Tuesday, November 27, 2012

Points, Miles, or Cash: An Earner's Dilemma

So, now you're aware of the options for earning "kickbacks" for your online shopping.  That brings up a dilemma that I frequently face: If I can earn X% cashback, X miles per dollar, or X points per dollar for shopping at a website, how do I choose?  Well, there's a simple answer and a more complex answer.

The simple answer is: Take the Money.  For the average person the best cashback percentage is usually worth more than the best miles offer.  If you want to keep things as simple as possible while maximizing your actual financial benefit, then always pick the best cashback percentage you find on Evreward.com

The more complex answer is... more complex.  It depends primarily on how you value your points and on how you plan to use them.  Value will often be referred to in shorthand as “cents per mile” (CPM) or “cents per point” (CPP) and expressed in decimal form, e.g. I value Priority Club points at 0.5 CPP and I value Delta Miles at 1.2 CPM.  The value that you assign to a particular program’s points or miles should guide your decision making process.   In order to determine how you value points, you should consider how you plan to redeem them.

Take Delta Skymiles, for instance.  I generally redeem Skymiles for Transatlantic (TATL) Business Class tickets.  A round-trip TATL ticket costs 125,000 Skymiles at the "low" award level.  By contrast, the cash price for such a ticket is routinely $3,000 or moreBut that doesn't mean that 125,000 miles are worth $3,000 to me, because I'd never pay that much for a ticket.  Consequently, the miles are only worth what I would pay for the ticket.  I'd pay $1,400 dollars for a TATL ticket in business class.  Dividing $1,500 by 125,000 tells me that each Skymile is worth 1.2 cents to me.  

The same logic applies to any other points "currency."  If I redeem 20,000 hotel points for a stay that I would otherwise pay $100 for, then each point is worth .5 cents to me.  I recommend coming up with a baseline figure for what you think your points are worth and letting that guide your decision on which shopping portal to use.  While there are ways to maximize the value of your points through strategic redemptions, its best to be conservative when placing a cash value on them.

Don't Leave "Money on the Table"

Earlier I mentioned that many people "leave money on the table" when it comes to their spending and travel habits.  The most basic example is traveling on an airline or staying in a hotel without being a member of the hotel's frequent flier program or the hotel's frequent guest program.  If you're here and reading this, that's probably not you.

However, a more common form of "leaving money on the table" is when consumers are unaware that many, if not most, companies will give them some form of "kickback" for shopping with them.  This can come in the form of points, miles, or cashback, and is particularly common for online shopping.  The way this works is that online companies will pay a referral commission to websites (commonly referred to as "shopping portals") for sending shoppers to the company.  Many of these portals will, in turn, pay you for going through them to the website where you want to shop.

For instance, you may have seen ads for Ebates, a website that pays cashback for online shopping.  Ebates is a great site and probably the one with the most exposure and market penetration.  I've used Ebates a lot, but they are not always the best deal.  In fact, they're usually not.

There are numerous competitors, each of which has its own strengths and weaknesses.  In the cashback realm, there's Mr. Rebates, Topcashback, and Big Crumbs.  These websites offer cashback (typically paid in 4-8 weeks after your purchase) for online shopping. 

Then there are points and miles earning portals.  Nearly every airline, and many hotel chains has their own shopping portal that will give you points for shopping.  Confused yet?

Seriously, it is this abundance of choice that puts many people off.  A person who's not inclined to spend time figuring out which website will give him the highest percentage of cashback at Jos. A. Bank, may decided not to fool with it at all.  But, the market has produced some excellent tools for sorting all this information.  One of the best is Evreward.  Another is Cashbackmonitor.com. I never make an online purchase without checking there to see if I can earn cash, points, or miles.  As a bonus, they will often list coupon codes that can save you more money.

By using these tools you can avoid leaving "money (or points) on the table."  Each time you earn miles or cashback for shopping at your favorite website, you're one step closer to sipping champagne in the front of the plane!

(Full disclosure:  Many of the links on this page are "referral links".  If you sign up with a website through one of my links, I may derive a benefit from it.  In many cases you will benefit as well, but I will never post a referral link if I know of any link that will get you a better deal.)

It all starts here...

Okay, for everyone reading this (Ed.: No one!), I've started this blog in order to have one place that I can point people to when they ask me, "How do I learn about miles and points?"  Previously, I've directed them to Flyertalk.com, Milepoint.com, View from the Wing, etc.  Now I can direct people here.

Here at The Points Ninja (Ed.: Thanks for the name suggestion, Ben!) I'll be covering what I consider to be the best deals in travel and cashback offers.  I intend to make this site a resource for people who would like to maximize their travel with the minimum impact on their budget.  This will involve making the best use of your credit, taking advantage of airline and shopping promotions, and making the best use of the miles and points that you accumulate.  I'm frequently amazed at the amount of money "left on the table" by consumers who don't take advantage of the various programs out there.

I likely won't be blogging a lot because the folks I'll be linking to cover most developments pretty well.  However, I'll try to keep this blog updated with links to current discussions of the best deals out there.  Of course, I'll post any ideas that I come up with on my own here as well.  I'll be covering basic ideas (like keeping track of your points and miles and using shopping portals) to "advanced" (Ed.: Byzantine!) strategies like "generating spend" with prepaid cards. 

For me, the points and miles game is an entertaining and lucrative hobby.  In the past few years this hobby has allowed Mrs. Points Ninja (Ed.: Ninjetta!) and I to travel to Germany, England, Canada, and France.  We fly business class and stay in nice hotels, and generally pay for little more than dining and taxes.  The point is that you can do it too.  My job here is to help you get to that point.  So, here we go!