0:00

Welcome to Radical Personal Finance, a show dedicated to

0:02

providing you with the knowledge, skills, insight, and encouragement

0:04

you need to live a rich and meaningful life

0:06

now while building a plan for financial freedom in

0:08

10 years or less. My name is

0:10

Josh Machitz, I'm your host, and today we're going

0:12

to dip our toes over into the more

0:15

seductive, more alluring,

0:19

the sexier side of personal finance.

0:22

In that, we are going to

0:24

speak today about credit card points

0:27

and mileage games and hotel points,

0:29

etc. I'm

0:31

going to share with you why

0:33

I think that for most people,

0:36

this credit card points game is

0:38

basically worthless, and in some

0:41

cases worse than worthless.

0:44

I am, however, going to tell you the

0:46

specific people for whom not only

0:48

is this credit card points game

0:50

not worthless, but in

0:52

fact it's extremely profitable and

0:54

it is well worth considering.

0:58

Let's begin with a little bit of background.

1:01

In order for you to understand

1:03

the current iteration of the credit

1:05

card points game, etc., you need

1:07

to understand the history of the

1:10

industry. I'm not going to lay

1:12

out a hardcore history of the

1:14

credit card industry, but rather just

1:16

start by the integration of credit

1:19

cards with airline mileage point programs,

1:21

etc. First,

1:24

businesses have for a very long

1:26

time understood the power of some kind

1:28

of loyalty program. One

1:30

of the four ways that a

1:32

business can increase its revenue is

1:34

to increase the number of purchases

1:37

from a specific customer per

1:39

year, per month, or whatever. If

1:42

you have a customer that ordinarily comes into your

1:44

business once or twice a month, and

1:46

you can instead get that customer

1:48

to come in three or four

1:50

times a month, that makes an

1:52

enormous influence, enormous impact on

1:55

your revenue over

1:57

the course of the business. And so businesses have figured

1:59

this out. And we've all seen

2:01

very simple loyalty programs where you get a

2:03

little card from your favorite local submarine

2:06

sandwich shop and they say buy ten subs

2:08

get the 11th free or your

2:11

local car wash will give you a card

2:13

and say Buy get

2:15

get ten car washes get the 11th

2:17

free things like that These are all

2:19

basic forms of loyalty programs and these

2:21

made their way into the airline industry

2:24

at the very end of the 1970s beginning of the

2:26

1980s When airlines figured

2:28

out if we could somehow figure out

2:30

how to incentivize people for

2:32

flying to fly with us on

2:35

our airline then we could get

2:37

them to more frequently choose us

2:39

instead of our competitors and

2:41

so you have the concept of a

2:44

Mileage account and with the early airline

2:46

programs. It was relatively simple and straightforward Let's

2:49

say you flew ten different 1000 mile

2:51

flights that earned you 10,000

2:54

miles and they would have a chart that

2:56

says once you've accumulated 10,000

2:58

miles on our airlines on our airline

3:00

that qualifies you for a free ticket and you can redeem

3:02

your 10,000 mile Miles

3:05

balance with us for a free airplane flight

3:07

or a couple of free airplane flights I

3:10

think these became very popular in

3:12

and were promoted Significantly

3:15

by the business community because they formed

3:17

a really nice perk a

3:20

non taxable job perk You might have

3:22

a businessman who flies constantly for work

3:24

his employer is paying for all of

3:26

those trips But every mile

3:28

he flies for work he gets

3:30

points in his mileage Balance

3:33

because those points are awarded to

3:35

the actual flyer who's on the

3:37

airplane not to the payer

3:39

the business who pays for the flight and

3:42

due to a nice little loophole in the Internal

3:45

Revenue Code in the United States. These are

3:48

just free non taxable job perks And so

3:50

for a lot of guys, especially some guy

3:52

who might be a road warrior in many

3:54

cases. He could Send

3:56

His entire family on a luxury airplane

3:59

flight vacation with luck the hotels based

4:01

entirely upon the points that he earned

4:03

from its. Flying

4:05

and staying on busy and hotels

4:07

on his business trips was airlines

4:09

were looking for a pathway to

4:11

increase their revenue. We got and

4:13

the credit card business itself started

4:15

to grow. Then in about the

4:18

mid to late eighties you started

4:20

to see an integration of part

4:22

of airlines and hotels partnering together

4:24

with credit cards and so they

4:26

would offer people the ability to

4:28

purchase an airline branded credit card

4:30

or the ability to sign up

4:32

for a credit card and get

4:34

a certain bonus. And today,

4:36

these credit card programs have

4:38

fundamentally transform the entire airline

4:40

industry in the United States.

4:43

Were not only does the

4:45

company itself generate an enormous

4:47

amount of revenue from these

4:49

credit card programs, but also

4:51

the entire airline has been

4:53

restructured to cater to these

4:55

programs. So I follow a

4:58

guy who is. So

5:00

I follow Guy who has traveled enormously

5:02

as in the midst starting an airline

5:05

at Satirists and either European guy in

5:07

one of things interesting it every time.

5:09

As in United States, all he wants

5:11

to do is complain about how the

5:13

entire experience of first class travel in

5:16

the United States been destroyed by the.

5:18

The. Credit card system because what

5:20

has happened is instead of you gaining

5:23

access to a first class lounge or

5:25

business class lounge because you paid for

5:27

a proper first class or business class

5:30

seat. Now those lounges or jam packed

5:32

with aspiration or travelers who are in

5:34

there because of their American Express Platinum

5:37

card or their status based upon a

5:39

credit card purchase and it's completely transformed

5:41

the entire experience of travel. Especially first

5:44

class. A Business Class travel. I'm not

5:46

here to. assist

5:48

protect you that whining and complaining after

5:50

all with a number of airplane tickets

5:53

that i by wind up on more

5:55

budget airlines than i would prefer sometimes

5:57

but the point is that these credit

6:00

card programs have experienced an enormous, have

6:02

had an enormous impact on

6:04

the industry at large. Now when I

6:06

first started to pay attention to this myself was

6:08

at the early days of the credit card

6:10

hacking industry and the internet enabled us to

6:12

communicate about all kinds of esoteric topics and

6:15

because of my interest in personal finance, I was

6:17

always attracted to this one and

6:20

I was an early subscriber to

6:22

Chris Gilibow's newsletters and I mean

6:24

there are a lot of people before him but that's

6:28

just the name that I remember from back in that era and

6:30

basically people would come together and they figured

6:33

out how to gain the system a little

6:35

bit and gaming the system, putting

6:37

it very simply involves signing up

6:39

for lots and lots of credit

6:42

cards in order to

6:44

get substantial sign up bonuses,

6:46

spending lots of money on those credit

6:49

cards in order to satisfy the minimum

6:51

spending requirements of your initial sign up

6:53

bonus as well as to

6:55

accumulate points in an advantaged way

6:58

and then exploiting those

7:00

points and redeeming them

7:02

for first class flights, really

7:04

wonderful peak experiences, things like

7:06

that. And because of the

7:08

ability of these communities to

7:10

share information, the tactics and

7:12

techniques advanced very quickly just

7:15

by way of illustration. There was a time

7:17

when there was a very short window when

7:19

there were people that were buying coins directly

7:22

from the US Mint on their credit cards

7:24

and they're spending hundreds of thousands of

7:26

dollars on their credit cards in order to generate

7:28

points and then getting those coins

7:30

and then I guess reselling them, I can't remember what

7:32

they did with them but putting them in the bank etc.

7:36

And so there were always been ways

7:38

to basically gain the system and those

7:40

ways have been shared around these Internet

7:42

communities very, very quickly. And

7:45

today the tactics and the techniques

7:47

are quite advanced. There are many,

7:51

many educators out there who have

7:53

large thriving brands of content and

7:56

education devoted to teaching people how

7:58

to manage. maximize these programs, what

8:00

cards to sign up for, how

8:03

to make the whole system work,

8:06

how to redeem them, etc. There's many

8:08

different angles to it. And

8:10

this is something that has always been an

8:12

interest of mine. After all, it's perfectly congruent

8:16

with my brand. This is radical

8:18

personal finance, how to get free

8:20

stuff. And I have partaken of

8:22

this off and on

8:24

throughout the years to different

8:27

levels. And it is

8:29

this experience that has led to my

8:32

forming the perspectives that I'm now

8:34

going to share with you. Why

8:36

is it that I don't think

8:38

that most people really are served

8:40

by these programs? There are

8:42

some obvious objections. For example, the

8:44

most obvious objection is if you

8:47

find yourself carrying credit card balances

8:49

and paying significant amounts

8:51

of interest, then these programs are never going

8:53

to pay off for you. And

8:55

most of the educators in

8:57

this space, people who have large brands, say

9:00

that upfront. If you're the kind of person who

9:02

carries credit card balances, don't do this because it's

9:04

going to wind up getting you into trouble. And

9:06

I think that's good advice. So if you're the

9:08

kind of person who carries credit card balances, you

9:11

will not make up for

9:13

the amount of money that

9:15

you spend at interest

9:17

with some free points and free hotel

9:19

stays. That's the first thing. There

9:22

are other objections though. And

9:24

it's the don't apply.

9:26

So for example, some people think, oh, it's all a

9:29

scam. It's not a scam. It

9:31

is absolutely something that

9:33

works. You can take free flights. I

9:35

have booked various free flights. You could

9:37

take free hotel stays. I've stayed in

9:40

free hotel stays, et cetera. Those things

9:42

are there. The biggest

9:44

problem that I have with it is

9:46

that there is an enormous amount

9:48

of learning that has to be done

9:51

in order to exploit these programs at

9:54

the highest possible level. And

9:56

this learning is really

9:59

significant. It's very,

10:01

very time consuming. I'm

10:03

not an ignorant person in

10:05

the world of personal finance. I grasp

10:07

most things related to personal finance pretty

10:09

quickly and I learn

10:12

things fairly easily. Over

10:15

the last couple of years as I have dug

10:17

back into this space and as I do with

10:19

all of the stuff that I talk

10:21

about, really worked

10:23

hard to test everything for

10:25

myself. I started hacking the credit

10:27

card game and applying for new

10:30

offers and accumulating points and etc.

10:32

I was amazed at how complicated this

10:35

space has become because there's

10:37

this constant cat and mouse game between

10:39

the credit card offers and

10:41

the world of credit card hackers.

10:43

The offers are designed to appeal

10:45

to as many people as possible

10:47

but then the hackers come along

10:49

and abuse the offers until they

10:51

have to make

10:53

the offer a little bit less sweet. The

10:55

value of my observation is that the

10:58

whole industry is not nearly as easy

11:00

as it was 10 years ago. It's

11:02

not to say it can't still be

11:04

done but it's not as easy as

11:06

it was 10 years ago. The sign

11:08

up bonuses are even if the nominal

11:12

value point, the number of miles

11:14

that you receive on a nominal

11:16

basis may be large and higher,

11:19

the actual value of those miles

11:21

has changed dramatically. The

11:23

airlines are always jiggering with their

11:25

mileage award charts and they're always

11:27

jiggering with their alliances and they're

11:29

always jiggering with their dates and

11:31

the tools etc. to use it.

11:33

It's extremely complicated. What most people

11:35

don't understand is that accumulating the

11:37

miles is the easy part. It's

11:41

not difficult if today you wanted to

11:43

go and join the airline miles game.

11:45

It's not difficult for you to go

11:48

and by 3 or

11:50

4 months from now have a few

11:52

hundred thousand miles in your accounts as

11:54

long as you have an adult sized

11:56

financial life and you can meet the

11:58

minimum spending requirements. However,

12:01

that's only half of it. The other

12:03

half of it is the redemption. And

12:06

this for me has been the biggest disappointment

12:08

for my own situation. For

12:11

example, when I fly, I don't

12:13

generally, if I'm flying alone, I'm flying

12:15

on business. And so ordinarily, I wouldn't

12:18

use a ward travel for that. Rather,

12:20

I would just book flights and deduct

12:22

them as business expenses properly. So

12:24

if I'm going to use a ward travel, I generally

12:26

want to do a ward travel with my family. But

12:29

due to the size of my family, it's

12:32

often difficult to find the appropriate number

12:34

of award tickets. Now I

12:37

understand that I have an unusually large family in

12:39

today's world when I'm buying seven

12:41

airplane tickets. But even if you're buying

12:43

four airplane tickets, you still have a

12:45

similar problem. And the

12:47

biggest, the most advantageous

12:51

redemptions with using

12:55

miles usually comes with

12:57

purchasing business class or first class

12:59

travel. That's where most

13:01

of the best, that's where you get

13:03

the most attraction. If you go on

13:06

and you try to find somebody who's teaching you about the

13:08

mileage and points game, what's going to

13:10

attract you, I think, is the idea that look,

13:12

you can get two business class seats to the

13:14

Maldives and you can fly all the way there

13:16

and back in business class with, look at this

13:18

great deal I got and look at this amazing

13:20

over the water bungalow that I booked for X

13:22

number of thousand points. And isn't

13:24

this an incredible experience? Well, yes,

13:26

it is. If you are

13:28

one person or two people flying together because

13:31

you can frequently find one or two seats

13:33

in business class as a word travel, it's

13:37

much more difficult, if not impossible to

13:39

book seven business class

13:41

seats on one flight. I

13:46

have not been able to successfully do that. I

13:48

have with some of the new tools

13:50

that are now available, have been able

13:52

to find seven seats

13:55

on economy class, but not on

14:00

business class. Speaking of tools, there

14:03

was one tool that was an incredible value

14:05

for me and that tool, it

14:07

may be for you as well, because I accumulated

14:11

massive numbers of points and

14:13

then I could not figure out how

14:15

to redeem them properly and I signed

14:17

up for various courses and various educators

14:19

and whatnot. It wasn't until sometime back

14:21

I discovered the tool of seats.arrow,

14:25

which is a little web

14:27

tool that somebody has built

14:29

that allows you to find

14:31

award travel seats that are

14:33

available from all the different

14:35

airlines systems.

14:39

And that saved me because

14:41

now I was able to, using

14:43

that tool, I was able to

14:45

search for seven airline seats and

14:48

only look at the airlines that

14:50

had the appropriate amount

14:53

of space. And that's what allowed me to start using

14:55

points on airline travel. By

14:58

the way, even this

15:00

tool, if you go to seats.arrow, you can use some of

15:02

it for free. I have a paid account, paid subscription to

15:04

it, but you can use a lot of it for free.

15:07

And one of the things that

15:09

you'll quickly find out is you'll

15:12

see the complexity of it. For example,

15:14

in order to properly redeem your points,

15:16

one of the tools and tactics that

15:19

you need to learn is that you

15:21

frequently need to redeem your points with

15:23

a partner airline of the airline

15:25

that you actually want to fly on. And it's

15:27

not on the airline that you're redeeming them for.

15:30

So recently I was redeeming

15:32

some points. Let's

15:34

see, what was it? I was booking for

15:37

an Air France flight on Delta. It was

15:39

a pretty simple example. I was booking on Delta

15:42

for an Air France flight. And then I

15:44

was booking on Air Canada for

15:46

a Turkish Airways flight. Things like that are very

15:48

normal. And so you frequently have to book on

15:51

an alliance partner in order to get things. And

15:53

it takes quite a lot of time to figure

15:55

this stuff out, figure out where would I like

15:57

to stay, what would I like to do. like

15:59

to do and etc. The

16:04

next thing that's a limitation for a lot

16:06

of people is it's going to be very

16:08

difficult for you to use these travel

16:10

experiences for their maximum value

16:13

if you have any kind of constraints on your schedule. So

16:16

what really works the best is if I'm

16:18

one or two people and

16:21

I'm open to any kind of peak experience

16:23

and I can just browse around using a

16:25

tool like seats.arrow and I can see, hey

16:27

where can I get great redemptions and oh

16:30

that'd be fun, let me go and fly

16:32

to that place and let's go

16:34

and fly business class there. And

16:36

that's perfectly fine by the way, that's what I teach.

16:38

If you want to travel the world for cheap then

16:41

one of the basic secrets is figure out where it's

16:43

cheap to go and then figure out what's

16:45

interesting to do there. And the same

16:47

principle applies to booking award travel, figure out where

16:49

you can get a great redemption for a great

16:51

experience and then figure out what you want to

16:53

do there. What's much

16:55

more difficult is to book

16:57

a specific place on a

17:00

specific schedule. So I want

17:02

to be at this city on these dates and I

17:04

want this hotel to work out and I want these

17:06

airlines to work out. Very

17:08

rarely are you ever going to be

17:10

able to accomplish the full booking process

17:12

all based on your points. When

17:15

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17:18

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17:20

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17:22

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17:30

rarely are you going to be able to get

17:32

the airline reward redemption on the date that you

17:34

want, in the class of travel that you want,

17:37

the specific place that you want, and the hotel

17:39

that you want is available and have it all

17:41

line up. So frequently you're going to be

17:43

using your points to fill in one or two of

17:45

those pieces and then you're going

17:47

to put one or two of those pieces

17:49

just under normal, normal constraints. And

17:52

okay, that's not such a terrible thing,

17:55

but it's annoying and frustrating. And

17:58

those are some of the biggest issues that I've had. Similar

18:00

thing, by the way, to booking airplane

18:03

seats occurs with booking hotels. Let's

18:05

say I want to book a hotel reservation. I

18:08

find it incredibly easy to use up all

18:10

my hotel points when I'm traveling by myself.

18:13

That's no problem. Or if I'm just traveling with my

18:15

wife or one or two people, no problem. Because

18:18

then everything works easy. I want to book a reward.

18:20

I need a standard room. The standard room has a

18:24

bed with two double

18:27

room for two people. There's

18:29

four people, etc. Then that's no

18:32

problem. I can book it with points frequently. The problem is

18:34

that a lot of times, again, those are business trips. Those

18:36

are trips that I would prefer just to pay for. I'd

18:39

like to save my points for my personal consumption.

18:42

But then when we go to personal consumption,

18:44

then I need multiple rooms. It

18:47

can be difficult on various hotel platforms to

18:49

book multiple rooms, or they're not available on

18:51

the dates that I want, etc. It's

18:53

just very difficult for

18:56

my logistics to make that work. Sorry,

18:58

I feel like I'm whining. I'm not whining. I'm just

19:01

sharing with you what I've learned. Because this does kick

19:03

in at anywhere. If

19:06

you have two children and you're a family of four,

19:08

I think you'll experience these same things. I

19:11

have not found – I'm sure they're

19:13

probably out there, but I haven't looked for them either. But

19:16

very frequently, the most active teachers

19:18

on this subject are usually a

19:20

single guy or gal or a

19:23

couple. All of their

19:25

travel is done as two people. The

19:28

world of mileage, redemption awards, etc.

19:30

is very friendly to them. When

19:33

I've had to figure out how to make some of

19:35

this stuff work with many more people, I've found it

19:37

much more difficult. It doesn't mean that it's not possible.

19:40

I've learned a lot. I've considered

19:43

making my own course on the subject, and

19:46

someday maybe I will. It's not the highest priority

19:48

for me, but who knows. It

19:51

can work out and it can provide some

19:53

cool ways to get some peak experiences, but

19:56

it's difficult. Now, what's the biggest

19:58

problem with it? My biggest problem with the whole system

20:00

is the opportunity cost. And

20:03

lest I sound like an endlessly

20:05

scratched record, I

20:08

am because the biggest problem, the

20:10

biggest cost for most of the things

20:12

that we do is the opportunity cost.

20:14

And I think that mileage hacking and

20:16

mileage, etc.,

20:19

the whole deal, it's

20:21

very much associated with this. So

20:23

recently, I booked a very

20:26

complicated trip that I'm planning to

20:28

take. And I'm

20:30

going to not share any

20:32

of the details for the moment, but a

20:35

very complicated international trip. And

20:37

I spent, in order to

20:39

book that trip, I had all the miles,

20:41

trying to use the miles, etc., it

20:44

took me something like 18

20:46

hours of work over the

20:48

course of about two or three weeks to

20:51

get this done. 18 hours

20:54

just to book this

20:57

trip. And I think I said it was a complicated trip. I

20:59

booked it as a complicated trip, but it

21:02

was complicated because it took so many iterations

21:04

to figure out a version of the trip

21:06

that I was happy with, the destinations that

21:08

I wanted to visit, all of the accommodations,

21:10

etc. And that was just 18

21:12

hours for one trip. Now, what

21:15

is the cost to me of that 18

21:17

hours of time versus the benefit? Well,

21:19

the benefit is I was able to use

21:21

my points. Great. But were

21:23

the points free? No, they certainly

21:26

weren't free. There's a cost to

21:28

accumulating the points, etc. And

21:30

then using them, it was

21:32

such a frustrating experience that it just made

21:34

me wish I'm just going to pay for

21:36

everything. And when I think about

21:39

the amount of time that I've spent investing

21:42

into the redeeming

21:44

the stuff, figuring out the rules, figuring

21:46

out the airlines, checking here, checking there,

21:48

trying to get the best yield, the

21:50

best value, etc., I just look

21:53

at it and I'm pretty scandalized by it. And I

21:55

think, gosh, we'll just make more money. What an idiot

21:57

you are for spending all this time trying to play

21:59

this game. just make more money and

22:01

make more money and afford to go and

22:03

buy yourself seven business class seats because you

22:05

can buy seven business class seats. You just

22:07

can't redeem seven mileage

22:10

award seats and

22:12

that I think is the biggest thing that

22:14

most people don't reflect on. The time commitment

22:16

for this world of

22:18

mileage hacking etc is enormous to

22:21

learn it and to do it

22:23

and to practice it on an

22:25

ongoing basis. It has to be

22:27

genuinely a hobby that you enjoy

22:30

going and searching for flights and checking this

22:32

website that website this tool that tool etc

22:34

figuring out where could I go this month

22:36

where could I go next month and just

22:38

doing that it has to be something that

22:40

you enjoy something that you that you that's

22:43

relaxing to you sitting on the couch

22:45

watching TV and you're just goofing off

22:48

on the laptop looking for for valuable

22:50

redemption awards. The average person

22:52

who doesn't have that kind of interest isn't

22:54

going to do it. I don't think is

22:56

well served by this system because it's too

22:59

time-consuming for you to go and accumulate the

23:01

knowledge necessary and then to know

23:03

how to even go through and

23:06

accomplish the redemptions. The complexity of

23:08

the whole system the complexity of

23:11

accumulating the points and doing this program

23:13

and tracking my minimum spend okay where

23:15

can I get another $3,000 of spending and then

23:18

I'm going to put this into this program and have

23:20

my American Express points I have my ultimate rewards points

23:22

I'm going to have my Capital One points I'm going

23:24

to have okay this is going to go to this

23:26

program now there's a mileage bonus let me go ahead

23:29

and it's the complexity of it is eats up enormous

23:31

amounts of time and it has to be a hobby

23:33

and if you actually look at the actual value that

23:35

you get from it is

23:37

that really a good value of

23:39

the time what if you had something better to

23:41

do with the time what if you had some

23:44

way to invest that time to make more

23:46

money to do something more interesting with your

23:48

with your time and with your ability in

23:52

addition there is and I'm

23:55

gonna come I'm gonna quickly come to who this is right

23:57

for but one more thing to point out Frequently,

24:02

you're dealing with, because

24:04

you're going after the luxury

24:06

experiences in many cases, frequently

24:09

you are dealing with not

24:15

the best option. What I mean is,

24:17

let's say you go to, I don't

24:19

know, booking.com. You're going to

24:21

travel to Paris, France, and you go to

24:23

booking.com, and you are going

24:25

to choose a hotel. A site like

24:28

booking.com will serve you thousands and thousands

24:30

of different options, from the most luxurious

24:32

to the least luxurious, etc. You can

24:34

choose among those options. If

24:37

you've got your credit card points, then

24:39

you are restricted to the partner to

24:41

which you can transfer those points. Maybe

24:43

it's Hyatt or Hilton or Marriott. Those

24:45

are the big ones. Hyatt,

24:48

Hilton, Marriott, and IHG are

24:50

your big ones. Don't

24:52

get me wrong. I really like these hotel chains.

24:54

One of the things that, in

24:56

my own travel planning, whenever possible, I

24:59

avoid flying on American-flagged

25:01

carriers. I avoid Delta

25:03

and United and American

25:06

Airlines whenever possible, in favor of

25:08

some foreign brand. I'd

25:11

rather fly on Korean Air or Singapore

25:13

Air or Turkish Airways, etc., because I

25:15

find that you get better service on

25:17

non-American-flagged airlines. However, I

25:20

personally prefer to stay at American-flagged hotels.

25:23

If I have the choice, I'd rather stay at

25:25

a Marriott or at an IHG or Hyatt or

25:28

something like that, in

25:30

many cases, rather than a small independent hotel,

25:33

because you get a different level of service.

25:36

I don't know why there's that difference,

25:38

but at least it's something I've noticed

25:40

and I would bet other people have

25:42

as well, that I would rather fly

25:44

on a non-American-flagged carrier in order to

25:46

stay at an American-flagged hotel chain versus

25:49

the opposite. But still,

25:51

you're just getting one certain thing. With

25:54

the portfolio of brands that

25:56

each of these companies has, you

25:58

can often find the kind of experience

26:00

that you're looking for. But

26:02

the point is that you're often locked in and the

26:04

same thing happens with airlines. If

26:06

you are flying for money, you have

26:09

all the same searching ability that you can do

26:11

and you can often find all kinds of inexpensive

26:13

fares that are available for you either

26:15

due to better competition on

26:17

that route and or, you know,

26:20

etc. Just better competition

26:22

on the route or more mistake

26:24

fares or their sales, all those

26:27

same things apply to finding great

26:29

airfare deals. And it's

26:32

just a simpler, more straightforward system to spend less

26:34

time finding a good deal on the kind of

26:36

hotel that you want to stay at and the

26:38

kind of airline that you want to fly on

26:41

rather than spending all the money and

26:43

the time to deal with the points.

26:45

So who is a good

26:48

fit for these mileage programs?

26:51

Well, as far as I'm concerned, there are

26:53

a few no-brainers. So the first one, it's

26:55

an absolute no-brainer, is simply

26:57

this. If you

26:59

have some kind of significant

27:02

ongoing expenses, usually

27:04

expenses associated with your business and you

27:06

can pay for those expenses with a

27:08

credit card and there's no cheaper way

27:10

for you to get those

27:13

expenses covered with another form of payment,

27:15

well, then you are a perfect

27:18

fit for a mileage program. So

27:20

if you buy hundreds of thousands of

27:22

dollars per year of Facebook ads and

27:24

Twitter ads and things like that, or

27:27

if you run a contracting business and you spend

27:30

hundreds of thousands of dollars a year renting

27:32

equipment, things like that, or

27:34

if you purchase supplies for customer

27:37

projects, you're renovating houses and

27:39

you purchase tens of thousands

27:41

of dollars of building supplies, which you then

27:43

bill your client for, you are

27:46

a perfect fit for a points credit

27:48

card because you'll have

27:50

so much spending that just the natural

27:52

value of the points, you'll accumulate enormous

27:54

quantities of them. And if

27:56

you have enormous quantities of the points and

27:58

it's basically, quote unquote, free. then

28:01

you don't have to spend all your time

28:03

going through and trying to figure out how

28:05

to maximize every single redemption. It's

28:08

perfectly reasonable for you. If you earn hundreds

28:10

of thousands of points per year just naturally,

28:13

it's perfectly reasonable for you to pop open

28:15

Delta Airlines and say, I want to go

28:17

here on those dates. Oh, look, pay with

28:19

points. And it's perfectly reasonable for

28:21

you to pop open mariot.com and, hey,

28:23

look, I want this number of

28:25

rooms and boom, pay with points done. It

28:28

works fine. You're not

28:30

in any way maximizing the system,

28:33

but you are a good candidate for

28:35

those kinds of programs just because your

28:37

built-in spending to the business allows

28:39

you to accumulate points. And

28:42

those points are probably more valuable

28:44

to you for those luxury experiences and

28:46

those tax-free perks and things like that

28:48

than would be something like a cashback

28:52

option that just adds a little bit more profit that you

28:54

probably don't need. The

28:56

second person for whom this is

28:58

really appropriate is somebody

29:01

who's an aficionado. So if

29:03

you are a single person or a couple or

29:06

maybe a family of three and you really enjoy

29:08

this and it's something that you do as kind

29:10

of a relaxing thing, then, yeah, this is

29:12

a good fit for you because you'll go

29:14

through the learning process. You'll

29:17

learn all the ways to exploit it,

29:19

maximize it. You'll learn all the loopholes

29:21

to redeeming them, and you'll be able

29:23

to create some luxury experiences that you

29:25

wouldn't otherwise have. That

29:28

really is true, and it is possible for

29:30

people. But it needs to be your hobby,

29:32

and this leads me to kind of the

29:34

cross between the second and the third person.

29:37

I think the third person for

29:39

whom this is a good fit is

29:41

somebody who just doesn't have other money-making

29:46

opportunities. Let's

29:48

say, for example, that you

29:51

and your wife are both college

29:54

professors, and you just

29:56

love it. You love teaching. You like

29:58

your lifestyle. and this

30:00

is what you're gonna do. And you don't

30:02

have any interest in trying to do a side

30:04

business and becoming the next Andrew Huberman or

30:07

something like that. You're just focused on, we

30:09

like teaching our classes and this

30:12

is what we do. Well, in

30:14

that situation, your income is not

30:16

infinitely scalable. You're not gonna go

30:18

out and spend your time working on a side hustle

30:20

to make more money. You're not an entrepreneur. You have a

30:22

stable, fixed income and a good lifestyle

30:25

associated with it. Perfectly fine. There's

30:27

nothing wrong with that. The acknowledgement

30:29

is, unlike me, who if I had invested

30:31

those 18 hours into something else, I certainly could have

30:33

made a lot more money than redeeming

30:35

my points made for me. You have

30:37

a different system. You have a different set of constraints.

30:39

And so if you have

30:41

that and you earn enough money

30:43

to cover your

30:46

expenses and you're not gonna go into debt and you

30:49

have a kind of a stable lifestyle, then this may

30:51

be a way for you to just systematically

30:53

acquire some points so that you

30:56

can have some cool peak experiences.

30:59

And it doesn't become that difficult

31:05

if you have a little bit of basic knowledge. In

31:07

essence, let's say quarterly, you're gonna sit down

31:09

and you're gonna subscribe to a couple of

31:11

newsletters or check out a couple of forums

31:13

or subscribe to some various

31:16

teachers' premium program and

31:18

every few months, you're gonna make a credit card

31:20

application, take out a new card. You're gonna move

31:22

your spending to that card for a few months

31:24

and you're gonna accumulate quite a lot of points

31:26

that way and that can work well. And

31:29

that's the crossover between kind of the person for whom

31:32

it's a hobby. If it's really a hobbyist of yours,

31:34

okay, you can do well at it. But

31:36

I'm skeptical that most people are really

31:39

getting all that much benefit from it

31:41

compared to what is possible. Because

31:43

for most of us, what

31:46

we're giving up to engage in that world

31:48

is many more lucrative

31:51

opportunities. Doesn't have

31:53

to be a side hustle. Doesn't have to be

31:55

entrepreneurship. But the problem

31:57

with becoming an expert in the credit card

31:59

points game. unless you're going to build

32:01

a business around being an advisor to people on

32:03

credit card points, you're probably

32:05

neglecting something else that would enhance your

32:08

career more effectively. Something that

32:10

would allow you to improve your job skills.

32:14

With the amount of time that you spend playing

32:16

with the credit card points game, you may be

32:18

able to code, learn to code and

32:21

go into a completely different setup or

32:23

become the expert on artificial intelligence at

32:25

your company, guiding your company to more

32:27

profitability or becoming world class at some

32:30

other thing. And that's what

32:32

we need to be really cautious of. We

32:34

need to be careful that we're not paying

32:36

a higher cost with our opportunity cost than

32:39

we are aware of it. If you

32:41

enjoy the hunt for the deal, go

32:43

for it. I think in many cases

32:45

you probably should focus out more on making

32:47

more money instead. Great. And

32:49

if you have high consistent expenses that can go

32:51

on credit cards, go for it. But

32:54

remember that these things may be

32:56

a distraction. And as I've

32:59

said previously, as I reflect on 10

33:01

years of radical personal finance, one

33:04

of the regrets that I have is that

33:06

I spent a lot of time getting

33:08

distracted with things that were...

33:14

They seemed alluring because they seemed like I was

33:16

going to live the lifestyle of a millionaire without

33:18

being a millionaire. They seemed

33:21

like things that I should go after because

33:23

look, I can exploit this. I can maximize

33:25

this little loophole. I can save a little

33:27

bit here, etc. And I've

33:29

just come to see a lot of

33:31

that as wasted time and effort. It's

33:34

not a matter of really great personal

33:36

finance. It's not built

33:39

upon a lifestyle of clipping

33:41

a coupon here and saving a little

33:43

bit there and finding some way to

33:45

live like a millionaire without being one.

33:49

The most effective pathway is to

33:51

just... is the direct one. It's

33:54

the direct pathway to becoming a

33:56

millionaire, to making a million dollars

33:58

a year, to... building a business

34:00

that can comfortably buy you all of your first

34:03

class travel and put you up at the

34:05

first class hotels and things like that. I'm

34:08

always conscious that that may not

34:11

actually be open to everybody. You

34:14

know, I don't, I'm not making fun of

34:17

clipping coupons. They, they

34:19

serve a value, but

34:21

truly we are more capable

34:23

than we, than

34:25

we realize. And if we,

34:28

if I had stopped years ago,

34:31

chasing down, you know,

34:33

little things to find a loophole and get

34:36

something for nothing and go a little farther

34:38

and et cetera, and just

34:40

focused on the fundamentals, then

34:42

it would not be necessary.

34:45

It would, none of the, none of the little

34:47

deals and things would have been necessary. And

34:51

as I try to learn from the last 10 years

34:53

and make a better plan for the next 10 years,

34:55

this is at the core of where

34:57

I'm at in my own business, my

35:00

own personal finances, et cetera. And

35:02

I don't think I have

35:04

anything to apologize for because

35:06

it, we're not, I, in,

35:08

in terms of the content that I've made, but, or

35:11

anything like that. I haven't, I don't think

35:13

I've steered anybody wrong. I just was, I

35:15

didn't realize how time consuming a

35:18

lot of those things really were

35:20

and how much better it would have

35:22

been to focus on the fundamentals and

35:25

a more straightforward focus on the fundamentals

35:27

would have, I think more fully paid

35:29

off. And so now when

35:31

I see people who are really interested in the

35:33

credit card game, et cetera, I,

35:37

I just asked myself again, unless they're making

35:39

money on it and they have coaching business

35:41

or whatever, or programming some tool that works

35:43

out and pays them money, I just asked

35:46

myself, wouldn't you be better off doing something else?

35:48

And the answer almost every time has been yes.

35:51

I've never met a wealthy person who

35:53

got rich because of their credit card

35:55

points. There are a significant number

35:57

of wealthy people who have gotten rich. talking

36:00

about credit cards, selling credit cards, etc.

36:02

and no problem with that because there

36:05

are a number of people who have been able to take

36:07

a once in a lifetime trip, a really peak experience because

36:09

of it. But

36:12

on the whole, I've never met

36:14

anybody who's become wealthy accumulating

36:16

credit card points. Even

36:21

if you go to those peak experiences, I watch

36:24

their YouTube videos and whatnot, you're sitting in business

36:26

class or you're sitting at the fancy

36:29

oceanfront resort. It's

36:32

not a sustainable thing. You're out of

36:34

your league. You're out of your depth. If

36:37

you can use credit card points, put a little fire

36:39

in the belly and say, I want to fly like

36:41

this every time, great, go for it. But

36:43

at the end of the day, I think credit

36:45

card points and the whole game is

36:47

much more of a distraction than many

36:50

people realize. They're not that

36:52

hard to accumulate, although it

36:54

does take a little bit of practice and a little bit of learning,

36:57

but they are difficult to redeem. The

36:59

time-consuming nature of it is something that

37:02

I think would send most of us

37:05

in another direction.