There are 17 hotel credit cards found on our best offers page. After completing the minimum spending requirements to earn the welcome offer, there is little reason to spend a dime on the vast majority of them. Cash back is quickly becoming a larger and larger part of my miles-and-points strategy, and not just for cash: you can earn more hotel points per dollar spent with a cash back credit card in most instances.
Marriott motivates the post
The latest (but far from only) example as to why it doesn’t make sense to spend money on a hotel credit card is the sale we reported yesterday from Marriott Bonvoy: through October 18th, you can buy Marriott points for just 0.875c per point as long as you buy 2,000 points or more.
Throwing redemption value out the window for a moment, that means that unbonused spend on any of the various Marriott Bonvoy credit cards is earning a maximum of 1.75c per dollar in value (since those 2 point can be purchased via this sale for 1.75 cents). You would be better off using a 2% cash back card. Here’s an example:
- Spend $43,750 on a 2% cash back card, earn $875 back
- Use $875 to buy 100K in Marriott Bonvoy points
- Net return on spend = 2.29 Marriott Bonvoy points per dollar spent
- Spend $43,750 on a Marriott Bonvoy credit card (on unbonused purchases), earn 2x points (87,500 points)
- Net return on spend = 2 Marriott Bonvoy points per dollar spent
In short, you would be able to accumulate more Marriott points with your cash back card than you would by spending the same amount of money on a Marriott credit card. Keep in mind that the above numbers are for easy math: this particular sale starts at buying 2,000 points for $17.50, so you’re better off with cash back even if you’re not going to buy the full 100K in Marriott points (and that’s without considering the fact that your cash is more flexible than Marriott points). Assuming you take the cash as a check and then use your credit card to purchase the points, you’ll furthermore earn 2% back when buying the points ($17.50 on $875) — enough cash back to potentially buy 2,000 more points.
But there’s a cap on purchased points
One argument you may have as to why the cash back strategy isn’t always better is that Marriott has an annual cap on purchased points. They ordinarily cap you out at 50K points purchased annually. With this sale, they have lifted the annual max to 100K purchased points. That might seem like a limiting factor if you’re planning a couple of big redemptions.
However, keep in mind that Marriott allows any member to transfer up to 100K points per year to any other Marriott member (note that there is no requirement to live at the same billing address — you can literally transfer to anyone whose Marriott Bonvoy account has been open and in good standing for at least 60 days). See our Marriott Bonvoy Complete Guide for more.
Furthermore, an individual can receive up to 500K points per year from other members. In other words, you could buy 100K and have 5 family members buy 100K each and pool all of the points in one person’s account for a total of 600K Marriott points via this promotion. I’m not recommending anyone actually do that; the point here is just that the true cap is a lot higher than it looks. Chances are good that you can buy at least as many Marriott points as you would have ever considered earning via spend on a Marriott credit card (for the record, 600K Marriott points would require $262,500 in spend at 2% back versus $300,000 in spend on a Marriott credit card).
Effectively, the cap isn’t much of a cap.
Doing better than 2% back
Of course, there are a number of ways to earn more than 2% back on purchases that don’t spark a category bonus:
- The Discover IT Miles card earns an effective 3% back in the first year thanks to Discover’s cash back match program
- The Alliant Cashback Visa earns 3% back the first year and 2.5% back in subsequent years (though the annual fee has increased to $99, waived the first year)
- The Bank of America Premium Rewards card with Platinum Honors (note: requires $100K in cash/investments with BOA/Merrill Lynch) earns 2.62% back everywhere ongoing
Those aren’t the only options to earn better than 2%, but they represent the best uncapped options.
If you were to earn at least 2.62% back everywhere, you’d be earning an effective three Marriott points per dollar if you used that cash back to buy Marriott points during this sale.
- Spend $33,333 at 2.62% cash back, earn $875 cash back
- Use $875 to buy 100K Marriott points
- Net return on spend = 3 Marriott Bonvoy points per dollar
Your net return on spend is 3 Marriott points per dollar: roughly equal to the return on the old SPG card. Many have pined for the days of using that card to generate Marriott points quickly; in my opinion, the BOA Premium Rewards card is even more appealing than the old SPG card since it is accepted in places where you won’t earn points with Amex. Of course, earning 2.62% back everywhere requires you to be able to park $100K in assets with Bank of America / Merrill Lynch. That won’t apply to everyone.
However, if you can instead score 3% back via the Discover IT MIles or Alliant Cashback cards, you’ll need even less spend to generate the cash back for 100K Marriott points.
- Spend $29,166 at 3% back, earn $875 cash back
- Use $875 to buy 100K Marriott points
- Net return on spend = 3.43 Marriott Bonvoy points per dollar
That’s a solid return that far out-earns the Marriott credit cards for unbonused spend.
The same is true with Choice, Hilton, and IHG
Point sales come and go with all of the major chains. Here are comparisons with each of them:
Through 11:59pm tonight (that’s September 17, 2019), you can get 30% off on the purchase of Choice Privileges points when you buy 5,000 points or more. That means you can buy points for just 0.77c per point. The Choice Privileges Visa Signature card earns 2x everywhere, but you’ll earn more with a cash back card:
- At 2% cash back, earn an effective 2.59 Choice Privileges points per dollar
- At 2.62% cash back, earn an effective 3.4 Choice Privileges points per dollar
- At 3% cash back, earn an effective 3.9 Choice Privileges points per dollar
Through October 22nd, you can buy Hilton points with a 100% bonus when you buy 10K points or more, which brings the cost down to 0.5c each. The base (unbonused) earn rate on the various Hilton credit cards is 3x. Using a cash back credit card:
- At 2% cash back, earn an effective 4 Hilton Honors points per dollar
- At 2.62% cash back, earn an effective 5.24 Hilton Honors points per dollar
- At 3% cash back, earn an effective 6 Hilton Honors points per dollar
As you can see, the return with cash back can equal many of the category bonuses on the Hilton credit cards in terms of the number of net points earned per dollar if you can take advantage of a sale like the current one.
Until September 24th, 2019, you can buy IHG Rewards Club points with a 100% bonus when you buy 7K or more, which brings the cost down to 0.5c each. The base (unbonused) return on the IHG Rewards Premier credit card is 1x. Using a cash back credit card:
- At 2% cash back, earn an effective 4 IHG Rewards points per dollar
- At 2.62% cash back, earn an effective 5.24 IHG Rewards points per dollar
- At 3% cash back, earn an effective 6 IHG Rewards points per dollar
Note that you might do even better. We recently reported on a (now dead) opportunity to buy IHG points for just 0.384 cents per point. If an opportunity like that returns, using a cash back credit card:
- At 2% cash back, earn an effective 5.2 IHG Rewards points per dollar
- At 2.62% cash back, earn an effective 6.8 IHG Rewards points per dollar
- At 3% cash back, earn an effective 7.8 IHG Rewards points per dollar.
The above assumes you buy at the right time
The other key argument against the logic above is that my numbers assume you buy at the perfect time: when points are on sale. It’s true: I am making the assumption that you buy when points are on sale, both because that’s the smart way to play this and because hotel point sales are so frequent.
Furthermore, unlike airline mile sales, which often require you to purchase large sums of miles in order to get the best value, hotel point sales often allow for the headline rate even on relatively small purchases. In fact, while writing this post, I bought 6,000 Choice Privileges points just so I wouldn’t repeat this mistake again.
Additionally, I’d argue that earning cash back instead of hotel points gives you the flexibility to be free to buy hotel points in all of the above programs with spend on a single credit card, which adds value in the ability to cherry pick redemptions / good sale prices for points. You can diversify your hotel point collection with a single credit card.
What about big spend bonuses?
One thing completely ignored in the above analysis is the benefit of big spend bonuses. Many hotel credit cards offer some sort of free night certificate based on big spend. If you know you are going to reach a valuable big spend bonus on a particular hotel credit card, it may be worth spending on that card (particularly in bonus categories).
Particularly, one credit card thus far ignored by this post (but which you should not ignore) is the World of Hyatt credit card. This is the one hotel credit card on the market that I’d argue is worth using for unbonused spend specifically for its big spend bonuses. This card earns 2 elite qualifying nights with each $5K in spend on the card. Additionally, you’ll earn a free Category 1-4 night after spending $15K in your cardmember year. In other words, $15K spend on this card will earn you 15,000 World of Hyatt points (at 1x), 6 elite qualifying nights, and 1 free Category 1-4 nights. I think that’s worth more than the alternative $450 you could earn at 3% on $15K spend.
Free night certificates earned on the Hilton or Radisson cards can also be worth it in the right circumstances. Keep in mind though that with the right cash back cards, you can earn as much as 5% back in many different categories (like 5% back at the Grocery store or 5.25% back on gas), which would create even more points per dollar spent.
Take the Hilton Honors American Express Surpass card for example. That card earns 6x at US Supermarkets and earns a free weekend night certificate after spending $15,000 dollars in a calendar year. If you spent the entire $15,000 at 6x, you would earn a free weekend night and 90,000 Hilton Honors points. If you instead put $15,000 in spend on a card that earns 5% cash back at those same stores, you would earn $750 — enough to buy 150,000 Hilton Honors points in the current sale. Whether you would rather have a free weekend night certificate and 90K points or 150K points is a matter of personal preference. I could make arguments either way: my point here is that it’s not a clear-cut decision even when cherry picking a good category bonus and big spend bonus.
I love miles and points. This year alone, I’ve redeemed north of 1 million hotel points. Many (likely more than half) of those points were earned via credit card welcome bonuses. Another chunk were earned through MS. A growing number are being purchased with cash thanks to carrying cash back credit cards to complement miles and points. Those cash back credit cards earn an effective return that out-shines traditional hotel credit cards and adds the flexibility to be a free agent in terms of which chain’s points I’d like to purchase when the time is right. With a number of point sales currently on, the time may be now to put cash back to use via hotel points – though if you’re not in the market for a hotel stay right now, it may be wiser to hold your cash back to maintain ultimate flexibility. Either way, it’s worth collecting cash back for your hotel stays.