Would 11 grand float your boat?
I have a 15-second test for you.
Before you read on do this one simple exercise. Fold your arms across your chest. Feels comfortable? Now fold your arms the opposite way. That feels uncomfortable, doesn’t it?
Trying something new or something you’ve never done almost always feels “uncomfortable” at least at first. Are you willing to go through an uncomfortable period of understanding and learning? If you are you will get more money/value than you would have ever expected from my strategy that I am sharing today.
I will offer this guarantee.
What can I guarantee you? If you think you can’t do this…you are right. You can’t do this!
If you don’t want to do this I fully understand. You may say, “I’m doing just fine. I’m too busy for this. I don’t travel.”
What if this happened to you?
What can I say to that response? If you’re walking along and see a twenty-dollar bill lying on the ground do you stop, bend over and pick it up? If you do then you might be a good candidate for what I’m talking about today.
Take this one to the bank.
Please remember one thing. You should never try to work to get a reward that you can’t use or don’t want.
This is a review.
Today I am reviewing my credit card arbitrage strategy I shared with you a few months ago. This is an update after four months of my 12-month program which might continue even longer.
What the heck am I really doing?
Arbitrage. What is arbitrage?
Here’s a good general definition.
“Arbitrage can be used whenever any stock, commodity, or currency may be purchased in one market at a given price and simultaneously sold in another market at a higher price. The situation creates an opportunity for a risk-free profit for the trader.”
Welcome to my world.
In my world, I “purchase” credit card points, not miles, when I use my credit card. I then “sell” those points to airline and hotel partners to get their products for free or greatly reduced prices. This provides a “risk-free profit for the trader”. Who’s the trader? Me!
I don’t need 11 grand. However, if I can earn 11 grand by doing almost nothing that is absolutely in my wheelhouse.
Randy, tell me how.
How do I do this? It’s so simple. Mind you I am giving you a very simplified version of one type of “points and miles” strategy. $11,000? My strategy is child’s play with the big girls and boys.
Three simple steps and a few baby steps.
Spend your money using credit cards
Don’t spend any money you wouldn’t normally spend
Charge everything!
Not taking action IS taking action.
Why can some folks not get started with this idea? They might think “I can’t get the deals Randy got”? Well, if you waited and waited and didn’t act that is likely true. However, if you DID act when I first shared this you could have gotten the same deal I’m using with the Chase Freedom Unlimited (CFU) card.
“On the plains of hesitation bleach the bones of countless millions who, at the dawn of decision, sat down to wait, and waiting died.”
I truly do love that quote. Too many times too many folks can’t make a decision and therefore miss out on an opportunity.
FOMO
Fear of missing out!
Don’t worry. If my deal is no longer available you can get your own deal. When I find a better credit card strategy, and I will, I will change in a heartbeat. There are well over 100 credit cards offered by the major banks and travel partners.
The best opportunity to earn large quantities of points is with “welcome bonuses”. This is where the credit card issuer lets you earn gobs of points for a certain amount of “spend” in a short period of time.
As an example, I just got a World of Hyatt credit card. To earn 30,000 Hyatt points I needed to spend $3,000 on anything in three months to get those points. I completed my “spend” and received 30,000 Hyatt points. By the way the term “spend” is commonly used in this hobby.
Currently, I spend an average of 8,000 points when I use points for a room at Hyatt. When I pay cash I am spending an average of $186 for a Hyatt room. That number will go down when my $271/night Zurich vacation spend washes through.
Earning and burning points.
I’ve been earning 3.1 cents per point for the Hyatt rooms that I bought with points. That makes the 30,000 Hyatt points I earned worth $936 that I can use for future Hyatt stays. Folks, I spent $3,000 in three months with my Hyatt card on things I would have bought anyway. That’s a 31.2% return on the three grand I spent!
They stock a lot of stuff in grocery stores.
FOMO. Fear of missing out. Think you can no longer get that Hyatt deal? I think it’s still available. But, even if it’s not available think about this analogy so you won’t be disappointed.
They say an average-sized grocery store stocks about 40,000 items. When you go shopping you might only buy 25 or 50 or 100 of those items. Do you feel disappointed that you didn’t get one of everything in the store? No, you don’t. If you didn’t get the garlic mayo on this trip you can probably get it next time.
Educate yourself
When I first started listening to podcasts on this topic the hosts went so fast it made my head spin. I kept listening. More and more started to make sense. I recommend these podcasts for the beginner. Don’t freak out when one guy tells you he has 43 credit cards with his “hobby”.
Recommended podcasts
Award Travel 101
Point Me to First Class (Get it? POINT me to first class)
I think of this as a game or hobby…a profitable game or hobby
Transferable points
This is important. When you get a new credit card with most arbitrage strategies you want to get a card with “transferable points”. That’s so much better than a single vendor card.
Here’s how that works. I am working with Chase. When I earn a point with Chase I can transfer that point to several airline and hotel companies for use in their frequent flyer and stay programs. Unlike the graphic, once I transfer points from Chase I cannot transfer them back.
When I earn a mile with my American Airlines credit card I can use that mile in the AA frequent flyer program…and nowhere else.
Here’s a list of some Chase transferees’ options
United
Southwest
Jet Blue
British Airways
Air Canada
IHG (Holiday Inn)
Marriott
Hyatt
Earn points; Spend points.
Just like the guy from “Die with Zero” said…Earn…Spend…Optimize for you and your family and your loved one’s personal enjoyment…Create memories…ESOC!!
Did you even think I could share one of these financial posts without mentioning Die with Zero?
Earn and burn. You don’t earn travel points to save them. These points depreciate in value over time. Earn ‘em and burn ‘em.
Welcome to the Chase Freedom Unlimited card!!
Charge everything!
Income taxes
Real estate taxes
Home and auto insurance
Everything else
Restaurants – earn 6%
All else – earn 3%
What’s my expected total spend for the year?
I expect to spend just over $100,000 for the year using credit cards. If only I could find a way to pay for our jumbo mortgage using a credit card! Importantly, I would never spend more money just to earn more credit card points!
Don’t worry if your numbers are bigger or smaller than mine. It doesn’t matter. We’re talking about a strategy to get you something where you weren’t getting anything or you weren’t getting much in the past.
I will profit in two ways. Here’s the first.
The little engine that could.
Let’s start with the smallest profit opportunity of the two. About one-quarter or 25% of my return comes from my “borrow low and invest high” approach.
Borrow low.
For the first 15 months of my Chase Freedom Unlimited use, they will let me carry balances with 0% APR. ZERO PERCENT APR? What does that mean? Each month I only have to make the minimum payment. They don’t charge me ANY interest on the unpaid balance.
Invest high.
I take the money I don’t have to pay to Chase each month and invest those funds in the Vanguard Treasury Money Market fund. Interest from this fund is not subject to state income tax. This makes the fund’s current tax-effective yield 5.83%. Back in late November, the fund was paying 5.89%. In four months, the rate hasn’t changed much.
Yes, it’s great to live in America!
What’s the second and biggest opportunity?
Earn points. Transfer points. Live the Life of Riley. Younger folks please Google that reference.
Which of these statements is true?
Your credit score doesn’t matter
Cigarette smoking is an outstanding thing to be doing
Not wearing your seatbelt is a good idea
Your credit score doesn’t matter!
That’s right. Your credit score doesn’t matter if you’re not getting a loan! What kinds of loans are people normally trying to get? A car or home loan. I won’t be needing a car or home loan any time in the next year or two.
Frankly, even if I needed a car loan and had to pay a higher rate because of a lower credit score that wouldn’t come close to wiping out what I would make with this credit card strategy.
How is my credit score affected by this credit card arbitrage strategy?
My credit rating score will likely be affected by the strategy I describe. How?
Credit utilization and credit pulls.
What is credit card utilization? Here’s a simple explanation. Let’s say the cumulative credit limit for all of your credit cards is $100,000. If the unpaid balance of all of those cards today is $10,000 then your credit card utilization rate is 10%.
Credit pulls…hard and soft.
Hard credit card pulls count against your credit score. Soft pulls do not. I have seven “inquiries” or hard pulls as reported by Chase which uses the Experian credit reporting service. They are all from credit card applications over the past two years.
My credit score has gone down just a bit.
My credit score has decreased by 56 points since I started this strategy in November. I expected this to happen. When I applied for an auto loan with a major airline credit union she told me my credit score was 850 and she had never seen a credit score that high. I guess I had some room to fall! Over the last month, my credit score went UP 10 points! Why? I have no frigging idea.
My arbitrage program with Chase Freedom Unlimited will last at least 12 months. My credit utilization will go up to somewhere close to 44% when my year is finished. I expect to owe about $85,000 on my Chase Freedom card when I am finished. If I can talk Chase into increasing my credit limit above that $85,000 I will owe them more!
I know what you’re thinking.
You were thinking all of this would tank my credit rating weren’t you? What can I say? I’m typing this while I’m staying in a beautiful Hyatt hotel in Melbourne, Australia. I guess there’s that.
Yes, if you were thinking that my strategy would hurt my credit score in the future you are correct. How much? Don’t know. However, as I pointed out I do not need to use my credit score for anything soon.
Don’t worry about stuff that’s not a big deal.
Far too many people waste their time asking, “What if?” Most of the time “what if” never happens. People who are always asking “what if” think the things they are imagining happen all the time. They don’t. Do I sound like a raving outrageous lunatic? I hope you answered “no” to my rhetorical question. I am not one of those people who continues to say, “What if” when the likelihood of whatever is remote.
I’d rather have $11,000 in my jeans than a credit score sitting in the background DOING NOTHING. What will I do with the 11 grand? I plan to blow the money on stuff as if money didn’t matter. When this program ends I will take the money I owe to Chase from my Vanguard money market fund and pay off everything in full. My credit card utilization rate with return to nearly zero except for that current month’s charges.
In the meantime, I will have as much as $85,000 earning nearly 6% at a borrowing cost of ZERO.
What’s my benefit? Free high-quality hotel rooms, oftentimes suites!
I don’t need to use my points for airline travel. I already have that covered. I will use my points exclusively to stay at hotels, Hyatt Hotels.
Points strategies.
Earn Chase points (3X from CFU) transfer to Hyatt
$100,000 spent = 300,000 Chase points. 300,000 Chase points = 300,000 Hyatt points.
How much is a point worth?
Example.
300,000 points X 3.1 cents (the rate I currently earn) is $9,300 tax-free.
Do I pay cash or spend points for a Hyatt hotel room?
Example.
At Hyatt when I can earn more than 2.5% with my points I use points.
Hotel cost – $200
Points needed for a free night – 8,000
Value of each point (200/8,000) = 2.5 cents per point
When I can’t get at least 2.5 cents per point I pay cash for the hotel. That still allows me to get credit for my night’s stay and moves me closer to their top frequent stay status of Globalist.
Example.
Hotel cost – $200
Points needed for a free night – 15,000
Value of each point (200/15,000) = 1.3 cents per point
How much? How much am I going to get from doing this?
What will the earnings be from my “0% APR strategy”? These are my current projected results through four months for the 12 months.
$3,351 before tax
$1,049 federal & state tax
$2,302 after tax
How much will I earn from my points strategies? I expect to spend $105,694 and have fees for paying taxes of $1,174.
$9,830 before fees
$1,174 federal tax fees
$8,656 after fees
What’s the bottom line?
People always want to know “What’s the bottom line”?
$13,181 before taxes and fees
$2,223 federal & state taxes on the interest earned plus credit card fees from paying taxes with a credit card
$10,958 after taxes and fees
Folks, that’s nearly $11,000 in cold hard cash to spend at Hyatt hotels. Don’t plan to stay in a Hyatt hotel? Use that money for other Chase transfer partners including several airlines and hotels.
Oh, one more thing. My federal and state tax rate is about 31%. Did you know to clear $11,000 if you were working or if you were taking that money from a taxable IRA and had my tax rate you would have to earn somewhere around $16,000-$17,000? Well, of course, you knew that!
You don’t have to spend your earnings with this strategy on a Hyatt. Take your loved one on a free airplane ride to somewhere far away.
Think you can’t afford a Hyatt? Remember, the rates I use for my Hyatt comparisons are discounted rates, not rack rates.
Think you can SAVE money by staying at a Motel 6 or a Super 8? Don’t forget to factor in the expense of a bulletproof vest! The person lying in a hospital emergency room with a bullet to the chest has got to be declared the loser. Remember, the poor man pays the most and often doesn’t even know it. My strategy is to “Buy Good Stuff Cheap”.
It pays to have status. It really does.
Long before I finish this credit card strategy I will have gained Globalist status at Hyatt. The cash and points needed for a Hyatt stay will not change. They will not increase.
What will I get as a Globalist?
Upgrade to a suite
Free breakfast
24/7 Regency Club access
Free parking on points stays
No resort fees
4 p.m. checkout
Plus, Hyatt hotels are just nice!
Hyatt Globalist comes in at No. 1 in NerdWallet’s 2023 ranking of the best high-level elite status among any major hotel chain.
I will still be earning around $11,000 in cold hard cash and value to spend on my Hyatt stays.
Points are not cash? Really?
Don’t think points earned with Hyatt are the same as cash? Let’s say you shop at Kroger or Ralphs or wherever. Is 25 dollars in cash the same as a $25 Kroger gift card? If you shop at Kroger it is! I stay at Hyatt. If I wasn’t doing this program I would STILL be staying at Hyatt hotels. I am not changing my lifestyle to do any of this.
Confusing? Get educated. You’ll be glad you did.
Once you get a little background on “points and miles”, and the podcasts can give you that background if you need it, you simply charge the expenses you would normally be spending anyway. Once you set this up you just live your normal life.
You can do it that way. Or, you can have me tell you how I did it. You get to choose. Nevertheless, all I ever promised you was an entertaining read on the topics of finance, travel, trackchasing, and life on the road. I hope I haven’t let you down.
“The world does not need another credit card.” Suze Orman. Wrong Suze!
Randy Lewis