This Game Is Not For You If…

I was reflecting on all of the good and increased offers recently from various banks for mileag-earning credit cards and I thought it would be important to offer some balance. I’ve been in this so long that it’s just second nature, but it bears repeating, and I don’t say it enough.

A plurality of miles are earned via credit cards (signup bonuses, spend bonuses, everyday spend) and not from butt in seat flying. Credit cards, in the US market but not just the US, are an integral part of the miles and points hobby.

I had an award booking client not long ago who had tons of miles but wasn’t paying off his credit card bills each month. With the interest charges he had to be paying he would have been better off buying the miles direct from the airlines and saving on interest with a better card selection. (Most mileage cards are also high interest rate cards.)

To play the miles and points game with the banks you must pay off your bills in full each month.

Not just that but you also must not spend more than you otherwise would because you’re using a credit card or justify extra spending “because you need it to get a signup bonus”

Violating either of these rules defeats the purpose of playing the game in the first place. And for many people it’s actually difficult to do, there are plenty of studies that the average consumer using a credit card spends more than one paying with cash. Some of that may be that consumers with credit cards are higher income, or that people choose to use credit for bigger purchases vs. smaller ones with cash but it’s certainly believed that accepting cards brings in higher average sales.

If you can’t resist this, the cards and miles game may not be for you. You should certainly care about interest rates (0% balance transfers and no balance transfer fees) rather than miles and points rebates.

I’ve been in this game a long time and have done very very very well thanks to playing it the right way with banks. But go in with your eyes open because the banks are where the money is for a reason.

There are great opportunities for arbitrage and large institutions can tolerate relationships where the consumer benefits but on the whole the banks wouldn’t play this game if there was greater benefit for most customers than for the banks. Everyone can benefit from the extension of credit, but consumer can also lose if they’re no careful with credit.

Be one of the savvy ones in the former camp, or don’t play the game.


About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. I think it is pretty obvious that mileage earning credit cards encourage more spending. So in a sense it also helps drive the economy. If the consumer sees a benefit in spending a bit more than he normally would and most importantly can afford to do so then both sides win.

  2. Sadly, the people who get sucked in looking for miles and then drowned in debt are paying for the freebies the rest of us get.

    If you ever think the banks must be crazy giving away all these miles, think again. It works for their bottom line.

    Thanks for this warning, Gary.

  3. “must not spend more than you otherwise would because you’re using a credit card or justify extra spending “because you need it to get a signup bonus””

    Many of us fall into this trap without realizing it. Only an exceptionally thrifty person will escape this one.

  4. I believe understanding the basics of manufactured spend is absolutely required to keep from falling into this trap……..otherwise you are chasing your tail in a stressed out manner……..every “newbe” I mention the credit card great signup offers flinches when the initial spend is mentioned……..you have to learn to walk before moving to a jog and an occasional sprint…….only a world class athlete can sprint all the time and even they have to pull up at times……..

  5. Agree 100%, Gary. This is one reason I’m hesitant to apply for cards that require spending any more than my normal spending to get a sign-up bonus.

  6. I looked around for a topic concerning Chase Bank but this was all i could find…
    I know this is off topic but did you know at CHASE bank you can no longer deposit money for other people unless it is your account.
    Now a mother that wants to put some money in there college kids account cannot do so,an I.D. is required.
    This is not right and many people are upset by this new policy.I am glad that i also have Capitol One that does not require an I.D for a deposit.
    I found this out when my roommate went to put her part of the rent into my Chase account.I couldn’t believe it.I just wanted to let your readers know about this before it happens to them.
    I think you can still use the drop box for now.

  7. Since I don’t have easy access to MS, I will admit that I paid some of my taxes, lent on Kiva, bought a lot of supermarket gift cards among other spending/pre-spending to reach the min spend needed on my new Citi AA card in the past month. It wasn’t easy, and in hindsight I should have probably just bought more gift cards. It really is a lot of work to keep track of small spending. In total, there were nearly 50 separate charges on my Citi statement this month.

  8. “I believe understanding the basics of manufactured spend is absolutely required to keep from falling into this trap”

    +1

  9. @Marie I think this is limited to cash deposits. You can still deposit a check into someone’s account. This is intended to reduce the likelihood of money laundering.

    And your roommate shouldn’t be putting her share of the rent into your bank account anyway. She should use Amazon Payments, which is a free service, and when paid with her credit card will get her miles/points. 😉

  10. “With the interest charges he had to be paying he would have been better off buying the miles direct from the airlines and saving on interest with a better card selection.”

    For domestic cattle class tickets, he would be even better off just paying cash for the ticket (from the cash saved from not paying interest) and collecting miles for the flight.

  11. There’s another important requirement that I don’t see people discuss: you have to be willing to make phone calls to your bank! I’m surprised how many people I know have real trouble with this; putting off the call to cancel (or request retention bonus for) a card can be pricey!

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