free stuff for rich people
1
I just asked our vendors--we have multiple vendors, for systems, engineering, etc.--to accept credit card payment, and they all refused. Even when I suggested they'd get paid faster. Anyone know, other than the bother of setting up credit card payments, what the objection on the vendor side might be?
2
Vendors pay a percentage to the credit card companies, which,, of course, lowers their profit. That's why gas stations will post one price for cash and another, higher price for credit.
2
$40k in spending turned into 250k in miles?
The whole article should have been about that.
P.S. I don’t know any contractors that take a credit card.
7
Since we retired to our house on the shore of Lake Michigan we tend to spend a few winter months in a warmer climate. Don't overlook the bonus discounts that come with changing your post address, even for a few months. We did a small but nice bath with a 10% coupon for Lowes that came with the USPS change of address material.
1
I find my life to be stressful enough that I don't want to have a second career managing points, miles and rewards. I'll just pay for what I get and spend my free time enjoying living in a place that I enjoy. Isn't that the point of renovating your home? To make it a space you enjoy and want to be in?
12
Don't forget to cancel the cards after you've cashed in the miles.
3
Interesting. I am looking at paying $10-15K to remove a septic system and do a lateral attach to sewers. Hope the local septic services take the travel cards but I doubt it. Not quite as sexy as those renovations.
1
This is one of the worst personal finance articles I have ever seen. People who use this strategy will INEVITABLY spend more than those who pay by check. Don’t get a
Kitchen renovation mixed up with a trip to Tahiti. Pay for each separately. This is probably why they spent 70k on a 50k renovation. Chase, Bank of America and their like know a lot more than Michelle Higgins around the psychology of spending. Credit Cards offer some great benefits, but putting a project like this on a credit card leads people to fall into the credit card trap.
4
If you have 150k to renovate your house, in Hawaii and also rent it out on Airbnb, why do you need to do all the work for these so called 'free' trips. Americans are real suckers for so called 'free' items; as the comments below point out. Rather than doing business class air travel and expensive hotels, spend some time finding cheaper flights, cheaper lodging and eating. The vacation will be better. Remember, when the plane lands, everyone gets off, even the economy class.
5
What a ridiculous article. One could just as easily charge renovations to a cash back rewards card (some of which are now offering 2-3% cash back on purchases), and use that money for absolutely anything, like paying towards a kid's college education or donating to a charity or even travelling. No need to fuss with travel rewards cards.
5
Another benefit to charging renovations on your card is the ability to dispute charges if things go south.
1
Southwest is the easiest to use and most straight forward. American Express is the hardest to cash in for flights. Don't fall for American Express premium card promise of a free ticket companion ticket, the price for the initial ticket is almost equal to two tickets. Total rip off.
3
The more cards you open, the more it affects your credit rating. It can also be really hard to make it pay to use miles. For instance, from the west coast to Europe on flyer miles often carries so many fees as to make it barely worth it, especially when many of the available flights make more than 2 stops. It can work, but you have to be lucky.
3
We have just finished a renovation of our kitchen, bathroom and more. The initial plan was about $70k but I finally paid some $100k. Well, our case seems usual, the final payment can be as much as double in many cases. Their tactics are quite clever; they talk to my wife for several additional plans which for sure make things look better and cost them almost nothing (and women often say yes...). The real cost for a house renovation has been one of the most mysterious things in my life. Also similarly mysterious is the millage that can be used only for flights only when available. Anything can happen if these two mysterious things are combined...
10
Putting renovations on a credit card means that the contractor takes a haircut and effectively pays at least part of the vacation. My sense is that shorting a contractor doesn't work out. They know all to well how to recover profit in the quality of the components and work they put into your house.
Also, one more reason not to buy a flip house.
9
So we all switched towards credit cards, and somehow everything got 1-3% more expensive to cover the card processing fees, and we didn't notice.
Now the card companies are offering back sometimes more than the processing fees they charge (c.f. Amazon Prime Visa 5% back), and those with sufficient economic status get to reap all the rewards. Sombody pays for all this - you need to ask who.
I don't know if anybody ever sat down and deliberately planned it this way, but it's hard to imagine a more perfect scheme to transfer more wealth to the already wealthy without anyone protesting.
56
Paul, Bravo.
I have felt this way for years -- that those of us who can reap the benefits of double or triple miles on credit card purchases do so at the expense of those carrying month-to-month charges with excessive interest rates.
I have resisted these perks because of the basic unfairness, that lower income folks should pay for the life style of those who already have entitled access to so much.
22
It is my understanding that merchants bear at least some of the brunt of these cash back schemes for credit card companies through higher interchange fees when reward cards are used. This hurts small businesses the most. As a small business owner, I can’t help but wince when customers celebrate their cash back or reward cards when they check out. And the often make a point to announce how many miles or points they’ll get for some reason. Small business owners also have less flexibility to increase costs to cover these fees. Competition is fierce in the small retail market. Of course, our business uses reward cards too to help our bottom line, but we pay by cash or check if we are dealing with other small businesses.
15
And don't forget business owners, who rack up zillions of miles/points on business expenses to get free travel--another benefit skewed toward the already-haves.
Sounds good, and that's what I tried to do with my VISA until I was told by the contractor, "We don't take credit cards, just cash or checks." Can you blame them ?
18
@Harry T: You should insist that the materials be separated out from the labor, which the contractor should not have a problem doing - unless he is marking up the materials which is so very common in the industry.
1
Same here. We worked with two contractors and both of them accepted only cash or checks.
1
I paid my contractor by check but bought all finish materials myself using a miles card.
Nothing in the article mentions the interest rates that these cards charge, as you get your points. A truly valid financial article would compare the two. Unless, of course, these are examples of people who are on the far end of the spectrum who can pay these charges off immediately. If so, this isn't an article that provides information for the general population.
13
Yes, you use the card for the rewards, but you have to pay off the charges to the card immediately to avoid getting hit with interest payments. If you already have the money put aside for the renovation, this isn't a big deal.
9
You need much flexibility .. especially using the Avios from BA. That's not to say you can't get something out of the plans. We used around 200k in Avios points (plus companion voucher) to fly in business to Kenya from NYC on BA last year .... the taxes and fees were close to the cost of a typical economy ticket. They kill you flying through Heathrow. Ireland and Berlin are how we will use in the future.
I'm building a new house ... so why not try and capture some of it. Opening a few new cards actually made the accounting easier and most give 50-80k in free miles for 4-5k in purchases. w/o the bonus ... I think the 2% cash back cards may be just as good long term. All the airline cards have annual fees -- after the first free year ........before you know it two years have gone by and those point now cost another $200.
4
How about an article discussing the ripoff that is mileage points.
The airlines purposely block out most desirable travel dates.
31
I have rental properties in Texas and charge every cent on renovations and repairs on charge cards racking up points. Went to Sicily last year Business Class, England the year before, also Business Class, Maui in August, first class and still have over 300k in miles.
I live in Austin where the rent is obscene. Hope your tenants are managing vacations.
13
We just finished a $75,000 home renovation. Just reading this article now. What a great idea! Any advice on treating profound regret?
15
Truly vomiting. The more people charge on credit cards to reap their precious points, the more expensive everything is going to get. The system is entirely out of control.
32
I hope the Clarks et al are aware of the fact that these "rewards" are taxable, and should be reported as income on Form 1040, Line 21. If not, I hope someone at the IRS has read this article.
14
Depends on how you receive them. Some are counted while others are not. Banks are required to send 1099's to people if they are over a certain amount too.
3
Credit card and frequent flier awards are not typically taxable. If you have to spend money to get reward points, this is considered a rebate. Sign up bonuses attached to a spending minimum fall into this category of rebates. Check with your bank. IF you do get a 1099 from your bank due to a sign up perk, don’t ignore it.
BTW this form of accumulating points by charging large purchases on a CC carries incredible risk and is not a good idea.
6
I want to get points so I can convert it to Bitcoin that I can convert to the folding green stuff so I can use that to buy some high end counter tops.
27
Congratulations to the everyone in the article. My experience has been a bit different. Racking up points with credit cards is pretty easy. Cashing them in is another story entirely. While I may have enough frequent flier miles for a round-trip business class ticket to Asia, finding availability at the lowest rates is generally impossible.
43
Allen,
This is exactly where a service like JuicyMiles can be invaluable. With a staff of travel professionals you can leverage their expertise to get you those award seats that are not easily found by the typical consumer/flyer. They know the tricks and secrets to finding the best redemptions. You are engaging a professional who does this every day; just as you would choose a surgeon to a medical procedure you needed rather than 'do it yourself.' They have a 'no-risk' guarantee if they do not find anything for you. Worth the effort.
4
I drive between homes in two U.S. states and use my frequent flyer miles for free hotel rooms. Some of the places I've stayed have been amazing.
I paid for all the tile, countertops, cabinets, etc. with a rewards card and the points paid for the fridge, the dishwasher and some of the stove. The rewards cards are definitely worth the hassle of sorting out all the rules if you're embarking on a major spend like a kitchen or bathroom renovation.
12
I dunno. I'm of the mind that getting cash back on credit purchases is probably the best "deal". There's a reason they try to distract you from doing so with all the other "offers".
21
I sort of admire people with the stamina to research and complete these complicated deals, but it all seems like more than enough work to justify paying the penalty in foregone benefits of not doing it!
22