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Convince Me That You Should Not Use a Cash Back Card As Your Every Day Card

The spate (spate?) of devaluations lately has made me re-consider the whole value proposition of frequent flyer miles. I’ve discussed before how any time you put miles on anything other than a cash back card, you’ve basically made the decision to purchase miles at 2.2 cents a piece (as the Barclay Arrival card essentially rebates you 2.2 cents per dollar, as long as you spend that rebate on travel purchases).

For me (and many others) that tradeoff made sense because of the pretty wide availability of business class international awards at what most considered to be reasonable mileage levels. That has changed pretty significantly recently.

As I’ve thought more about it, I’ve become hard-pressed to find a reason to use anything but that Arrival card as my everyday card. A few points:

- I’m not talking about signup bonuses, which are still worth getting (though remember, those are not free — the $5,000 spend necessary for the 50,000 Ultimate Rewards points for the Ink Bold are costing you $110. That’s a good deal, but it’s not free).

- There is not an unlimited amount of manufactured spend. For most people, doing $1,000/month through Amazon Payments and $5,000/month through Vanilla Reload/Bluebird is the most you’ll be able to manufacture at this point (assuming you can find $5,000 worth of VR, which I cannot). And if you are using manufactured spend to meet minimums or just to get points on a card, you are NOT using it for cash back. Maxing out on manufactured spend on a cash back card results in $91 in cash back each month after VR fees (almost $1100 a year).

- If you’re taking cash back it really makes you think about how much you’re “spending” for that “free” business class ticket when you earn through credit card spend. United now charges 140,000 miles for a business class ticket (on United metal) to much of Asia. Earning that through spend means you’re paying $3,080 in forgone cash back for that ticket. Maybe that’s a bargain to you, I don’t know. But for me, I’d be more likely to buy a coach ticket with the cash back for $1,000 and buy up to Economy Plus. Is business class really worth $2,000 out of pocket? Not to me. You may be different.

- I think of the Arrival cash back as a Travel Savings Account. It’s money I’m putting away that can only be used on travel, as a way to replace what I otherwise would have earned in points. That way I still travel for “free” but I believe I’m getting more value than if I put my spend on a points-earning card.

- I could be convinced that if you’re going to use the points exclusively for international business class travel that you would earn some points at least on the Starwood Amex. Though the more I think about it, the less I’m convinced that makes sense for me. Sure, I like sitting in business class for a trip to Tokyo. But with that cash back option, that’s a lot of actual cash that it’s costing me for business class.

- The other option I see is if you have a specific trip planned at an expensive Starwood hotel where it would be worth earning the points to pay for the hotel. There are Category 6 hotels that require 20,000 points but would otherwise cost far more than $440, for example.

What am I missing here? Why wouldn’t the Arrival card be the best option for everyday spend for people who like to travel?

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18 Comments.

  1. Since I earn miles for a moderate amount of paid flying, UR/MR points are worth more to me than a cash back card. I can combine those with the miles I’m already earning. Otherwise it would be harder to burn through those butt in seat miles.

  2. Jared, I agree with your point of view if flying premium (business/first) class is not a priority. For families, that may be out of reach anyway, between the number of miles required and being unable to find four such seats (for example) on a single trip.

    With regards to your proposed strategy, why not use a pure 2% cash back card with no AF instead? The ArrivalCard is better in year 1, but once you need to pay the annual fee, the extra 0.22% does not justify paying the AF in my opinion. Plus a true cash back card (such as Fidelity) means you can use the cash back for any purpose, not just travel.

    • i think there’s value in forcing myself to put $$ away for travel (which is why I was thinking of this as a Travel Savings Account). I don’t disagree about the Fidelity Amex – it’s a great card. It’s just that I’d like to force myself to use the money for traveling.

  3. I definitely take your point and have been giving it some thought lately, but my inclination is to stick with my status quo. First of all I’m already doing a decent amount of cash back or equivalent: restaurants and entertainment go on the Citi Forward (5 pts per $1, works out to 6.6 cents towards travel), and groceries on the Amex Blue Cash preferred (6 cents cash back per dollar). After that, a lot of my spend goes to things that hit bonus categories on various Chase UR cards, so there I’m paying at most 1.03 cents per point rather than 2.2 (taking into account the annual 7% UR bonus). Then there’s whatever other spend is left over, plus manufactured spend. Often that’s going towards a min spend, but when it isn’t, I’m happy to put it on a Starwood Amex since those points are useful and not so easy to come by in large quantities. The Barclay Arrival would obviously be a reasonable substitute.

  4. In our case, we bring the seniors in their 70′s and the kids under 6. It’s certainly nice to be able to have them up and walking (or running) after the 10 hour long flights. For arguments sake, let’s say it costs 150k miles, roughly an equivalent of $3000, which is not always enough to buy a long haul lie flat seat, while its usually doable using miles with some planning.

    So for now I’m still using the sapphire and spg cards, although I agree it pays to keep clear headed and constantly reevaluate it especially now that the valuation is approaching the break point.

    Once the kids grow up more, and we are just flying by ourselves, and until we are too old, it will be totally different. After all, we all grew up flying coach. I can’t wait to be able to put the money into the experiences that actually counts, food and activities rather be a slave of the points and miles game. Sometimes I feel I’m planning trips around availability rather than where the hearts want to take us.

  5. I have little kids and so am traveling only domestically on shorter trips. So right now all of my travel and dining go on Sapphire Preferred and then I transfer to Southwest for Wanna Get Away fares. That gives me 2.8 cents per dollar of spend. That is still better than Barclays. None travel-spend goes on Barclays.

  6. I’m single and I live by myself so I find Sallie Mae card very practical for me, but if you have a family, then Blue Cash Preferred is obviously the ideal choice for the Groceries:

    1) Sallie Mae card – no annual fee:
    - 5% cash back on Gas and Groceries for first $250 spend each category
    - 5% cashback on books for first $750 spend each month…Amazon.com is confirmed as bookstore, just not digital store. I haven’t tried it on Audible.com yet.
    - If you have a UPromise account and Sallie Mae high-yield savings account, you can potentially get 5.5% or little more cashback. Ideal if you’re saving up for education or your child’s.

    I’m single and live by myself in San Francisco. One of the most accessible fun is dining in this city. I take the US BANK Cash+ and choose 5% cashback on restaurants and hotels (if you go to hotel bars often):

    2) US BANK Cash+ – no annual fee
    - 5% cashback on two categories of your choice like restaurants, fast food and department stores

    Just spreading the goodwill! :grin:

  7. Isn’t using the Fidelity AmEx a bit more convoluted to get the cash out than the Arrival card? I briefly looked into the Fidelity card, and if I read it all correctly, it just seemed to be more effort than it was worth. And while I wouldn’t have the $40K spend needed to compensate for the annual fee of the Barclay’s card, I was thinking that the initial bonus would count toward the annual fee, at least for a year or so after the first free year. After that time, I’d see how things were going and where the miles/points game is and then reevaluate. Still pondering.

  8. Thanks, Jared! For some reason, I thought there were more steps involved, but I haven’t done the “deep dig.”

  9. I also have found UR to be terrific when transferring to British Air and using something like 9,000 Avios for round-trip fares that typically cost at least $500. Obviously, each situation is evaluated on its own merits.

  10. Most of us who are playing the credit card game already have “enough” money. I’m sorry, but earning 2% cashback isn’t aspirational or fun. I won’t do it.

    Frankly, anyone reading this such being putting most of their spending meeting the various credit card sign up bonuses. After awhile, the credit card companies will object to you getting a new card every month, but there are some bonuses that take time. For instance, anyone who lives near an American Airlines or US Airways hub — half the country? — should be collecting British Airways Avios points. Right now, you can get 100,000 points, but you’re going to have to spend $20,000. That takes some time, but it’s extremely lucrative if you ever fly. Like it’s unbelievable expensive to take 650 mile flights in America now, but you can do that for 4,5000 miles. Do you really want to earn 2% instead?

  11. That’s 4,500 miles, and sorry for all the typos.

  12. Because if you’re playing the game right, you won’t have a ton of “everyday spend”

    Think about how much money you put towards meeting sign up requirements, 5X gift cards, bonuses on gas, airfare and a ton of other topics…. and how much left will you be spending in a year on nonbonused spend? Not sure about you, but I don’t spend nearly enough to justify that $95 fee

  13. You’re right. If you have enough time and energy left after meeting the spend, you should pay attention to cashback rather than points or miles. I don’t believe Barclays is better than Amex Fidelity even with a slightly better travel return. Cash is cash. Now when the difference is 1X cash or 5-6X travel, that’s another matter.

  14. Thanks for the info, thought it would be harder

  15. You are overlooking the fact that, for most individuals, couples and families, there is no reason to do everyday spending that is not going towards a sign-up bonus. You can get an SPG card each year and earn 6 (or 7) SPG points per dollar on $5000. United 55K offer is good for 60 points per dollar, AA 50K is 17.6, Ink is 11, new 55K CSP is 19.3, Lufthansa is 11, Arrival is 42 and so on. Unless we see lots more new cash or cash-like cards with good bonuses, it still makes more sense for anyone who will travel to put their credit score to good use and get miles and points cards as well as cash back cards as long as they have healthy bonuses.
    I do use Arrival for the bulk of my MS because it’s the only card that gets me the hotel stays I actually want.

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