It’s the time of year for saving money!
Recently, I have had the good fortune to learn about the latest and most advanced strategies of accumulating and spending credit card miles from not one, but two, finance industry experts. Many credit former American Airlines CEO Robert Crandall with inventing the concept of frequent flier miles, which changed not just the way we travel but, more importantly, the way many of us ultimately spend money. These “loyalty” programs have hooked many of us to specific airlines, hotel chains, and so forth.
We collected and often hoarded miles by the hundreds of thousands, but as these travel conglomerates got more and more greedy, it became increasingly difficult to actually use said miles/points. God forbid an airline abandoned service to your local airport – you could be stuck holding a huge pile of miles that are damned close to worthless all of a sudden. And please don’t tell me that you want to take the wife and kids to Hawaii, because unless you stay up until midnight eleven months before your desired date, you’re likely going to get hosed.
And if you really want to make yourself sick, take a look at what huge volumes of airline miles get you when used on, say, hotel rooms. $100,000 in spending gets you a $300-per-night room (for one night) at a Las Vegas Strip hotel, when the same spending on that airline gets you a $3,500 ticket across the country in First Class? No thank you. Simply put, traditional airline miles or hotel points just aren’t what they used to be, but by no means does that mean that you can’t apply new strategies, including ones that might just effect your AV system.
What I learned from my recent sessions with these two “credit card whisperers” is that selecting exactly the right credit card for your expenses is very important in the modern era of this game. One caveat: this article assumes that you already have pretty good credit (meaning more than 700 and likely closer to 740 or 750) because if you don’t, it’s is hard if-not-impossible to get the best cards and you shouldn’t be spending your money on much more audiophile gear versus paying off debt and getting your credit right.
OK, with that disclaimer out of the way, the credit cards that you want today either give you cash back for your spending or, better yet, give you a lot of points for every dollar that you spend. Personally, I am not a fan of the cash-back cards, in that the best ones that I have found yield about 1.5 percent, but the cards that I use for my business and personal spending yield two points for every dollar spent. That is a good haul, but if you look really hard and spend in one specific category, you might find a better one.
One of my credit card gurus recently spent over $1,200,000 every year with Google Ad Words in his core business. He found a somewhat off-beat Amex “Plum Card” or something like that, which yielded three points for every dollar. He was able to pay for his business partner go literally on a South African safari (from Los Angeles) with his brother accompanying him for three weeks without spending a dollar. And there was a pretty good pile of points left even after such an epic trip.
The problem with these more off-beat points-based credit cards is that they don’t yield on every type of spending and said categories can change without much notice, making a category like ad spending go from three points per dollar back to more of a one-to-one ratio when, say, gas expenses are now offering points on a three-to-one basis going forward. The chances of the dude spending $1,200,000 on Facebook ads also being a cross country truck driver is pretty slim, thus these cards aren’t quite as appealing to more mainstream spenders but do, very much, benefit the savvy credit card points shopper, which we all aspire to be.
The cards that I am spending most on today are somehow both offered by Capital One, not that we are on the take from them or any other bank for that matter. I find the customer service is fantastic on the Business and Venture (personal card that Sam Jackson and Jennifer Garner do television spots for) but the downside is that Capital One will never, ever raise your credit limit and they hold you to the penny on your spending, which often makes mid-month payments to the card needed.
That can be frustrating, but these two top Capital One cards yield two points per dollar spent on everything. That is a good haul on points and, more importantly, you never need to worry about which categories are collecting the most points or follow how the card changes over time. In the real world, who has the time for that?
But what I find even more compelling is the concept of being fully disloyal to an airline with my points. If I am flying from Los Angeles to New York, there are all sorts of good options to choose from, unlike so many other domestic routes. I never worry about EQM (flight miles) or supporting an airline to get “status,” because unless you are true road warrior, as we call them in the sales trade, said status isn’t getting you upgraded to First or Business Class very often. In fact, I enthusiastically use a traditional travel agent (yes, a real person who books my travel) and, along with a history of travel spending with the agency and fees of $35 per trip, I am actually given status on my two key airlines as a perk. It’s a nice bonus and very appreciated, but I can’t say that it has benefited me in any unique way, as I personally try to never fly coach and as such don’t have to pay for bags or wait in the longer lines when checking in. Depending on your travel preferences, status could have a varying effect.
Another HUGE advantage of these new, more points-based cards is that, unlike more traditional airline miles, you can use points to pay for part of what you want. Let’s say you’ve spent $500,000 and have a million points, but four tickets to Maui in First Class will cost $11,000 all-in. You can use your million points to wipe out $10,000 of the cost right on the credit card website (or with a phone call, as I prefer) and boom: for $1,000 your family is ready for a Luau.
So how do these new strategies effect your AV purchases? I’ve been holding out on you for this key point until the end. In the old days, if you have one of the better AMEX cards, they used to periodically send you a catalog filled with all sorts of consumer-grade stuff or other goodies that needed millions upon millions of miles to qualify for. They would ask for an insane number of miles for a Sony flat-screen TV or a pair of wireless headphones.
The new-school outlook of working with credit cards that allow you to apply your miles to what you want when you want is much more in your favor. Just like the example above with the Hawaii trip: if you wanted a $5,000 stereo preamp on sale for $4,000 at your local dealer (or Audiogon.com or wherever) you can buy whatever you think is best. Then simply call up your credit card company or go online and use some or all (the “some” part is more of a recent trend) to pay down your audiophile investment. Much like my buddy’s dad, who got me into the hobby of audiophilia as a young teenager back in Philadelphia: he saved his New Jersey bridge toll reimbursements from the law firm that he worked for to slowly save up for more Nakamichi, Naim, Linn, and Bowers & Wilkins upgrades. He was winning the audiophile war of attrition every month, and that helped him build a pretty dialed-in system back in the day.
Credit card points today are even better. Some places will try to charge you a fee (I am not sure this is even legal), thus you are paying more to get points. But other places will not. For example, I had an odd 2015 California State tax issue that the state generously offered to put on a payment plan for $450 per month. When I sold AudiophileReview.com and HomeTheaterReview.com, I wanted this charge to stop automatically drafting from my bank account. I called the FTB (state tax folks) and they said “no problem” and took my Capital One Venture Card right over the phone with no fees and charged $10,000 to it. Yes, I hammered my card, but for no cost to me I got 20,000 Capital One points, thus $200 in free spending. In effect, for every $100,000 I spend, whether on big ticket items like my goofy state tax bill or on weekly groceries or gas for my SUV, the points keep adding up. Simply put: for every $100,000 I spend, I get $2,000 to spend pretty much any way I want. Right now, we are looking at possibly going to Fiji for Spring Break… all on miles.
Embracing these new concepts using today’s best, highest yielding credit cards is a game to be played by the financially responsible, as I view banks as the true scum of the Earth. I don’t trust them. I don’t like to use credit cards to finance anything beyond very low, introductory rates (if ever). One warning: don’t use miles/points cards to buy things that you can’t afford easily, because the miles/points that you get are not worth the 15 to 20-plus percent interest that these shylocks will charge you. A month or two won’t kill you, but don’t get in the habit of using these types of cards to finance big expenses unless you can transfer the charges to a long-term, lower-interest-rate loan over time.
In 2019, I did just this with my new house, with the work that we did here to get a 1996 McMansion up to more modern standards. My contractor would fortuitously take my credit card without charging me three to four percent fee above the sale price, thus I was able to get the points on the Capital One Venture Card and then move big volumes of money over to a Citibank card with a large limit and 18-month zero-percent financing. But once again, at the end of 18 months that zero-percent card went up closer to 25 percent and that is no bargain.
In the end, you are playing a game against billion-dollar banks, and winning that game feels pretty damn good. With human nature and the law of large numbers pushing the odds in the favor of the banks, they will bet against you being financially responsible. But you are smarter than that. If you can play the game the right way, you get an extra $2,000 for every $100,000 that you spend and that is quite the lure assuming you don’t fall into their treacherous trap.
How do you use your credit cards to get perks today? Are you an all-cash buyer or do you use other means of finance (such as a home equity loan) to invest in your gear? Were you loyal to an airline or two? Do you keep an old airline credit card in your pocket, like the Chase Untied Visa or the American Airlines Citibank card just to get into the clubs? Tell us how you play the game and how your strategy has changed over the years. Also, in the comments below, tell us about anything crazy that you have bought using points/miles. We always want to hear from you.