get a deal for all these award booking sites and all stuff you could go there there might be some discounts I know Waze has one it's basically like that for hotels so you can go and search I want to go to you know some crazy hotel you want to go to St.

19:35Regis Bora Bora just show me a calendar for the next year of when I can use my points to go for like 80 ,000 points a night instead of sometimes like Hilton is notorious for this you'll search for a hotel and it'll be like we can you could use your points it's only 1.3 million points per night. I saw this recently. I was looking for spring break stuff. That's what it was. It was like 2.5 million points a night. I'm like, uh, what? Yeah. But, but there are nights where it's only 50 ,000 points. And the whole hack about all of the way user points is airlines, hotels, they all have this like saver availability.

20:06And it's like, they have a few seats or a few rooms that they price at this really reasonable, incredible price. And then all of the other ones, they price at this egregious price you would never use ever. And so it's fine. The whole game is finding that saver availability. Your best option is booking like 12 months out or booking two weeks out. Because come last minute, it's really easy. Like they, a lot of airlines and hotels just open up the doors and say, we want to fill these rooms so you can use your points for everything. And recently, during the pandemic, a lot of airlines and hotel groups basically made cancellations really easy.

20:40So if you want to cancel your flights, especially if you book with points, you can almost always get your points back or your money back, maybe on the money side in the form of a credit. So I always say, look, you can always book a trip and then check. You know, you're going on this Caribbean trip. Check a week before. If all of a sudden you can get the thing for half off, whether it's the flights or the rooms, you can go cancel and rebook. Or I do this a lot of times if there's just no great business class availability with points, we'll book an economy. But two weeks before, we'll look and almost always something opens up and we just change.

21:12Here's a good one for you that someone asked me recently. uh best way because you mentioned taking a trip to europe with kids obviously it's way more expensive you have kids i have three kids so the flight thing is almost as expensive as a hotel sometime are there any cards that that make this easier for doing big big kind of families whether it's hotel or flights or yeah i was going you have to say i was thinking about this and i was like you asked me like what are the best travel cards for kids i was like well i got a couple ideas so One, we never checked bags when we didn't have kids. Never made sense.

21:44Why don't we check bags? We don't have to lose our bags. We have so much stuff for the Union of Kids now. So if you live in Denver and you're always flying United, it might make sense to get the United card just so you get free check bags. You don't have to spend any money on the card. You don't have to use the card. In fact, the Chase Sapphire Reserve, because you can transfer the points to United, you often earn more United points using the Chase Reserve than you would a United card. but you might get free check bags, which might make your life a little easier. That's one there. We won't go into the nuance of this, but there is a way to open up a couple of cap or a couple of Southwest cards and boost your points balance in one year and get quickly towards companion pass.

22:23So if you were like, gosh, my, my partner and I, we decided we're going to take our two kids this year and we're going to do a lot of traveling. You could each open up like two Southwest cards and get really close towards companion pass for both. And when you get companion pass on Southwest, you can name a person and that person travels for free. That's the hack that I've done in the past where I open one card and get the points for me, then another one in my wife's name and get the points for her. That's the kind of thing you have to like combine, right? When you have player two, you get to do everything twice, which is like the industry term we call is like, you have player two.