As of this morning (Feb 1), there are a number of changes to the payouts from Chase’s Ultimate Rewards Mall for the Chase Sapphire Preferred and Ink Bold (note that when logging into the mall for other Chase cards, you will have different offers).

Let’s look at some key bonus rates for the Sapphire Preferred and Ink Bold:

• Avis: 5X
• Barnes & Noble: 10X (up from 7X)
• Drugstore.com: 5X (down from 10X!)
• Groupon: 0 (has been missing from the UR Mall since January)
• Hotels.com: 4X
• HP: 3X (down from 5X)
• Kohl’s: 10X
• Magazines.com: 40X
• Office Depot: 5X
• Sears: 4X (Same as before. Boo!  I was hoping Sears would go up!)
• Staples: 4X (down from 5X)
• Target: 3X (down from 5X)

Comparing to predictions

Last night, I made the following predictions:

• Staples.com will stay at 5X
• Target.com will decrease from 5X to 3X
• HP will stay at 5X
• Drugstore.com will decrease to 8X
• Sears will increase to 6X or 7X

How did I do?  I got Target exactly right.  I also correctly predicted that Drugstore.com would go down, but it actually went all the way down to 5X instead of my predicted 8X.  Against my predictions, Staples and HP both went down, and Sears stayed the same.  So, I batted 1 (or maybe 1.5) out of 5.  Not very impressive!

Analysis of Changes

Ick.  Most of the changes are not so good.  Sears staying at 4X is a big disappointment.  Staples dropping from 5X to 4X slightly lowers to value of the Ink Bold double dip I’ve been writing a lot about lately (in fact, I need to re-write a new post that I had ready to go).  Office Depot at 5X doesn’t help too much as their terms and conditions explicitly say that gift cards are excluded (but it’s a great deal if you actually want to buy something from Office Depot).  Also Groupon is still missing from the site altogether.  On the plus side, it’s great to see Barnes & Noble back up to 10X.  I’m really pleasantly surprised, as well, to see Magazines.com staying at 40X and Kohl’s staying at 10X!  Also with Avis at 5X and Hotels.com at 4X there could be some great opportunities to save on travel and double-dip with other promotions.

What’s Next?

Virtually every shopping portal, including the Ultimate Rewards Mall, is heavily promoting Valentine’s Day related merchants right now.  So, my next bold prediction is that rates will change again on Feb 15th.  Let’s hope for some good news then!

Win a Nook!

Reminder: Until Feb 14th, you can win a Barnes & Noble Nook Color simply by adding a comment to our ever growing story. Visit this page to participate!

Earning points and miles from credit cards is not free. I’ll explain why.

Almost every major airline and hotel program allows you to earn points or miles by using a rewards credit card. When people get points in this way they tend to think of them as free, but they are not. The reason? By using a points-earning credit card, you are giving up the chance to earn cash back (or the equivalent) at a fixed rate.

There are several credit cards that give a fixed 2% return on all purchases. For example, both the Capital One Venture and the Escape Discover Card give 2% back in the form of travel credit. Even better, if you have a Fidelity account, you may be able to get the Fidelity Investment Rewards American Express Card which gives 2% cash back on all purchases. If you really want to maximize your cash back earnings, you could get a 2% cash back card for basic purchases, and then use a card like the American Express Blue Cash Preferred and earn 3% cash back at gas stations and department stores and a whopping 6% back from grocery store purchases!

While it is possible to earn more than 2% on credit card purchases, I consider 2% to be the benchmark rate for credit card earnings. By juggling cards, as I described above, you can do better than the benchmark, or with a 1% cash back card you can do worse. For example, if you use a 1% cash back card, then with every purchase you effectively lose the additional 1% you would have received from a 2% card! By the same measure, the points you earn from points-based cards cost you 2 cents for every dollar spent on the card. Since most points-based cards give 1 point per dollar spent, this means that most people effectively (and unknowingly) buy points for 2 cents each every time they use their credit card.

Most credit cards have bonus categories that allow the card holder to earn more than one point per dollar spent in those categories. Frequently, the bonus categories are limited to money spent at the particular hotel or airline that co-brands the credit card. Other times there are broad categories such as travel, grocery, or dining that will result in more points. As bonus categories are more frequently used, the cost per dollar of points goes down. In order to estimate the cost of points purchased via credit card use, it is necessary to estimate how much will be spent within such bonus categories. For every person, the true mix will be very different, but for this analysis I took a stab at estimating each common category:

With the chart above, we can now estimate the cost of earning points and miles from credit cards. For this analysis, I’ll examine three popular credit cards and compare them to standard airline branded cards that earn 1 mile per dollar except within their limited category:

Typical Airline Card

Most airline branded credit cards give 2 miles per dollar spent directly through the airline and 1 mile per dollar for all other purchases. If we accept from the chart above that 5% of a cardholder’s spend would be with the airline, then that means that the cardholder would earn, on average, 1.05 miles per dollar. Compared to the 2% cash back alternative, that amounts to buying miles for 1.9 cents each. While that rate is better than buying miles directly from the airline, it is often possible to buy miles for much less. I’m not saying that airline credit cards are a bad deal – they often come with many perks (free bags, priority boarding, etc.) that make them worthwhile. However, you may want to think twice before using them for day to day spend.

Starwood Preferred Guest® Credit Card from American Express

The SPG card gives 2 points per dollar at Starwood hotels , and 1 point per dollar everywhere else. If 2.5% of purchases are made at Starwood properties, then the cardholder would earn, on average, 1.025 points per dollar. This translates to 1.94 cents per point. While this sounds pretty expensive, I’ve found SPG points to be quite valuable when used for hotel redemptions. The interesting thing about this card, though, is that you can transfer the points to airline miles and get a 25% bonus when doing so. For example, if you transfer 20,000 SPG points into American Airlines miles, you will get 25,000 AA miles! So, if we take that into account, the 1.025 points per dollar one earns can become 1.28 miles per dollar. The cost, then, goes down to 1.56 cents per mile. Not bad!

American Express(R) Premier Rewards Gold Card

The Amex Premier Rewards Gold Card gives triple points for airline tickets and double points for gas and groceries. Using the chart above, this means that the cardholder would earn, on average, 1.55 points per dollar. That amounts to buying points for 1.29 cents each. Even better, American Express often runs promos where the transferred points are worth even more. For example, you can often get 1.5 Delta SkyMiles for each Membership Rewards point transferred to Delta. In that case, your miles per dollar earnings increases to 2.33, and the cost for “buying” Delta miles goes down to less than a penny per mile (.86 cents)!

Chase Sapphire^SM Preferred Card

 The Chase Sapphire Preferred gives double points for all travel and dining expenses, and triple points for travel booked through their site. Additionally, cardholders are given an annual 7% bonus on all points earned each calendar year.  This means that the cardholder earns, on average, 1.52 points per dollar. That amounts to buying points for 1.31 cents each. If all else were equal, this is better than the SPG card and about equal to the Amex card (without counting the Amex 1.5x transfer bonus). Of course, all-else is not equal: it can be argued (and has been argued) that the transfer partners available to Ultimate Rewards are much better than the transfer partners available to Amex Membership Rewards. In future posts, I’ll attempt to quantify this difference so that we can make a better apples to apples comparison.

Juggling Cards

In addition to picking the single best card for “buying miles”, it’s possible to bring the cost of miles down further by using multiple cards. Use the Amex Premier Rewards Gold for gas and groceries. Use the Chase Sapphire for dining and all travel expenses, and use the SPG card for everything else. In that way, you will earn, on average, 1.88 points per dollar. If you transfer the earned SPG points to airline miles, and transfer Amex points to miles during a 1.5X transfer promo, and use the Amex card for airfare and dining, the earnings per dollar goes up to 2.62 cents per dollar. This amounts to buying miles for .77 cents each!

Analysis

There are many benefits you can get from credit cards, but if your main goal is to get points and miles you should look carefully at how much those points cost you. There are several non-miles earning credit cards that can give you the equivalent of 2% back, so if you don’t value points and miles you should look seriously at those options. If you do value points and miles, then the earning power of your credit cards should be looked at closely. From the example above, it is clear that juggling cards is the best way to maximize your returns. If that’s too much trouble, however, you’ll still do better using a card like those shown above instead of a standard airline rewards card.

Disclaimer: if you use one of the links above to sign up for a credit card, I will receive a referral fee. I promise however that I only recommend cards that I truly believe offer the best value.

There are many ways to take advantage of Sears’ 10 extra points per dollar, but you need to act fast!  This deal is for December 9th only.

Tomorrow only, Sears will be offering 10 extra points per dollar for purchases made at the Ultimate Rewards Mall. To take advantage of this, you need a Chase credit card that gives access to the mall. The best option is the Chase Sapphire^SM Preferred Card because it will give you an annual 7% bonus on top of all rewards earned during the year. So tomorrow, with the Chase Sapphire Preferred, you will earn 1 point per dollar in base earnings plus 10 extra points per dollar for going through the mall plus .77 points per dollar for the annual bonus (11 * 7%). There are so many ways to take advantage of this, I hardly know where to begin! Here are a few great opportunities:

Earn 22.47 points per dollar at Sears!

Sears is one of the few online merchants that will give you points for both buying gift cards and for using them. So, do the following “double dip” to get 22.47 points per dollar!

1. Go to Sears.com to figure out what you want to buy and how much in total you will spend (including taxes and shipping). Clear out your shopping cart and close your browser.
2. Go to the Ultimate Rewards Mall and find Sears. Click through to Sears to shop online.
3. Using your Chase Sapphire^SM Preferred Card, buy e-gift cards for yourself in the amount that you plan to spend.
4. Wait about an hour (in my experience) to receive the gift card via email.
5. Go back to the Ultimate Rewards Mall and through to Sears again.
6. Buy everything you want, and then use your gift cards to pay for those items.

With the process above, you will get 1 point per dollar for base spend + 10 points per dollar for buying gift cards + 10 points per dollar for using gift cards + 1.47 points per dollar for the annual bonus (21 * 7%), for a total of 22.47 points per dollar!

Other credit cards will work as well, but the total rewards may differ. With the Chase Ink Bold^SM, for example, you won’t get an annual bonus so you will earn a total of 21 points per dollar (which is still terrific). If you use the Chase Freedom® card it is worth noting that department store purchases are granted 5 points per dollar this quarter (up to $1500 in purchases). This means that you could earn 25 points per dollar with the Chase Freedom card!

Meet minimum spend and double your signup bonus!

If you signed up for a credit card in order to get a signup bonus, consider buying gift cards to meet your minimum spend requirements. To see how versatile Sears’ gift cards can be, read “An Infinite Number of Uses for Sears Gift Cards“. So, if you’re struggling to meet minimum spend requirements on some credit cards and you can afford to stow your money away for a while in the form of gift cards, this could be a great opportunity.

For example, suppose you recently signed up for the The Chase Ink Bold^SM. The signup bonus for this card gives you 50,000 valuable Ultimate Rewards points after spending $5000 in three months. One way to meet that minimum spend is to buy $5000 in Sears gift cards all at once. This would give you another 50,000 Ultimate Rewards points!

The amazing thing is that you can do this with any credit card, not just a Chase card! You do need a Chase card to get access to the Ultimate Rewards mall, but you can use any credit card to make purchases! I used this trick a few months ago, for example, to help meet minimum spend on my Starwood American Express card.

Note one risk: if for some reason your points don’t post, the use a non-Chase credit card may be a problem since the Chase representatives will not be able to look up your transaction.

Get elite status and other bonuses!

Many credit cards offer bonus points or even airline or hotel elite status for reaching certain high-spend thresholds within a calendar year. If you’re struggling to reach one of those thresholds, this might be the opportunity you’re looking for! As long as you have access to the Ultimate Rewards mall, you can use any credit card to make your purchases. So, on December 9th one option for you is to go through the mall to Sears.com and buy up a bunch of gift cards. Later you can worry about what to do with those cards. I’ll write posts in the future with suggestions. For now, one option is to upgrade and then sell them. Read Buy miles for 1.2 cents or less for details about how to do this.

Today I added a new permanent page to the Frequent Miler site: Preparing for Miles. Look for the link at the top of every Frequent Miler page. This page will grow and evolve over time, but for now I’ve saved you the trouble of clicking through to the page by posting its current contents here:

I regularly post schemes for earning points and miles. For example, you will find a series of posts about the search for the Perfect Perpetual Point Machine. A perpetual point machine (PPM) is a technique for earning miles and points over and over with minimal cost or effort. Another series you will find here is about Gift Card Churning. Gift card churning is the process of earning points and miles for buying, upgrading, and using or selling gift cards.

Often, these schemes require certain credit cards to make them work. It’s also the case that opportunities come and go quickly so you need to be prepared to take advantage of them when they appear. My recommendation is to arm yourself, in advance, with the credit cards that are most likely to be needed for these opportunities.

This page will be updated regularly. Please check back often!

Credit Cards Needed for PPMs and Churns:

At some point this may change, but for now the best opportunities seem to come from Chase. Not only does Chase offer some of the best sign-up bonuses, but they have some of the best opportunities for earning points and miles once you have the cards. Here are the cards that I most highly recommend:

Chase Sapphire^SM Preferred Card

This card is the star of the show. If you only get one credit card, this should be the one. This card does two important things for you: it makes it very easy to earn points AND it makes the points you earn more valuable.

Earning Points: You will get 50,000 Ultimate Rewards points simply by signing up for this card and spending $3000 in 3 months. Just as importantly, though, you will gain access to the Ultimate Rewards Mall. Through the mall you will be able to earn extra points for purchases at merchants that you are likely to buy from anyway. It is true that there are many other online shopping malls that award points, but in my experience this one is the best. It is not unusual, through the mall, to earn 10 extra points per dollar on purchases! Outside of the Ultimate Rewards Mall, you will 2 points for every dollar spent on travel and restaurants and 1 point per dollar on everything else. This is also the only card that gives you an extra 7% bonus on all points earned every calendar year.

Redeeming Points: You can redeem your points for cash or gift cards, but then the value of those points is limited to exactly 1 cent per point. What makes this card (and the Ink Bold) really shine is two new options you have that are not available with other cards: 1) You can redeem points for travel and get 1.25 cents per point value; or even better: 2) You can redeem points for hotel and/or airline miles. Points redeemed in this way transfer instantly and can be put in anyone’s account. This is really a big deal because it is very easy to get more than 2 cents per point value from United Airlines miles or Hyatt points, both of which are transfer partners with Chase Ultimate Rewards. It is due to this capability that most experts value Ultimate Rewards points (when used with this card or the Ink Bold) at 2 cents per point or more.

Caution: do not confuse this card with the regular Chase Sapphire. Unless it is the “Chase Sapphire Preferred” you won’t be able to transfer points to other programs and therefore your points are limited in value to 1 cent each.

Chase Freedom® Visa – $200 Bonus Cash Back

By itself, this is a pretty good cash back card. It earns 5% cash back within rotating categories of purchases and 1% cash back on everything else. Note that the 5% bonus is limited to $1500 of spend per quarter. Here are the bonus categories for 2012:

Q1: Amazon.com and Gas Stations
Q2: Grocery Stores and Movie Theaters
Q3: Gas Stations and Restaurants
Q4: Airlines, Hotels, BestBuy and Kohls

What makes this card really shine is that when paired with the Chase Sapphire Preferred or the Chase Ink Bold, the points accumulated can be turned into Ultimate Rewards points and redeemed for airline miles and hotel points. If you value Ultimate Reward points at 2 cents each, this means that you can earn the equivalent of 10% back from your in-category spend!

You can also sign up for something called “Chase Exclusives” and earn even more. See Dan’s Deals for more about Chase Exclusives.

The New Ink Bold^SM with Ultimate Rewards

The Ink Bold is a business card, so you need to own a business to sign up for this one. That being said, you can own a business simply by saying so. If you sell things via yard sales or EBay, then you legitimately have a Sole Proprietorship business. If you are in that situation, then simply use your own SSN for the business Tax ID when filling out the application.

The Ink Bold has very similar benefits to the Chase Sapphire Preferred. Like the Sapphire Preferred, you will earn 50,000 points as a signup bonus, but this one requires $5000 of spend in 3 months. Also, like the Sapphire Preferred, when you have this card, your Ultimate Rewards points are worth more because they can be transferred to hotel and airline programs.

In one area, this card is even better than the Sapphire Preferred. The Ink Bold will give you 5 points for every dollar spent on office supply stores, cable and wireless service, and landline communications! You will also get 2 points for every dollar spent on gas and hotels.

Credit Cards Needed for Airline Elite Status:

Platinum Delta SkyMiles® Credit Card from American Express

This card has some nice perks by itself that make it worth the $150 annual fee, but the real kicker here is that this card allows you to earn Medallion Qualifying Miles or MQMs. In order to reach elite status on Delta, you need 25,000 MQMs for Silver, 50,000 MQMs for Gold, 75,000 MQMs for Platinum, or 125,000 MQMs for Diamond. With this card, you will earn 10,000 MQMs after spending $25,000 in one year and another 10,000 MQMs after spending $50,000. So, with this one card, you can get very close to Silver status without flying. Here are some other perks:

• Get 20,000 bonus miles upon your first purchase with the Card (5,000 of which are Medallion Qualification Miles)
• Get 5,000 bonus miles when you sign up for two Additional Cards
• Check your first bag for free on every Delta flight
• Receive Zone 2 priority boarding on Delta flights
• Receive 20% In-Flight Savings on food and entertainment
• Complimentary companion coach ticket each year upon renewal

Delta Reserve Credit Card from American Express

This card is similar to the Platinum card, but it allows you to earn even more MQMs, but with a steep annual fee of $450. With this card, you will earn 15,000 MQMs after spending $30,000 in one year and another 15,000 MQMs after spending $60,000. So, with this card you can reach Silver status and be on your way to Gold without flying. Here are some other perks that help pay for the high annual fee:

• Get 10,000 Medallion Qualification Miles (MQM) upon your first purchase with the Card
• Enjoy Delta Sky Club^TM access (for you and up to two guests!)
• Check your first bag for free on every Delta flight
• Complimentary First-Class companion certificate each year upon renewal
• Access to Concierge services
• Receive 20% In-Flight Savings on food and entertainment

Delta SkyMiles® Business Credit Cards

For each of the Delta cards described above, there is a corresponding business version of the same card. The business versions usually have identical annual fees and benefits with the one addition of American Express Open which gives you 5% rebates for certain business purchases. The great thing about the business cards is that American Express will allow you to hold both a personal card and a business card and therefore you can earn signup bonuses and MQMs for each of them!

Other Credit Cards:

There are many other credit cards that can award you elite status and other perks. One of the best summaries I’ve seen is from Dan’s Deals: Credit Card Benefits, Categorized by Benefit. Browse the list and figure out which cards you need to meet your goals.

Disclosure: For most of the cards listed above, I will get a referral fee if you signup. I would never recommend a card, however, if I didn’t truly believe it was a great deal. With the exception of the Chase Freedom card, I personally own and use all of the cards listed above. And, you can bet that the Freedom is high on my list for my next credit card churn!