On Thursday I mentioned the Priceline Rewards Visa® Card from Barclays, buried in a discussion of the AviancaTaca LifeMiles program.
The mention there was that it’s probably better to earn cash back from credit card spend and then use the cash to buy LifeMiles when they’re offering a 100% bonus (because that costs 1.5 cents per mile) than it is to earn 1 mile per dollar with the LifeMiles Visa.
And I realized three things.
- That the Priceline Visa is a little-known gem that hasn’t gotten much coverage
- That it can be a better strategy to earn cash back and use the cash to buy miles, than to put spending on a mileage-earning credit card
- That many people are better off with cash back anyway, and it’s worth a discussion of who that applies to and under what circumstances.
When is a Cash Back Card Better than a Mileage-Earning One
There are plenty of cash back cards in the world, most of them are good for 1% on most purchases and then there are occasional bonuses or category bonuses that make you feel like you’re doing better than that.
There are fans of the Capital One Venture card which earns 2 points per dollar spent, and each point can be worth up to a penny, meaning that if you spend your points in exactly the best way you can earn up to 2% cash back.
There are better options than that, though, like the Fidelity Investment Rewards American Express card which earns 2% back on all purchases in the form of actual cash that gets deposited into a brokerage account.
That card is effectively the opportunity cost of earning miles with your credit card spending.
That means every dollar you put on a mileage earning credit card that does not earn any bonuses — every dollar that just earns one point — is costing you two cents. In other words you are buying miles at two cents apiece each and every time you put a charge that earns one mile per dollar on your credit card. Which is more than most people think they’re happy buying miles at!
Of course the best use of your spending is meeting minimum spend requirements on credit card that earn bonuses.
And beyond that I actually like earning 1 point per dollar with my Starwood American Express card, my Chase Sapphire Preferred and Chase Ink Plus and Ink Bold cards (which earn Ultimate Rewards points), those have huge flexibility to transfer to a number of different airline mileage programs which is very useful to me.
But there are people who shouldn’t be earning airline miles with their everyday credit card spend. Anyone who wants to redeem for domestic coach awards, and sometimes international coach awards, would often be better with a cash back card. You then use the cash to straight up buy the airline tickets, don’t have to worry about flight availability, and those flights even earn miles and count towards status.
The best use of miles in my view is for premium cabin international awards, and cash back cards are not good for that — you’ll wind up having to put half a million dollars on a cash back card, perhaps, before you can buy such a ticket. But people not interested in premium cabin awards should consider something else.
If you want coach travel, it’s hard to imagine doing better for your everyday spending (not spending that counts towards bonuses) than the Citi Thank You Premier card since there’s an offer of 2 points per dollar on all of your spending for 2 years and those points can be worth more than a penny apiece when redeemed for airline tickets.
The Priceline Visa as Hidden Gem We Should All Know About
If you want cash back, though — real cash, not credit towards airline tickets — the gold standard has been the Fidelity Investment Rewards American Express card.
But the The Priceline Rewards Visa® Card is actually probably an even better card.
It’s a Visa so has broader acceptance than an American Express. Like the Fidelity card it has no annual fee. It also earns 5% cash back on Priceline Name Your Own Price bookings, and a $50 credit after first purchase.
You can redeem starting at 2500 points for a $25 statement credit that applies to a specific purchase you choose on your card statement, within 30 days of posting (there are some excluded purchases like gift cards). You have 90 days to apply points to Priceline name your own price purchases.
It’s the no fee 2% cash back card that people just don’t know about.
Using Cash Back to Buy Airline Miles
If you earn 2 cents back per dollar, and use the 2 cents to buy airline miles for less than that, you come out ahead compared to earning 1 airline mile per dollar spent on the credit card.
US Airways is the classic example, they sell miles much of the year with a 100% bonus and those miles then cost a bit over 1.8 cents apiece.
You could put a charge on the US Airways Mastercard and earn 1 mile.
Or you could put a charge on a 2% cash back credit card, earn 2 cents, buy a US Airways mile… and have a small portion of that cash back leftover.
Similarly, AviancaTaca’s LifeMiles program offers mileage purchase bonuses several times a year, and when they do you can buy miles at 1.5 cents apiece.
So you could put $3 in charges on the LifeMiles Visa, and earn 3 LifeMiles. Or you could put $3 in charges on a 2% cash back and earn 6 cents — which buys 4 LifeMiles.
This Strategy Isn’t For Me — Should it Be the Strategy for You?
I want to be clear, this is a strategy that works for some. It highlights what miles are worth, and what they aren’t worth.
Every time you earn 1 mile per dollar spent on an airline miles card, you’re buying that mile at 2 cents because you could otherwise be earning 2 cents on the Priceline Visa or Fidelity American Express.
I don’t have a cash back card. I earn miles. I use my spending to earn credit card bonuses. And I even earn 1 point per dollar — 1 Starwood point with my Starwood American Express or 1 Chase Ultimate Rewards point, and I am effectively buying that point at 2 cents. And getting outsized value for that 2 cents.
But I wouldn’t earn 1 mile per dollar on a US Airways Mastercard (even though I have that card). I’d rather earn 2% cash back, and then buy US Airways miles at a bit under 1.9 cents apiece when they have a 100% purchase bonus. Cash is more flexible, and in this case it’s also a better deal.
In fact I’m even reluctant to buy US Airways miles at 1.9 cents, because I already have plenty and I think there’s some risk to US Airways miles — a risk of award chart devaluation (it’s been about three years since they last did that) and a risk that the airline adopts a revenue-based model for its frequent flyer program (although a merger with American could forestall that).
And if I’m not a buyer at 1.9 cents, I certainly shouldn’t be a buyer at 2 cents.
I should also say that the Priceline Visa offers referral credit to me if you use my link to sign up and are approved. I don’t get any credit for the Fidelity American Express card. Cash back cards are a popular category and I want to highlight the very best ones, and also point out that my own strategy is wedded to miles and points and not to cash. But some will find these to be great opportunities.