The Best Credit Card for All Your Unbonused Spending

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If you put a dollar of spending on a credit card, your opportunity cost is the two cents you’d earn with a 2% cash back card. If all you’re earning is one airline mile, you’re effectively buying that mile for two cents.

The simple way to see that is you can earn 1% when you make a purchase and 1% when you pay for the purchase with a no annual fee Citi Double Cash Card. You’re giving up cash when you put spend on a miles credit card. So you should be getting a higher rate of return in order to do that.

2 cents is more than most people are willing to spend for miles. For instance, I don’t recommend most people buy American Airlines miles when they’re on sale for 1.8 cents or 2 cents.

Here’s how much I value different airline currencies at:

The good news though is that you can consistently get better than a 2% return on your spending even without limited-time offers or category bonuses that apply only to a portion of your spending.

There are three ways to do it.

Chase Freedom Unlimited

Chase Freedom Unlimited earns 1.5 points per dollar on all spending. (The information related to Chase Freedom Unlimited credit card has been collected by View from the Wing and has not been reviewed or provided by the issuer of this card.)

If you also have a Chase Sapphire Preferred Card you can move your Chase Freedom Unlimited points to your Sapphire Preferred account and from there to airline miles or hotel points.

Since I value Sapphire Preferred’s points at 1.9 cents apiece, earning at 1.5 points per dollar on Freedom Unlimited means this strategy nets you a 2.85% effective rebate on spend without any other bonus. That’s unparalleled for earning on an ongoing basis.

Starwood Preferred Guest American Express

The Starwood Preferred Guest® Credit Card from American Express only earns one point per dollar but it earns Starwood points and I value those at 2.3 cents apiece.

They have the most airline transfer partners where points transfer 1:1 and of course when you move Starwood points into 20,000 miles you get 5000 bonus miles. That gets you effectively a 1:1.25 transfer ratio with most airline partners.

With the addition of Korean and Aegean as transfer partners, on top of existing programs like American, Japan Airlines, Singapore, and Alaska) I’d probably raise my valuation of Starwood points but I’m waiting to see what happens with the Marriott integration.

Putting unbonused spend on these three cards can all consistently get you better than 2% on your otherwise-unbonused spend, meaning that they’re better than a 2% cash back card and better than earning 1 mile per dollar with an airline card.

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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Comments

  1. The only issue with the SPG Amex card, vis-a-vis transferring the points, is WHERE you transfer them . . . For example, since points transfer on a 1:1 basis, if I transfer *less* than 20,000 Starpoints, I am essentially trading away money (e.g.: converting Starpoints into Delta Skymiles means I’m buying Skymiles at 2.4¢ each, when they’re worth only 1.2¢). Even with the 5k bonus one receives for transferring 20k won’t make up for that loss.

    That said, I *do* use my SPG Amex for much of my unbonused spend, but because I want the Starpoints.

    On the other hand, I *do* plan on getting a Chase Freedom or Freedom Unlimited card in the future, though a) I’ll have to wait until the 5/24 rule no longer applies to me, and b) I intend, at the moment at least, to get the CSR card, then downgrade my CSP to a Freedom card . . .

  2. Gary, you should collect your assets at Merrill Edge and earn 2.625% with one of their cards. Cash is king. Not a fan of buying miles at 1.75 cents each.

  3. Your valuation of Ultimate Rewards points doesn’t quite make sense to me. According to your own valuations, the most valuable transfer partner for Chase is United at 1.6 cents/mile and yet you value UR at 1.9 cents/point, so that’s a fairly significant flexibility premium (nearly 20%).

    I can sort of see the logic of a flexibility premium if we’re comparing points/miles programs to one another (all else equal I would rather have the UR point than the mile), but once we start talking about cash, I can’t see it.

    That is – I don’t think I should ever be willing to pay 1.9 cents for a Chase point in that the most valuable thing I can exchange it for is a 1.6 cent United mile AND I have less flexibility then I did when I was holding the cash.

    You could, perhaps, make an argument that because I can’t actually buy a United mile or Hyatt point, etc. at the rate of your valuations, there will be times when fantastic deals spring up where the marginal value of a mile/point is much higher than the average valuation and so holding Chase points is a way to maximize the probability of being able to take advantage of such deals. But this implies that I’m holding onto points for an extended period, in which case a) I’m exposed to all of the downside risks of devaluations, etc. and b) I’m forgoing whatever I would have done with the cash in the meantime. Moreover, I think fantastic deals on flash sales are at least as common (and probably more so) than “flash” opportunities to use points for high value.

  4. The biggest bang is had, NOT by pairing the Chase Freedom Unlimited with CSP, but with the CSR, as I just recently did.

    Also, note that the starpoint is worth on average 2.x as a hotel points currency and NOT when it is transferred to airline miles, which I believe is @Jason Brandt Lewis’s point…

  5. My preferred combo, and where most of my spend goes, is with the CSR-Freedom-Freedom Unlimited combo. Not sure I could do better without a business card.

  6. Gary, I know this article is not about valuation of airline miles. However, by including your own valuation chart, you endorse these valuation numbers as current. This could mislead your readers. For example, AA mile is significantly overvalued in this chart, I believe. It’s nearly impossible to redeem AA miles on its metal for good value because AA is, on purpose, making very few award seats available (at least on popular routes). Its routing rules are the most strict, and AA miles are the most widely available and the easiest to obtain. The only valuable redemption option is on its OW partners, but that redemption is significantly less costly and much more flexible with AS miles. Even based on that redemption, if you value AS mile at $0.017, then AA mile should be worth significantly less.

  7. @DCS – exactly, transfer Freedom Unlimited UR points to your Reserve card and it really gets good. Gary must not carry the Reserve card but you’d think he’d at least include a line about it…

  8. Gary,
    i don’t get how singapore miles are worth more than those of korean air. i am not sure whether singapore charges surcharges on their redemption as korean does. even if that is the case, singapore awards are way more expensive than korean.

  9. @Tony —> if it’s any consolation, “another network” offers different valuations . . . 1.5¢ for AA, while AS is 1.9¢ (versus 1.6¢ and 1.7¢, respectively).

  10. All good points, but forgetting a crucial counterpoint, IMO. You have to consider the annual fee when evaluating the opportunity cost of getting more than 2 center per point. Its why I closed my SPG account, I wasn’t spending enough on it to be worth the .3 difference. Chase FU doesn’t have an AF however.

  11. I guess it isn’t available anymore, but the Amex Blue for Business offer from earlier this year gives 2.3 MR/$ on everything for the first year. That’s unbeatable IMO.

  12. @Sean —> Different strokes for different folks. The AF for the Amex SPG card is $0 for the first year; $95 thereafter. For that AF, you get a 2 stay/5 night credit towards your elite status — I don’t know about you, but I can’t stay twice (or stay five nights) at a Starwood property for $95 . . .

  13. This looks right to me as far as everyday spend with no minimum, if you add the UA Club Card, at 1.5 miles per dollar. But if you spend $25K in a year on a Virgin Atlantic Black card, you get 2.1 miles per dollar from the two threshold bonuses. If you spend $30K in a year on a BA Visa card, you get an award companion ticket, which can be worth over 100,000 miles. And for one year, the Marriott Visa offer of five points per dollar (up to 150K) may top them all, since five Marriott points equal 1.67 Starwood points.

  14. stvr, how do you get to 2.625% cash back on Merrill Edge credit cards? I see a 75% bonus if you have $100,000 on deposit, but I don’t see where that bonus applies to any card offering 1.5% cash back.

  15. Thats 75% bonus on the 1.5 points per dollar travel charge.

    And that is 100k on balance somewhere with BofA / Merrill as long as you have a, completely free, BofA checking account.

    Roll over an old IRA to Edge, get bonus $, then get a 2.625% on every dollar you charge. Oh, and 100 free trades per month as well on the Edge platform.

    I honestly do not know how they make money off of me.

  16. I just figured out my spending on the Amex Everyday preferred. I have my wife use it as her main card which helps hit the 30 transaction limit. I use it or my SPG for unbonused spend. Supermarkets were the 1st and 3rd most common place to use the card. We ended up getting an average of 1.97 points per dollar spent on the card last year. It’s a keeper for us.

  17. USAA has a 2.5% cash back card (if you have a bank account with direct deposit). Another good option if you qualify for USAA membership.

  18. @karl: If you are trading with Merrill Edge they are making money a) selling your order flow or internalizing it on their own dark pool
    b) Loaning out your stock if you have a margin account.

    If you think their margin rates are high , try being on the other side , wanting to borrow stock to short. Rates can run over 100% on stocks that are hard to borrow.

  19. I will never understand the magical appeal of that “MYSTIC SPG AIRLINE BONUS OMG FOMO WE ALL NEED THIS” that every blogger raves about.

    Let’s do some basic math. I want 25,000 United miles. I can:
    * Use 20,000 starpoints, and get that 5k bonus OR
    * I can use 56,000 MR points (which converts from 18.6k starpoints)

    Why does nobody report on that? Is UA that unpopular?

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