When getting there, sometimes, cash is king!
We at Average Joe Arbitrage are all about finding value where others do not. We chase our point bonuses, or airline miles, and our secret shopping. All, so that we can take those amazing trips and live a life more rewarded! But, in the thrill of the hunt, lets us not forget, that sometimes, cash is king. Let’s pretend we are going to Copenhagen:
Competition Unleashed – The best advantage to the Average Joes is competition among service providers. Who is willing to go to the lowest price and yet still offer good service? In our Average Joe world, we need to constantly be shopping around comparing prices, checking coupons, and searching for the best deal for the best experience. This is especially true among hotels, airlines, and restaurants. The three pillars of every great vacation!
Airlines – Flying domestically in the United States has become dominated among the big three; Delta, American and United. The deals are getting harder to find as the big three squeeze out competition and keep pricing fairly stable and elevated. However, flying internationally is a free for all as new and more aggressive carriers seek market share. This means, we Average Joes have a great opportunity for going to Europe paying cash as opposed to paying in points.
Comparison Shopping – We have to get out and broaden our horizons and take advantage of the foreign competition that is struggling to break into the American market place and compete against the big three. For example, using a launch date of about June 27th, I compared three airlines flying to our dream trip of Copenhagen:
Delta – Chicago to Copenhagen, coach 62,500.00 points; cash is a staggering $2,819.00.
WOW Air – Chicago to Copenhagen, $389.99. A basic coach flight.
Norwegian Air – Orlando to Copenhagen, $350.00. A basic coach flight. However, here we see the disadvantage of the new airlines as they are not in every market like a major airline like Delta.
Of course with WOW Air and Norwegian Air, they are offering those low costs as they are going to factor in some extra costs such as baggage. But, still the cash price difference between Delta and the other two is amazing!
Second element to consider is that the low cost European airlines are not in every market. In this example I was using Chicago as my base of flying, but Norwegian Air does not fly out of Chicago. Another issue to consider.
Points or Cash? In a previous article, I wrote about using cash to get from Hawaii to Minnesota. Sometimes, cash is king; I saw a great deal and decided to jump on it using cash and saving my points for later. Points are wonderful, but, how much costs have you incurred to accrue those points? If you are chasing a Delta bonus, 60,000 points for signing up for their credit card is pretty sweet. But, suppose you have already used that bonus? Now, you are having to manufactured spend to get another 62,500 points to get to our example city of Copenhagen. Manufactured spending has some costs associated with it that you will have to factor in.
The Costs of 62,500 Points – To achieve 62,500 Delta points, you would need to churn 125, $500.00 debit cards using Delta’s card that offers a 1% rebate on purchases in the form of miles. Each debit card you purchase will cost you $4.95 in service fees, plus about $0.79 in a money order in order to deposit that money order into your bank account, for a total costs of $5.74. You will spend $5.74 per transaction X 125 transactions = $717.50.
I of course am not factoring in your time and energy chasing these debit cards. You will need to consider those costs of doing business on your own terms and conditions.
This one of the reasons I am such an advocate of organic spending. Organic spending allows you to garner points through your natural spending habits; a few dinners out, gasoline, pay a few bills, etc.
Now, certainly, being a very smart Average Joe, you may use a card that is offering 2% back, or even a higher rate of return, which would lower your acquisition costs and change the dynamics of this equation. Different cards offer different rates of returns and some cards even offer rotating bonus periods allowing you to get a staggering 5% returns on occasion. The point is, you have to be smart about your manufactured spending.
But, for this example, you would very likely come out paying cash and taking the WOW Air flight.
I know there are people who swear about manufactured spending as the panacea of free flight, I just want everyone to consider and think through their options and to be willing to explore other options in order to chase down and have those amazing adventures!
As always, let me hear from you and tell me about your amazing adventures!
