Points and Miles Strategies Cause Financial Drain Without Discipline

Key Quotes

"I've driven to Costco to check for gold that was out of stock. I've sat on hold for an hour to get a small refund for a price drop. I have booked flights, hotels, or even entire vacations I never ended up taking. I have compared cashback portals for really small purchases that I probably sometimes even returned. I've endlessly scrolled through blogs, emails, Slack, WhatsApp, websites to try to find the latest deals. I've built dozens of spreadsheets to optimize just about everything when it comes to my points and miles journey and probably even my entire life."

Chris Hutchins highlights how he has historically spent his time on activities that, in retrospect, did not provide sufficient value. He uses these examples to illustrate his first mistake: not valuing his time. Hutchins suggests that many of these activities were entertainment rather than productive endeavors, and that a minimum hourly rate can help evaluate whether a task is worthwhile.

"On the flip side, let's say you had the US Bank Altitude Reserve Card. This is a card that a person I was talking to about this scenario, because this is a real scenario, they actually had this card, and the kind of purchases they were making were ones where they could have been using mobile wallet, and they would have gotten 3x on their spend, which with that Altitude Reserve Card, which unfortunately is no longer available and for people who have it will be kneecapped and not be as effective towards the end of the year, but would have earned 4.5% back because you can make all of those points that you earn worth 1.5 cents time rewards to get value from them. So that same $270,000 would have earned $12,150 worth of cashback."

Chris Hutchins uses this example to explain the concept of opportunity cost in the context of credit card spending. He contrasts earning United miles and status with earning cashback on a different card, demonstrating how the choice of which card to use for spending can have a significant financial implication. Hutchins emphasizes that the "actual cost" of achieving a goal like airline status is not just the fees involved but also the value of what could have been earned elsewhere.

"On American, I flew American three times, but the original reason that I started going for American status was that I was flying Alaska a lot, and I thought, "I can't earn high enough Alaska status as I wanted from credit cards and flights, so if I could earn American status, they have reciprocal benefits on Alaska, let's just go for American status." And right as I was almost done with that journey, Alaska releases a card with uncapped ability to earn elite qualifying points for credit card spend on the new Summit card, and I was like, "I know ultimately if I'm going to fly Alaska, I should have Alaska status, not American." So for the three flights I took on American this year, they were all after that switch, and so I put in my Alaska number, I booked those flights through Alaska, and because Alaska earns elite status on award flights, I earned Alaska status, not American status."

Chris Hutchins illustrates his mistake of chasing status by detailing his complex and ultimately misaligned pursuit of American Airlines status. He explains how he initially aimed for American status due to perceived benefits with Alaska Airlines, only to pivot when Alaska introduced a new card that made earning Alaska status more feasible. Hutchins highlights that he ended up with American status but had not flown American, demonstrating a disconnect between his efforts and actual travel patterns.

"So here's the example I want to walk through. I looked at a nonstop San Francisco to London flight, found one on saver availability with American for 57,500 points. Now, it had higher taxes and fees, it was $733 of fees and taxes, but the flight was $3,300. So that's a 4.5 cent per point flight. And I think everyone listening is thinking, "Gosh, I'm going to get a $3,300 flight for 57,500 points plus $733 in taxes, what a deal!" That's not even a fair comparison, right? One-way flights are often so expensive. Is $3,300 the right number to look at?"

Chris Hutchins uses this example to challenge the common perception of high point valuations, arguing that the initial calculation of cents per point can be misleading. He demonstrates how comparing a one-way flight's cash price to the points required can inflate the perceived value of points. Hutchins suggests that a more realistic comparison, considering round-trip flights and alternative booking methods, significantly reduces the calculated value of points.

"What this means is if you have a million points sitting in one of these accounts, it's worth at least $10,000. And so I'm not saying you can't get more than $10,000 of value, but when you think about opportunity cost, you got to consider that if you wanted to cash out 1 million points for $10,000 or 10 million points for $100,000, like that is an option. I'm still making this mistake. I haven't brought myself to do it. I keep looking at the historical earning and spending. I think my strategy going forward should be to keep enough points for two years of travel so that I have the opportunity to do that. But everything else, I'm not sure I need it."

Chris Hutchins explains his fifth mistake: not cashing out points, which he views as a missed opportunity for tangible value. He highlights that even conservative cash-out options can provide a significant dollar amount for accumulated points, which is often overlooked. Hutchins admits he struggles with this strategy, preferring to hold points for future travel, but acknowledges that points can devalue over time, making cash-out options a valuable consideration.