Rationality is overrated

At events like Frequent Traveler University (which I wrote about on Monday) and the upcoming Chicago Seminars, I spend a lot of time talking with fellow points and miles collectors.  In the past couple of events, I’ve noticed an interesting behavior.  Some people seem embarrassed to admit that they collect miles instead of cash back.  Or, they’ve read in blogs how awful Delta or Marriott’s loyalty programs are compared to the competition, and they’ll only hesitantly admit their allegiance… 

Oh, wait, maybe it has been me acting this way…

Rational behavior

If we define rational behavior as acting in a way that leads to more money in your wallet (or less money leaving your wallet), then everyone should probably do the following:

  • Sign up for credit cards with big signup bonuses and then cancel the cards (or downgrade to no-fee versions) when the annual fees come due.
  • Get 5% cash back cards and milk them for all they’re worth (see “Playing 5X everywhere Whack a Mole”).
  • Use a no fee 2% cash back card for all purchases where 5% cash back isn’t available, and sometimes get more than 2% value from it.
  • When traveling, fly economy class because it almost always costs less in terms of cash or miles.
  • When staying in hotels, use points you already have, or use services like Priceline (and learn how to hack them) to get the best prices.  Stay in cheap hotels that offer free breakfast and internet.  Or, stay in a cheap B&B.  Or, go couchsurfing
  • Never chase elite status.  With airlines, chasing status usually means forgoing cheaper flight alternatives.  With hotels, the primary benefits of elite status (free breakfast and free internet) can be had by simply staying at cheaper hotels that offer those for free anyway.

 

Motivation matters

Personally, the idea of making money or saving money through travel hacking techniques is not a big motivator for me.  Making money is what my job is for (OK, yes, given that I’m a full time blogger it’s hard to distinguish my job from my hobby so just pretend I’m a dentist or something for the sake of argument).  Truthfully, if this hobby was simply about earning more money, I probably wouldn’t bother with it.  Its not rational, but its true.

So, if my motivation isn’t money, what is it?  I think there are four things that drive my behavior:

  • The joy of free
  • Luxury travel
  • Elite envy
  • “Because I can”

Let me explain each:

The joy of free

I first introduced this term in the post “Impossible point valuations and the joy of free.”  In that post, I explained the idea as follows:

When you book travel using miles & points, it may feel like your trip is free (or nearly free), regardless of how many miles and points you spend.  If so, the pleasure you get from spending points and miles may greatly outweigh the pleasure you’d get from paying for the same trip with cash.  In this case, miles & points are arguably (and ironically) worth more to you because you do not value them like cash.

Some people find it painful to part with their cash, but easy to part with their points and miles.  And, so, vacations booked with points are more enjoyable.  For better or worse, I’m one of those people.  Rationally, it doesn’t always make sense.  For example, lets say I spend $20,000 over time and earn 2 points per dollar instead of 5% cash back.  I would now have 40,000 points to spend.  Then, let’s say I book a hotel for two nights for 20,000 points per night.  I’m happy because the hotel was free.  However, had I gone for the 5% cash back instead, I would have earned $1,000 with my $20,000 spend.  I could have then booked the same hotel and paid cash, most likely at a substantially lower rate than $500 per day.  But, paying cash for that hotel would hurt more than paying points! 

Again, I’m fully aware that’s its not financially rational, but I get more joy from spending points than from spending cash, and so the points have more value to me than they should.  Paradoxically, the fact that I value points more should make me less eager to part them, and the joy of free should diminish.  Time will tell if that ever happens.  I don’t think I’m there yet.

Luxury travel

Last year, on short notice, I used airline miles to travel around the world in first class, just because I could.  For good or bad, I get a kick out of traveling in ultimate luxury.  I flew Lufthansa first class to Frankfort and spent time in their first class lounge before heading to Bangkok on Thai first class.  After spending time in Bangkok (in a suite, of course), I flew Thai first class to Hong Kong, then topped it all with an amazing flight in Singapore Suites class from Hong Kong to San Francisco.  Most people who do not collect points and miles would never dream of taking such a trip.  The fact is, after earning enough miles, trips like these are readily obtainable.  Now, my family and I have become used to traveling first or business class wherever we go.  Booking trips like these is not always rational, but it is fun. And, when on vacation, it makes the journey as much a part of the vacation as the destination itself. 

Below is a photo of my “bedroom” on the Singapore Suites flight.  Since the Suites class cabin wasn’t full, they made up my bed in a separate suite from my “living room”:

Since I brought it up, if you’re interested in reading about my Bangkok trip, please see the following posts.  If you just want to read one, I recommend “My dangerous decision.” It has nothing to do with miles and points, but many have told me that it was their favorite of my blog posts.

 

Elite envy and “because I can”

I can, and I have previously, made rational arguments for why it makes sense to seek high level airline or hotel elite status.  With Delta, for example, high level status makes my miles worth more: I have access to more saver level award space, and I can make free award changes.  When I see available award space, I can book it even if I’m not sure I’ll end up keeping that particular flight.  Or, I can book part of a trip and complete the rest later.  Similarly, high level hotel elite status frequently means free internet, and free breakfast or lounge access.  The savings from food alone can justify the expense of seeking status… 

Let me be honest here.  The paragraph above contains after-the-fact justifications.  The real reasons I seek elite status have nothing to do with savings or awards.  I think I can boil down my true motivations to “elite envy” and “because I can”:

Elite envy: Many years ago, I remember checking into a hotel around the same time as a colleague from work.  I was given my room key, but my colleague was given both his key and a welcome present in a bag.  I asked him what that was about, and he told me that he had elite status because of how much he travels.  This was, I think, the first I’d ever heard of hotel elite status.  And, I’ll admit it, I was envious.  I doubt that gift bag contained anything I valued, but darn it, I deserved one too! (note: envy is not a good quality. I’m not proud of this).  Later, the scene repeated itself at an airport when a colleague with elite status was upgraded to first class while I crammed into coach.  Again, envy reared its ugly head…

Because I can: Why seek elite status?  Because I can.  Thanks to my ugly elite envy, I’ve spent a lot of time learning tricks to fast track to elite status.  With Delta, I simply run up spend on credit cards (see, for example, “Mileage running, from home”).  With hotels, I’ve used credit cards and elite challenges:

  • Club Carlson: Simply owning a Club Carlson credit card is enough to keep Gold status with the chain.  See “Club Carlson rocks our world… Again.”
  • Hilton: Last year, I requested a status match from Marriott Platinum to Hilton Diamond.  Instead of a match, they offered me free Gold status for a year and half, and a Diamond challenge.  Since Hilton Diamond status is not much better than Gold, I simply accepted the free Gold status.  When status runs out I’ll consider signing up for one of the credit cards that offer automatic Gold status.
  • Hyatt: I recently completed Hyatt’s Diamond Trial that requires 12 paid nights in a 60 day period.  See “Chasing Diamond Success!
  • IHG: Simply being an IHG Visa cardholder gives me top tier Platinum status.
  • Marriott: A couple of years ago, I signed up for Marriott’s Taste of Platinum challenge.  I completed 9 stays in 3+ months in order to secure Platinum status for about a year and half.  More recently, I was able to keep my Platinum status by paying Marriott 40K points from my account.  Thanks to the United/Marriott partnership (RewardsPlus), this also gives me United Silver status.
  • Starwood: Currently, I have SPG Gold status thanks to my Amex Platinum card.  I’d really like to get Platinum status at some point, but my travel patterns haven’t yet resulted in enough SPG stays to make this practical.  A shortcut is to signup for both the business and personal SPG credit cards since each offer 5 nights and 2 stays towards elite status, but even then I’d be far from Platinum.  Platinum requires 25 stays or 50 nights.  And, unfortunately, their Platinum challenge requires a whopping 18 paid nights in 90 days.  It looks like SPG Platinum is not in the cards for me anytime soon.

 

Wrap up

Sure, the rational thing to do for most people is to save and earn money.  But, we all do things that are not purely rational from a fiscal point of view.  In this post, I’ve come clean regarding my own behavior.  No, its not fiscally rational, but I enjoy it, so its rational in another way.  Think about what motivates you, and try to be honest with yourself.  If you’re experiencing difficult financial times, then try to forgo the desires that lead to spending more money (and collecting less money).  But, if your finances are sound, maybe its OK to follow your heart even if your wallet complains.

About Greg The Frequent Miler

Greg is the owner, founder, and primary author of the Frequent Miler. He earns millions of points and miles each year, mostly without flying, and dedicates this blog to teaching others how to do the same.

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Comments

  1. Using the Club Carlson Visa card for everyday spend is way better than 2% cash back (for example, you can get 2 nights free in excellent London hotels for $10,000 in cc spend – a redemption that is worth way more than $200). Even without the “last night free on award stays”, cc usually offers a better return than cash back.

    SPG card everyday spend is also marginally better than 2% cash back (various blogs value SPG points at 2.2-2.5 cents each. I’ve found I can often use points at Cat 5 hotels in expensive cities to save a lot of money on hotel stays).

  2. Hi my name is Dan and I have a points collecting versus cash back addiction.
    I know I can do better on paper or with Capital One (thanks Alec Baldwin)but I really, really, really like airline miles and hotel points. I’m not as active as I could be but I have still managed to collect about 200k AA miles, 400k US Air miles, 400k IHG points plus a moderate 10k to 40k in about 2 dozen other programs in the last year or so. Heck US air even gave me Silver status for last year and I only flew maybe one short revenue flight with them. I enjoy the free luxury travel. I like that I have been able to spoil my wife and teenage son with first class trips. I kinda feel like Ryan Bingham lately as I’ve been too busy to book any leisure trips so I keep collecting miles. As a trade off I’m guessing that if I was able to get 5% cashback instead this last year or so I would have $5k to $20k in cash but I wouldn’t have the points and I would not have already traveled to Europe in 2013 in F, have airline tickets and hotel booked for a cruise out of Miami in September or first class tickets to Paris in early 2015, or free hotel nights for my son to attend an event at road Atlanta this week, or or or.

  3. Thanks for linking to my CouchSurfing post. Have you had a chance to CouchSurf yet, Frequent Miler?

    I just hosted someone for four days this week. It was a ton of fun and made me get out of the house and explore my own island. I took her to my favorite cliff jumping spot and finally tried pho for the first time.

    It’s even more fun when you’re traveling and get to stay in a local’s part of town, eat at locals’ restaurants, drink at locals’ bars, and make new friends with similar interests (you’re both crazy enough to CouchSurf.) Plus, of course, CouchSurfing is free.

  4. I love this post and this concept. If I really put a dollar value on the perks of elite hotel status, or business class over economy class, luxury would lose out almost all the time. But by using points, I can trick myself and my family into paying for those things anyway… and adding an immense amount of enjoyment to a trip… or equally importantly, remove an immense amount of inconvenience, in the case of business over coach.
    Points also allow us to do things we wouldn’t do with dollars. We would never take a 3 day trip to Paris using dollars, because we would fly coach and be too jet lagged to enjoy a trip that short. But if we can use points to fly somewhere in business class, we can arrive rested and enjoy a place for just a couple of days. It’s hard for me to put a dollar value on that.

  5. Research from Colloquy April 2014, Fears for Tiers, indicates men more than women desire higher elite status in loyalty programs simply for bragging rights.

    “With regard to gender differences, hard benefits like monetary or cash rewards are more likely to motivate women than men, and the positive feeling of a high member status is stronger for men than it is women.”

  6. Because my 5x Citi Thank You card is ending, I am currently transitioning from a manufactured spending regimen where I earn gift cards to one in which I earn 5x in cash. Even though taking the money in cash is so much better than taking it in gift cards (flexibility, plus I can earn more rewards on the spending that would have been paid by gift cards), I don’t like it. I like the gift cards! It’s so much more fun, and more satisfying, that a cash statement credit. Completely irrational. But it makes perfect sense (I think).

    • I know what you mean. I think its part of the genius of gift cards. Even though they make terrible economic sense (except when bought at a discount or for miles), gift cards can mean more to the gift recipient than cash for the reasons you said. “the joy of free”

  7. Human beings are not rational creatures…

    That’s the first flaw of treating social sciences such as Economics as an exact science…

  8. Wow. Just when I CXthink this blog can’t get better it does.

    As I’ve said l before:

    There are many travel having blogs, then there is the frequent miler.

    Thanks Greg.

  9. I guess it would matter how much time vs how much money you are making. For some that I know it is a job. My guess is that the people who get upset about deals dying are the ones that are trying to do this financially and for those who are just doing this a little hobby it’s not a big deal. Perspective is everything.

  10. Excellent post. Asking readers to travel in economy class was the best that i liked. I think people get too carried away by bloggers constantly suggesting only about business and first class flying and everyone has to work double or triple hard to get those points. If readers could least bother about where they sit that too for short haul flights, i think they can maximise their savings and also get more number of free flights. You also drove the point about elite status pretty well. I really wonder why people just keep spending and do mileage runs ruining the fun of travel, sleeping at airports etc just to get that so called status to get additional food, space or whatever they are excited about and also spend more in just one airline where they could save money flying another airline. To me all that matters in miles is the additional free flights i get and if it is economy, i am fine with it. I use this to travel to visit my family every weekend. That is what matters to me most – to be with my family at the least possible cost. If i have to pay, i will rather go for the best fare and charge it to my barclays or amex prg card. I just dont care about status or anything else. Kudos for bringing these points up.

    • And one thing that i forgot to mention above is about my strategy of using cash back cards to ensure that i earn enough on them to meet the expenses that i incur on spending to earn miles. I will keep using barclays to generate as much as i can in cash back to cover the cost i incur on generating points through my other cards – that way, i dont spend anything out of my pocket to earn those miles.

  11. I think your rational argument about being irrational is very rational………….And I will continue to believe that the “most” rational way to approach points and miles is to aspire to luxury usage where the multipliers trounce cash back………And thanks for the great post! What I am embarassed to talk with you about is the purchase method I just made on some item….this is a conversation my wife often have about portals and processes and I frequently have some Homer Simpson moments……..

      • @FM Sorry for the confusion….it is one specific purchase it is “everything” we buy………you live virtually “rent free” in our office so that EVERY time we go to make a purchase we muse “Hmmmmmmm. What would Greg do” Actually that would make a great bumper sticker I think…………We’re so unworthy………

  12. Great post. If I can get my husband to read it, maybe he’ll understand it all better. He likes the free flights and hotel rooms but status, suites, lounge access and upgrades matter little to him. He grumpily follows me to find an airport lounge to keep the peace and I doubt he’d bother on his own. But when I get us into a hotel lounge, he is happy for the perks and will sometimes find his way back without me. Still, I think you do a great job explaining the odd mindset of points and miles junkies. Thanks!

  13. I agree with this point addiction, but the slew of devaluation finally woke me up and slapped me hard on the face. Now, most of my spends go on Barclay Arrival…I actually ENJOY dining out and using spa service at the hotel and not having to worry about paying for those services…
    These ancillary costs REALLY do add up, even if you got a “free room” per se.
    I still do accumulate UR and SPG points, but not with as much fervor as before.

    devaluation…
    devaluation…
    devaluation…
    devaluation…

    On the extreme side of this coin, there are those who accumulate and do NOT SPEND the points…they just get giddy with having large point stash…

    devaluation…
    devaluation…
    devaluation…
    devaluation…

  14. Sorry for the typos earlier; traveling today for business and had to board a plane.

    Last comment hit it on the head and one thing I love about Ben’s blog is he stresses earn and burn if you are in the point/mile game…..

  15. Another great post that mimic’s my feelings. You have mentioned before that you like to make the journey a memorable part of the experience and that’s exactly how my wife and I feel. We get as much a thrill flying first class and staying in luxury hotel rooms as we do from the destination. I know that isn’t how everyone feels – and to each his own! The FACT is that if I had the cash I wouldn’t feel free to use it in the same way and thus I would never have and enjoy these experiences. I come from very humble beginnings and never even could have dreamed of traveling the way I do in the style I do. You have played a MAJOR role in that via the brilliant information you have shared – so again – Thank You!

  16. Great summary of how many of us feel! ☺
    I especially sympathize about splurging without guilt on points, while being generally thrifty with cash.

  17. Not sure if I am over-rational or irrational at all… When booking a flight or a hotel room, instead of using my super abundant miles/points, i use cash quite a lot when I decide the miles/points would worth more than paying with cash.

  18. Great post. One of you bloggers finally needed to admit a lot of this stuff. So many times I’ve read through lists of perks for elite members. Then I’ll read the list again trying to,figure out why the hell anyone cares. Occasionally there will be a perk that seems valuable, but then I look at the effort for obtaining that elite loyalty level…

    Plus part of it is I don’t travel as much as a lot of points and miles junkies. If traveling were more of a lifestyle for me, the elite perks and effort required to get there would probably seem a more natural part of the whole thing to me.

    • @levender If you redeem for premium ticket then the perks of status will come with the ticket……..chasing premium status rarely pays for the casual flyer……..it’s a mirage….you win when you don’t pay fees and your miles are free………

  19. A fantastic post. I’ve often struggled with similar decisions, in which apparently rational choices do not always win out, e.g., things I pay a monthly fee for so that I don’t even need to worry about them (even if the individual use costs would be lower).

  20. I am not an especially envious person. I find a lot of joy in developing relationships with brands I value and being incidentally rewarded with miles that I get from enjoying the great service i get from companies I value working with. I specifically won’t be staying with Hyatt for a LONG time to come and cancelled my card that connected me to them since it’s what set in motion the problem I had with them. But I am excited to learn of deal from you, rather than hearing about them by accident from someone else. I don’t spend miles or money easily, especially nowadays. But I got 4 nights in Paris free with Marriott. FABULOUS service. Made my whole trip.

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