Shoddy Goods 013:

Our regular readers know we’re not exactly the best source for actionable consumer advice. But this edition of Shoddy Goods, the newsletter from Meh about the stories behind the stuff people make, buy, and sell, is a little different. It might actually be useful! Join me, Jason Toon, as I navigate the world of travel rewards with some help from an old friend…

If anybody I know fits the title “Renaissance Man”, it’s Sam Kemmis. Funny enough to write for The Onion (and Woot, where I hired him, and Meh, where he succeeded me). Chill enough to teach meditation. Adventurous yet cheap enough to become a professional expert in optimizing travel rewards earnings. And now, a family man and full-time dad. I coaxed Sam out of paterna-tirement for this chat about how those of us who aren’t quite as brilliant might still maximize our miles.

Shoddy Goods: I’ve always been wary of rewards programs in general, like if it was a good deal, they wouldn’t offer it.

Sam Kemmis: I think in some ways that’s true. But really what they’re doing is something more akin to life insurance adjusters. They’re trying to find that balance of, “OK, we know some people are gonna game the system as best they can and get more value from us than we give to them. But we just hope that that’s outweighed by the people who get into it thinking that they’re going to do that and then don’t.”

So that’s really the game we’re playing with them. And it’s that the same problem where 90% of people think they’re above average drivers or whatever. I think most people think, “oh, I can outsmart them.” So really, I think the first thing that anyone needs to do is just ask themselves, honestly, am I going to do a better job at this than most other people?

If you’re not someone who’s organized, who’s decent with numbers, who’s patient, who’s willing to deal with some frustration and look at terms and conditions, you may not be best suited to try to optimize these things. But then of course there’s a huge middle range where if you’re just an average person, then you’re probably going to get about as much value out of it as you give to them.

“I am the lord of the points” said he.

Shoddy Goods: What are the first things that somebody can do to start getting the most out of programs like this?

Sam Kemmis: Let’s talk about credit card rewards. They make their money by getting people into debt. And so if you’re carrying credit card debt, you absolutely should not try to get into the travel rewards game. Because you’re already losing to the bank. The first thing is just make sure all of your current credit cards are paid off and that you’re able to pay off your credit cards completely every month.

And this is where it’s going to vary from person to person, but the next thing is to do a little bit of research on what kind of points you want to get. There are basically two types. There are co-branded credit cards, which are associated with a particular airline or hotel like Qantas or Delta or Hyatt or whatever. And then there are travel credit cards where you earn points with that credit card program, like Chase points or Amex points or Citi points. Those tend to be a little bit more flexible, you can use them for basically any travel, but they maybe aren’t giving you as good of a deal.

So that’s the first decision: do I want one of these all-purpose travel credit cards or do I want to get a co-branded card specifically for one travel brand? And of course, people who do this are going to end up with a lot more than one credit card. If you do what we call “churning”, where you go through many cards over time, it matters less because you’re just getting lots of cards and racking up points.

And then just do some basic Googling and Reddit searching: I’m new to this, where’s a good place to start? Get that card and learn the ropes on that card. In some sense that’s all there is to it. Just get the card, learn how it works, maximize it a little bit, don’t use the points in a dumb way, and then get going.

Shoddy Goods: You mentioned churning. Does that mean rotating through credit cards to take advantage of their signup bonus offers?

Sam Kemmis: That’s exactly it. Churning is signing up for cards, getting their signup bonus, and then either canceling the card or downgrading it to a card that has a lower fee. It’s the most straightforward way to game the system, basically. And credit cards have various ways that they try to stop you from doing that. Like Chase, a lot of cards will not let you sign up for more than a certain number of cards in a certain period of time. So you have to be aware that you can’t just go out and sign up for unlimited cards.

The other thing is they have minimum spend requirements for those signup bonuses. So it’ll be, like, earn 100,000 points if you spend $6,000 in the first three months. OK, great. But then when you think about it, spending $6,000 on your credit card is actually kind of hard for most of us! And so it’s good to do it around times when you’re booking a big trip or you have something like a wedding or you’re moving: something where you just know you’re going to spend a bunch of money. That’s usually a good time to sign up for a credit card and get the signup bonus.

Shoddy Goods: Conversely, what are some of the pitfalls to watch out for?

Sam Kemmis: One thing is that the points are worth very different amounts from each other. So, like, Hyatt points are worth about two cents apiece. Hilton points are worth something like less than half a cent apiece. And so when you’re signing up for a bonus of 100,000 Hilton points, you’re like “oh my gosh!” But just do that quick math. Just Google it: “How much is 100,000 Hilton points worth? How much is 100,000 Hyatt points worth?” And you can figure out which of those is actually a better offer.

Another one is often, if you close your card outright, you’ll lose the points that are associated with it, especially for those flexible travel points like Amex and Chase. So it may be a little bit harder to get out of those cards than you think when you get into it. That’s a pitfall that a lot of people fall for. Everybody talks about the signup bonus, but then don’t talk about how you get out of the card in a way where you don’t lose the signup bonus. So I think it’s pretty important to keep in mind.

Basically, 80% of the game is actually using the points. I think the biggest pitfall is people get really good at accumulating points and don’t actually spend them. If you do that, you’re just getting, you know, doge coins or whatever. If you don’t actually turn it into a thing at some point, you haven’t gotten real value out of it.

It’s this funny little inversion because we’re taught that people who save money are being smart. But when it comes to points and miles, it’s actually the opposite. Saving points and miles is a terrible option. They not only devalue in the way that all currencies devalue generally over time, but that devaluation is totally up to the program that runs it. It’s not some kind of international market of points that balances itself out.

Chase could just decide tomorrow “You know what? Actually they’re worth half as much.” And there’s nothing that can stop them from doing that. They’re trying to pass some legislation to manage that, specifically to say airlines and hotels can’t just devalue these points willy-nilly, but for right now they can.

And in general, budget airline and budget hotel brand points are a bad deal because they’re so restrictive and do expire. Things like Spirit Airlines and Frontier Airlines points I would just totally stay away from.

“You wanna get muddled?!? Let’s get muddled!”

Shoddy Goods: To get back to why this is worth doing in the first place, what are some of the travel experiences you’d never have had without getting really good at this?

Sam Kemmis: I mean, there are just tons of trips that I’ve taken on points and miles. I went to New Zealand on Emirates business class. I went to Japan on Japan Airlines first class and got to eat, like, handmade sushi in the first class lounge. There was a period where I was really going for those things, like, let me just do those once-in-a-lifetime trips. Now, especially with family, I’m less focused on that.

There’s just fun things like my partner and I basically lived in a hotel for a while during COVID. The hotel prices were so cheap then because we were staying at business hotels and no one was doing that. We sort of gamed it out because I had such high status with the hotel programs that I was just constantly earning free nights. So that was a fun little thing where we figured out that staying in a hotel was significantly cheaper than renting an apartment just because of the way we were using points.

Though I will say, also, you know, I have like 12 travel credit cards right now and that does add some background stress of just needing to keep up with them and make sure I’m not wasting money on any of them. Like, oh, I have a free hotel night with Hyatt that expires in June. Where can we go and stay one night at a Hyatt that’s eligible for the credit that I have? So you end up making all sorts of really dumb travel decisions in the name of optimizations. It cuts both ways.

If you can just do a pretty good job at it, and not get paralyzed by the fact that you’re not as good as the guy on Reddit or whatever, that to me is the game. Because the people who are spending their entire lives doing this, that’s not good. We have made a huge mistake, dedicating our lives to this like dumb, like, Bank of America casino. So yeah, it’s all about the balance.

TBC HERE