Case Study I: When an annual fee makes sense
I had until recently avoided any cards with annual fees that were assessed the first year. Many cards waive the annual fee for the first year, but assess it for subsequent years. Last year (and again this year), American Express offered a sign-up bonus on their Platinum card for 100,000 Membership Rewards Points after spending $3000 in 3 months. The annual fee to be paid in the first month was $450. Since 100,000 points is easily worth $1000, I had been leaning toward getting it when the bonus was around 50,000 points, but since Amex currently limits users to only one sign-up bonus per card per user per lifetime, I wanted a really good deal. And then it happened, I saw on slickdeals that the offer was available and signed up as quickly as possible, which was extremely fortunate as the offer was available for less than 24 hours.
When I researched all that the Platinum card offered, it was easily worth the annual fee. First of all, it offered $200 in airline incidental reimbursements per calendar year. Since it was August, I could do one in August and one in January, which would make it $400 in travel reimbursement, which almost offset all of the annual fee by itself.
Since I don’t spend a lot on incidentals, I had initially discounted that part, but in reading some posts online both at slickdeals and reddit that reimbursements also worked for purchasing the selected airline’s gift cards, I found it to be much more helpful. Though Amex specifically does not guarantee reimbursement for gift cards, I was able to get reimbursements for two different airline gift card purchases, one last year and a different one this year. I just had to make sure to activate my initial selection and change my selection the next year on Amex before making the purchases.
But as they say, “wait! There’s more.” Amex Platinum offers to reimburse my TSA pre-check or Global Traveler one-time fee of $85-100, which is good for 5 years. The 100,000 American Express Membership Rewards is worth roughly $1350 through points brokers, which to me means that they are likely worth even more if one knows where to look. If a points broker can buy them and resell them profitably, there’s obviously some areas where those points have higher valuations. Finally, since Amex had a pro-rated refund policy*, if I decided the card wasn’t worth it, I would get back most of the annual fee originally paid. I always like to have an exit plan if a product or service doesn’t meet my expectations.
$1390 approximate value through point broker ( (100,000+3000) points x 0.0135$/point )
– $450 (annual fee)
+ $400 ($200 per calendar year of airline reimbursement)
+ $100 (TSA Global Traveler or $85 TSA pre-check)
+ $300 (prorated annual fee refund)
= $1740 in total cash or equivalent benefits from a single card!
There were a few other items that I wouldn’t actually pay money for, but have found some value. These included complimentary upgrade to Hilton Gold as well as a free year of Shoprunner, which is basically like Amazon Prime’s free 2 day shipping for several non-Amazon companies. Amex also occasionally offers usable “Amex Offers” where they refund a certain amount in statement credit for purchases at certain stores. I’ve easily had $200 returned to me from purchases made in this manner. Again all Amex personal cards only allow each person to earn the signup bonus once per lifetime, so make sure you get good offers before signing up.
Some people have trouble hitting the $3000 spending in 3 months. For some that’s because their expenses are so low and they don’t see any reason to add to their spending to earn less then 20% back on purchases and that make’s sense, however, there are so many ways to manufacture some credit card spending to meet the required minimum spend requirement.
Another nice bonus with the Amex Platinum card is that the airline and TSA credit reimbursements don’t reduce your spending that counts toward the minimum $3000. By buying $200 in airline gift cards, getting the $100 TSA Global Traveler and more than $100 back in Amex Offers over the first 3 months, I only had to only spend about $2600 in purchases to get the 100,000 rewards points (plus I received 3000 reward points at the 1 point per penny normal rate). Using the point broker value of 1.35 cents per point, I made $1390 on a net spending of $2600, which is over a 50% cash back on those purchases! I did have to cover the $450 annual fee up front and that didn’t count as a purchase, but I still figure I netted right around 50% of my net spending back in cash over the first 3 months I used this card.
= $3000 Total Spending needed
– $200 airline refund
– $100 TSA Global Traveler reimbursement
– $100 Amex Offer refunds
+ $150 Net Annual Fee ($450 – $300 refund)
= $2750 net out of pocket spending
Total cash back earned:
= $1390 (103,000 points *0.0135)
I did receive another $100 worth of Amex offer refunds and another $200 in airline gift card purchases in January 2016 that aren’t included above as they fell outside the required spending time frame. All in all, one of the most lucrative credit card signups that I’ve been able to participate in. My wife recently completed the same sign-up bonus as well, though they are still holding her points for some “verification” that she indeed spent the required amount. Why a bank thinks that it is not possible to spend $3000 in 3 months AND pay it off when they have issued a card to you is beyond me… oh, wait, it’s a bank.
Case II: Combining Marriott and Southwest card benefits
Earlier this year, my family and I took a trip to sunny California and enjoyed a 7 day stay at the Marriott and round tickets for free.
Here’s how we did it. Chase offers both business and personal cards for both Marriott and Southwest. Marriott points are worth slightly more than monopoly money by themselves, but they do have some great reward options if you acquire a lot of them that you can transfer to other airlines.
Chase offered 70,000 Bonus points for spending $3000 in 3 months on both it’s business and personal cards (offers have gone as high as 80,000 for general applications or even 100,000 for targeted individuals). We did a phased sign up over several months with me signing up for a business card first, then her for a business card and then me for a personal card. We also made the mistake of adding the spouse as an authorized user to get 7500 points extra (don’t do this latter part-it’s worth only about $40 and counts against your 5/24 Chase limit of cards).
With the 219,000 points that we got by sign ups and 1 point/dollar spent, we only needed $1000 in additional spending to get to the 220,000* combined goal between the two of us. Once we got to that number, we were able to redeem those points for a 7 night stay at up to a Category 5 Marriott branded hotel and also earn 70,000 Southwest Rapid rewards points. We did this near the beginning of the year so that this transfer would count toward the coveted Southwest Companion Pass-more on this in a bit. Marriott does allow you to transfer points between members of a family provided that you’re redeeming for an award. We had to both call in and authorize the transfer, but it was fairly painless.
After we had met our spending requirements for the Marriott cards, she applied for the Chase Southwest card, which offered 50,000 Rapid Rewards points after hitting the $2000 spending in 3 months. Once those points posted, we had over 120,000 Rapid Reward points which got us over the 110,000 required to earn the Southwest Companion Pass. The companion pass is essentially a buy one ticket, get one free deal for Southwest flights where there are two or more seats still available. The ticket isn’t entirely free as there’s a $11.20 round trip government imposed 9/11 free, which we paid with the gift cards earned earlier.
So, how much was it all worth? That really depends a lot on which hotel you choose to stay at. We chose one that would accommodate our family: two adults and 4 kids. One was under two and so we were able to finagle a room for 5 without having to pay extra. The regular cost per night was almost $200 a night with taxes included. For the 7 night stay, that would have been worth about $1400 by itself. Southwest points can generally be redeemed for about 55-70 points per dollar or about $1.40 to $1.80 per hundred points.
The companion pass can potentially double that value, though we used most of them to fly our kids with us as well (youngest was also free). So 120,000 points would be around $1800 alone (@$.015/point) or up to $3600 if fully utilizing the companion pass. Our value for the Southwest points should be around $2200-$2400. So total value earned for the 4 credit cards was about $3700, or approximately $925 of value per card. On a reward value per card application basis, those were some of the best we’ve had. We can also rinse and repeat in 2 years time if we want to try again.
Would we do this again? Maybe. We don’t always like to stay in one place for seven days so this might not be ideal to try again. We did have a hiccup in booking our room in that the website had a few bugs that directed us to reserve the room using cash, though we thought it had been booked with our 7 day reward certificate. After discovering this issue a few weeks before leaving, and trying to find a different hotel in Los Angeles that would hold 5 people and was Category 5 or under was not easy. We had to spend over an hour on the phone getting that resolved.
On the plus side, the website was fixed a few weeks after our making them aware of the booking issue. Always call to confirm rewards bookings to make sure you’re getting what you think you are. We ended up getting a single hotel room, instead of the suite we had previously booked–I had read the terms and conditions and knew the suite was not generally permitted, but the site took my booking, so I figured it was good since the hotel was all suites. This was our first time with this reward combination, so some learning was expected. If we’re traveling to a new place and have a toddler who isn’t sleeping well while all sharing a single room, vacation is not an appropriate description of what you’re doing.
Case Study Results
The referenced card offers vary, but usually repeat regularly. We did pay the $79 annual fee for the Southwest card and promptly cancelled after several months and received a full refund. The Marriott cards had no annual fee for the first year, however, we’ll probably keep one or more as each year, a free night at the Category 1-5 hotel is included which more than offsets the annual fee.
All told, we expect to derive almost $5500 of value from the 4 Chase cards and the American Express Platinum card. Since the hotel and airline purchases would have been more than we normally budget for our entire year of vacations, it’s safe to say that we were able to unlock a huge amount of value in having a great family vacation on a relatively shoestring budget.
Had we earned the money to pay for all of those things, it would have taken about twice as much using the $2 = $1 math, or $11,000! For a family on a $50,000 income, that works out to over eleven weeks of earnings, or five and a half weeks for a $100,000 income family. Figuring I spent about an hour per card managing each signup and redemption, plus an hour chatting with Marriott, I was earning the equivalent of $1833 an hour ($11,000/6 hours) after taxes, albeit with no health/retirement benefits included.
*As of Sept 1, 2016 American Express no longer offers pro-rated refunds on annual fees after 30 days from the date billed. This reduces the total value by about $300 if you use it for the full 12 months.