A puzzling USA Today article about the best travel credit cards

USA Today published an article today entitled “Travel rewards credit cards. Which pay best?” The article uses analysis by nextadvisor.com to rank travel credit cards. The rankings are based on how much flight or hotel “value” you can get out of $100 worth of credit card spend. They based it on the following:

To cut through the fog of miles and points, as well as flight and hotel room availability, NextAdvisor sought to use the cards to book airline tickets and hotel stays on the same dates in the summer and fall for its analysis.

It would be nice if they expanded on what kind of a search they did, because it might give a bit of context. I think it goes without saying, though, that searching a couple of dates across summer and fall without considering the most efficient way to redeem those points isn’t an accurate basis on which to judge the value of points. But my bigger issue is that they seem to be comparing apples and oranges. For some cards they’re using the pay with points option, whereby you can redeem your points towards the revenue cost of a ticket, while for other cards they’re actually redeeming the points for award stays/flights (at least that’s the only way I can rationalize their numbers).

The other issue I have is that they’re judging how much travel value you can get out of $100 worth of credit card spend without considering in which categories that spend occurs. This is why I’d rather compare the value of points across programs on a 1:1 basis, as opposed to comparing them based on how much you spend. When you set a value to each point you can work the math for yourself and figure out what kind of a “return” you’d get based on the categories you spend the most in (then again, I can see that might be a bit detailed for such a piece).

Their top pick is the Capital One Venture Card, which earns two points per dollar spent. Those are points that can be redeemed for one cent each towards travel. However, the Chase Sapphire Preferred card offers double points on dining and travel plus a 7% annual points dividend, while the American Express Premier Rewards Gold card offers triple points on airfare and double points on gas and groceries. This analysis suggests you’re never spending money in a category which earns a bonus.

So when we look at their valuation, the Capital One Venture Card is at the top of the list with $2 of value per $100 spent, while the Chase Sapphire Preferred card is close to the bottom with only $1.05 of value per $100 spent. How they arrive at $1.05 is beyond me, since each Ultimate Rewards point can be redeemed for 1.25 cents towards travel (meaning a minimum of $1.25 per $100 spent). So at the very least that’s $1.34 per point towards travel (with the annual points dividend), and that doesn’t factor in double points for dining and travel. It also doesn’t factor in that using Ultimate Rewards points as cash towards travel is far from the best use of them, given their excellent transfer partners.

The funniest thing has to be that the United Explorer card is near the top of the list, with $1.94 of travel value for every $100 spent. Aren’t we forgetting that Ultimate Rewards points can be transferred 1:1 to United, not to mention that the card accrues more points per dollar spent than the United Explorer card?

Lastly (because I could go on and on), why aren’t any Membership Rewards branded credit cards on the list, in particular the Premier Rewards Gold card, which is probably the single most rewarding travel card if you spend in their bonus categories.

Anyway, as usual the lesson to be learned is that points valuations are subjective. The amount of “value” you get per point varies not only based on what you redeem points for, but how much you value those redemptions at. For example, when redeeming 120,000 miles for a first class ticket that would sell for $18,000, are you really getting a value of 15 cents per mile? Some would argue yes, while I’d argue the value is only equal to what you’d be willing to pay for the product. I’d realistically pay maybe $2,400 for first class, so I’d say two cents per mile is a much more realistic valuation for such a redemption.

If you do want to learn about what are no doubt the three best travel credit cards, see here (and in the interest of full disclosure I do get a referral bonus if you apply through one of the links below, which I’m of course very appreciative of):

Comments

  1. lucky says

    @ Antonio — What are you talking about? After yesterday’s posts I moderate offensive comments. Anyone that has anything negative to say about credit cards will promptly have their comments deleted. ;)

  2. Antonio says

    Let’s see: the Capital One Cash Rewards card is a WAAAAAAY better travel CC than the Chase Sapphire!!!

    Did that cross the line? Too offensive? ;-)

  3. HikerT says

    These articles make me cringe as much as when friends with Chase Freedom tell me they just redeemed their UR for cash.

  4. RakSiam says

    Maybe the author wanted to throw off the masses so they don’t try to redeem the same award seats we all want.

  5. Michael says

    It looks like NextAdvisor earns referral credit, so how can you take anything they write seriously? They probably just get the most credit from the Cap One Venture and so they promote that one the most.

  6. Anita says

    Cap One Venture gets ranked highest in a rating done while they’re doing a big promotion during March Madness. Coincidence, or marketing dollars at work?

  7. Lantean says

    I guess Capital One offers great value for people who travel domestic coach and want to use their “miles” for it. For the rest of us… not so much.
    I often fly JFK-VIE via FRA on Singapore & Lufthansa… only cost me 68k AmEx memberhsip points (so let’s say $68k spent – I’m not counting sign up bonuses) plus about $500 fees. The same ticket retails for about $7k… that’s 700k Capital One Venture points = I’d have to spend $350k on Capital One… you do the math.

  8. chitownflyer says

    Cap1 may be the best card for acquiring domestic coach airline tickets. However, so many articles discussing what is the best credit card do not delve into how to gain the most value from credit card points.

    A good comparative example would do the following. A coach ticket on an airline has a worth of around $300 and costs 25,000. A business class ticket on Star to Europe may cost 105,000 points which is slightly more than 4 coach awards. The 4 coach awards would be valued at $1200 while the business class ticket retails for $7000 and might be found on a sale for $3000, so the business class ticket is by far a better deal. A first class ticket to Europe may retail for $12,000, so it is the best value relative to 5 coach award tickets.

  9. Rai says

    These nonsensical articles provide me a good chuckle. I think my time is better spent looking through your and other writers’ blogs and figuring out what is best for my own travel plans. Each person uses and values points/miles differently, so most attempts at valuing them are futile at best.

    I think people nowadays want the information spoon fed to them, which does happen. But the true points/miles maximization come from an individual running their own numbers and doing what is best for him or herself.

    I think these articles provide a starting point for some people, which is great. Then they get to find out about your blog and others out there. Then they cascade into a points/miles junkie and eventually share what they learned with us!

  10. dbeach says

    Here’s what I don’t get about the Cap One Venture Card: Why not just use a cash-back card? Fidelity Amex, at least, gives 2% cash back on everything, which is effectively the same as the Venture, but without the annual fee, and you can use the money for anything, not just travel.

    The only advantage of the Venture I could see is no foreign transaction fee, but the vast majority of people would be better off using the no-fee Cap One Cash Rewards card when overseas. (You’d need to spend over $10k abroad before the additional points would cover the Venture’s fee.)

  11. dan says

    its “USA today” -seriously, are you actually expecting something intelligent out of that paper?

  12. lucky says

    @ Curtis — Are you talking about the link on this page? Just tried it and didn’t have any issues.

  13. Larry says

    Although I put little spending on my Capital One Card, I will defend it as a strong #2 card. Yes, we can get 3 or 4 or 5 cents per point value when we use SPG, assuming we stay at certain Starwood hotels and there is availability or use our Sapphire Points to book an international first class trip on United assuming there’s availability. But, Capital One gives 2 cents per point on just about anything travel related. Bag fees, airplane meals, any hotels, car rentals, any flights, etc. (I don’t think you can get bag fees paid for with Sapphire or Amex points). And you don’t necessarily have to Book with the card, just use it (a reservation can be made with any card, but when checking out, just hand them the capital one card). I’m booking an all-inclusive hotel in Punta Cana, and Capital One gives me 2 cents per point, whereas Amex MR or Sapphire give me about 1.25. My SPG, Hyatt, and Hilton points are worthless there. But Capital One are always worth 2%. Again, I’m not saying it’s the best, but it is extremely versatile, and everyday spending of 2% back is very competitive. It’s easy to write an article about why it’s a good card; especially when the article isn’t dealing with churning, and first class airline tickets. Right now, with my trip to Punta Cana in the planning stages, I wish I had used it more this past year, and my SPG card less.

  14. HikerT says

    Larry, Sapphire Preferred gives you more on the hotel you’re booking. If you count the 7% annual dividend, you get 2.14x on travel. Not to mention you may be missing the forest thru the trees here. You can probably save a lot more more than 1 or 2% on that Punta Cana all inclusive booking thru the right portal. What hotel are you booking?

  15. Larry says

    HIKER T
    I’m looking at Iberostar, Riu, Gran Bahia, etc. Yes, you can earn 2.14 points/$ on Sapphire or AMEX MR when using the card for bonus categories, and each point may be worth 2 or 3 cents, with great transfer partners like United or Hyatt; so I agree that using Sapphire to book the room may return 5%, but I am looking at redeeming my points (i.e. rewards). I would rather not spend thousands of dollars for my Christmas vacation. Last year, we booked at a Hilton (Papagayo Costa Rica) and it was a free All Inclusive vacation using points, and that’s great. But this year, our family voted on Punta Cana, and unfortunately, I can’t seem to use points for my stay unless I want to burn through my Amex MR points or Sapphire points. For Point Redemptions, I only get a little over 1.25 cents for each Amex MR point or Sapphire Point. I think we all agree that using those points for transfer partners is a better way to go. For general spending (not the bonus categories of travel or dining), I received 2% return per dollar spent on my Cap One Venture card (I got the card last year during the 100k promotion). So on non-bonus spend, I see it that my Capital One card gave me a two percent return, but my Sapphire or Amex card can only give me a 1.25% return (for non bonus categories) when redeeming for non-partner general travel. However, if I am missing something, please advise.

  16. HikerT says

    Larry, Sapphire is a no-fee card so not really a fair comparison. You’d need to spend $10K or more on your Venture before you cover the annual fee and come out ahead at 2% vs. 1.25%. Personally I’d rather save that $10K to meet spend on sign up bonuses and earn another half million of points in 2012. Venture is no longer in my wallet as of yesterday when I called to downgrade to a no fee version and they refused to waive my annual fee since the fee had already hit. Said I would have to cancel and re-apply to waive the fee. I told them f-that, I wasn’t going to pay the fee or get hit with another 3 inquiries.

    As far as AI hotels deals, send me a PM on Flyertalk. I have some suggestions for you. Sounds like you are going around Christmas so you’re probably going to be paying an arm and a leg.

  17. HikerT says

    I guess I misread your reply Larry. I thought you had the no fee version Sapphire. Sounds like you have Saphhire Preferred. I suppose it depends on how much you value that extra 1 cent (max) you might earn on Venture vs. another card. If a purchase doesn’t earn me 2x or higher I use a card that I need to meet spend on. For example, for every $10K of spend, you might earn an extra $100 (max) by using Venture vs. another card. Would you rather have that $100, or would you rather have gotten the recent AMEX 75K bonus for 10K of spend? That’s an extreme example but unless you’re out of options for card churns you’re going to do better focusing on churns.

  18. says

    And this is why we come to you Lucky for advice instead of USA Today. There is a value for each and every person. Some will agree with USA Today and others (like you and me) prefer to figure our valuation and hence, the best value, slightly differently.

  19. Larry says

    HIKER T.
    Fortunately, Card Spending is not a problem. I do my quarterly churns and spend about $200k a year on cards, so I can meet my spend when required. I guess to summarize, It is considerably easier (or “No Hassle”) to spend the Capital One Rewards rather than SPG, HILTON or Airline rewards. Assuming last year I had 50k of non-bonus category spend, that didn’t go to minimum spend requirements, I would have been better off using Capital One than padding my SPG/Sapphire Preferred accounts.

  20. JJ says

    @dbeach To state the obvious, Fidelity AMEX is not a Visa. Unfortunately, AMEX is not accepted everywhere, so a good non-AMEX card recommendation is helpful.

  21. PanAm says

    The biggest lesson here is, as always, that USA Today is a piece of crap rag that I use as a doormat whenever it’s provided at my hotel room! I found so many poorly researched/written articles (on many subjects) that I just can’t even both with it anymore.

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