As you may know, I recently signed up for the Citi Executive AAdvantage World Elite MasterCard because of its current 100,000 mile signup offer. The offer requires paying a $450 annual fee and completing $10,000 spend in 3 months in exchange for 100,000 AA miles and a $200 statement credit. Initially there was confusion about whether the statement credit was to offset spend with American Airlines specifically, or to offset all spend. Recently, though, a number of people have reported receiving their statement credit without having made any AA purchases. So, the total first year cost of ownership for this card is really $250, not $450.
In my recent post, “Tips for spending $10K to get 110,000 miles” I listed a few ideas for what to do and what not to do to reach $10K of spend. What I didn’t address, though, was the topic of everyday spend. To help meet the card’s minimum spend requirements, should you use this card for regular everyday purchases at grocery stores, restaurants, and so on? In my case, the answer is no.
I carry cards in my wallet that currently give me 5 points per dollar for almost all of my day to day spend:
- Citi Forward: Unfortunately, Citi no longer offers this deal, but I was lucky enough to get this card when they still advertised 5 points per dollar at restaurants, bookstores, movie theaters, and other entertainment venues.
- Citi ThankYou: This is another offer no longer available, but for the next month I’ll continue to earn 5 points per dollar at grocery stores, gas stations, and drug stores. After that, I’ll replace this card in my wallet with my old Amex Blue Cash card that offers 5% cash back in the same categories, but only after $6500 in spend per calendar year.
- Chase Freedom: The Freedom card offers rotating 5X categories. This quarter it is gas stations, movie theaters, and Starbucks. I can earn 5X Citi ThankYou points instead for these same categories, but I value Ultimate Rewards more highly so I like to max out my $1500 5X Freedom spend each quarter when possible. Plus, because I have a Chase checking account, the Freedom card awards me with a 10% bonus each year on all points earned.
- Chase Ink: Chase Ink cards offer 5 points per dollar at office supply stores and for telecom, internet, and cable purchases. I can use my new Ink Plus Visa card at Staples to buy gift cards to earn 5X and additionally get 1% cash back if I spend $200 or more (thanks to the Visa Savings Edge program), and I can earn Plink points for additional savings! See “Staples Rocks” for more details.
For more examples of cards that offer 5% cash back (or more), please see “Cashing in.”
Why not Citi Executive 11X?
With the current 100K offer, your first $10K of spend earns 11 miles per dollar (since you’ll end up with at least 110,000 miles). So, isn’t 11X better than 5X for day to day spend?
Not really. The key is that the Citi card earns 11X on any spend at all (for the first $10K of spend), whereas the cards I listed above earn 5X only for specific spend. The fact is, I am better off paying a fee to reach $10K of spend than to give up 5X. Let’s look at an extreme example. Imagine I had $10K of actual spend that I could make in the above listed categories. If I use my Citi Executive card for that spend, I would earn 110,000 points. If I used, instead, my 5X cards, I would earn only 50,000 points. However, it’s possible to buy the spend on the Citi Executive card. Worst case, I could use a service like Google Wallet to send $9,719 to my wife for a 2.9% fee ($281) in order to spend a total of $10K. Let’s now imagine that the 50,000 points I earned were worth only $500 in cash (they’re actually worth more than that to me, but let’s go with $500 for the sake of argument here). In that case, I would still earn 110,000 AA miles and I would earn $219 profit ($500 – $281).
To be clear, I’m not recommending paying 2.9% to meet the $10K spend requirement. The above was an extreme example to prove a point. Instead, my real approach is to use the Citi card for all day to day spend in which I do not already earn a category bonus. Next, I turn to manufactured spend techniques in which I do not earn a category bonus. A great option, for example, is to send $1,000 per month to a friend via Amazon Payments. This month I was able to send $2K by creating a virtual account number for my wife to use (Citi has an online mechanism for creating these). If these free techniques don’t end up being enough, I can then look to paid options such as paying taxes (1.87% fee) or even using Google Wallet as described above. I don’t really think that I’ll have to resort to paid options, but they are better than giving up 5X, at least in situations where 5X is worth more than the paid option fees.