I did not participate in the "What's in Your Wallet" theme that went on a few weeks ago. I'm going to review each item in my wallet one at a time, beginning with my go-to card, the American Express Hilton Honors Card.
The details: No annual fee. I don't know what the interest rate is, as I don't carry a balance. 20 day grace period. The statement closes at the end of the month and the payment is typically due on the 20th. As I get paid on the 1st and 15th, this gives me two paychecks to ensure liquidity in the event of any large purchases. I have heard about how much protection and service American Express gives above most other cards. Frankly, I have never used, or feel that I have needed to use any of that. The rewards: 3 Hilton Honors points for each dollar spent on the card, and 5 points per dollar spent at Grocery, Gas and Drugstores.
Why this card, and why these rewards? My girlfriend and I like to travel. In fact, I would say that it is our budgeting vice. We don't buy expensive clothes. We don't go out to expensive dinners, except for the rare special occasion. We don't spend lavishly on things we don't need. We're fairly conservative in our spending. But we like to travel. In the last few years we have taken at least one major trip each year. Cancuun in 2003, Japan in 2004, Maui in 2005. In between there we have taken numerous trips to Vegas, Portland and San Diego. We are able to do those trips very inexpensively by staying with friends, or otherwise getting really good deals. We also went to Chicago last year, and used my Hilton Honors points for that trip. So, if we have one budget buster, it's typically the big trips. We easily spend a couple grand each on these bigger trips.
Our next major trip will possibly be our honeymoon, and we have discussed going to Europe, specifically Italy, Spain and France. There is no way to fully do this on the cheap, without making sacrifices we are not willing to make on our honeymoon. However, I have figured out that I can save a bundle if we use my Hilton Honors points for a significant portion of the lodging.
The question about rewards cards generally comes down to, what is the percent return per dollar spent? In other words, if I spend 100 dollards, how much value to I receive in return? $1 cash back? $2 in movie rentals? $5 in gas? Generally, 1% is not difficult to achieve, so should be considered the minimum.
The hotel that I have my eye on for our stay in Rome is the Rome Cavalieri Hilton Hotel. Take a look at the pictures of the accomodations, amenities, etc. It looks absolutely stunning. I priced out a six night stay in October. Based on the current exchange rate of Euros to Dollars the rate is $536/night. Good Lord!!! Well, thanks to the magic of Hilton Honors Points, I can get that same six night stay for 240,000 points.
Now lets do some simple math. $536/night for six nights = $3,216. In order to obtain 240,000 points, I have to spend $80,000, assuming none of that is at gas, groceries or drugstores. At that rate, a reward of $3,216 for $80,000 spending is a 4.02% reward. Pretty dang nice.
The trick is that you have to be smart about how you use the points. I don't think we fully utilized our points when we staying in Chicago. We stayed at the also stunning Hilton Chicago. The room rates are $374/night for a weekend stay in May, and "costs" 35,000 points per night. So, I need to spend $11,666 for 35,000 points, and receive a room valued at $374. That's a reward of 3.205% Still good, but not as nice.
This card is not for everyone. First of all, you have to be a traveler who like to stay at nice places. My girlfriend and I like the nice amenities that the upper end hotels have to offer. Second, you have to spend a fairly significant amount on your card. I have a job that allows me to put a number of meals on my personal card, and expense full reimbursement. My average monthly balance is about $2000. At that rate, I'll accumulate enough for Rome in 3 years and four months. Fortunately, I also obtain miles through MyPoints.com, and e-rewards, as well as occasional stays at Hilton Garden Hotels, or Hampton Inns while traveling for work. Again, if your average monthly balance is more like $500, it'll probably take too long to accumulate enough points to make it worthwhile.
Most importantly, if you do not pay your balance in full, no amount of rewards or points will make up for the exorbitant amount of interest that you will likely be paying.