Introduction
There were a couple of posts last week about MS’ing $40K on the AMEX Hilton Surpass to achieve Diamond status. I’m too lazy to find and link to them now, but Google is your friend. Anyway, I’ve been telling you guys how you shouldn’t MS on the AMEX Hilton Surpass at all, and that you should run all your grocery spend through AGC (this was before the removal of AGC, so this post may be irrelevant unless it comes back.) So I wanted to quantify the opportunity cost of running 40K grocery spend on your AMEX HH Surpass at 6X grocery so that you can get Hilton Diamond, which in theory should give you better upgrade rates than Gold. There is also some incremental lounge benefits, but for the most part, it’s the increased upgrade availability. You can read more about it here from Ben’s blog. This should help us give a hard dollar cost value of doing this, and then YOU can decide if you think Diamond is worth it or not. So let’s try to do that now.
Spending $40K AMEX HH Surpass 6X at Groceries
So let’s say you are purely MS’ing 40K a year at grocery and also not charging like $5K a year on ‘true’ groceries. That means you have bought about 79 x $505.95 gift cards. That also means you’ve spent $470.05 in fees (79 x $5.95) and netted 239,820 HH points. Now let’s try to value those 240K points so we can get down to just 1 variable (the dollar value). Wandering Aramean probably had the best method in calculating the point value at .43 cents. Before I even looked up that value, I would have guessed .40 cents. Okay, I know there are some of you out there that would just hold the points until you got at least .60 cents or even a full cent, but then you’re HH points would just be collecting dust and probably devalue on you anyway. So let’s use the .43 cents for this exercise. That means your 240,000 HH x .43 = $1032. If you now subtract the cost of $470, you get a total rake of $562 for this method.
Buying $40K of AGC with FIA and using at Grocery Store
Yes, I know you feel less guilty of swiping your Surpass at the grocery store instead of an AGC, but it’s time for you to do some social engineering to get over that barrier. So let’s run the math on an FIA AMEX and TCB at 2.25% if and when it comes back. That means you’d buy 20 x $2,003.95 AGCs. You would then still go and buy 79 VGC at the same grocery store. Here’s the full math:
- +$900 portal cashback ($40,000 * 2.25%)
- +$801.58 card cashback ($2003.95 * 20 * 2%)
- – $79 AGC fees (20 * $3.95)
- – $470.05 VGC fees (19 x $5.95)
- = +$1152.53
So in this scenario, you are now making $1152.53 cashback from your 40K of spend. This is where it gets a bit more complicated. So in scenario 1, we assumed you also spent the 240K HH points for free hotel stays. When you did that, you earned no additional HH points since you booked on points. In this scenario, we assume you paid the cash price for those stays and earned 12X HH on the Surpass (or maybe 10X on the Citi HH Reserve) plus additional 25% for being a GOLD member. So how do we calculate that? Well we can say that the cash price for 240K is the $1032. If you put that $1032 charge on your Surpass, you’d earn 15X on your spend (12X * 1.25) for a total earning of 15,480 HH points. Then if you value those points at .43cents, you’re earning an additional bonus of $66.56 (15,480 * 0.43). This brings our total net profit from this scenario to be $1,219.09.
Now I know you must be thinking, “Uhhh I thought you said NOT to get the Surpass.” I didn’t say that. I said you shouldn’t MS on it. You SHOULD get the Surpass or the Citi HH Reserve so you can get the Gold breakfast benefit. You should then only use it on HH charges.
Conclusion
Let’s recap on what you get with both options:
- HH Surpass option – after 40K of spend, you are out of pocket $470, but you have 240K HH points (worth $1,032) for a total net of +$562. You also now have DIAMOND status.
- AGC/FIA option – after 40K of spend, you have $1,219 worth of cashback and HH points rebates.
- The net difference between the 2 is $1219 – $562 = $667
Therefore, the true hard opportunity cost of Hilton Diamond is $667 per year. Now you just have to ask yourself if you think Diamond is worth that much or not. I only stay at Hilton maybe 3-5 stays a year, so to me, it’s not worth it (I’d rather have the cashback.) However, if you’re staying 10+, then it might make sense for you to MS on the Surpass to get Diamond. I hope all that made sense and my math isn’t off. This was longer than I expected and I hope I covered everything. If I missed something, let me know in the comments.
Don’t forget about the cost of a free shipping subscription for agc, but that hits both sides so it is moot at the net.
But more importantly if you buy agc with surpass, you’re really giving up 3xHH for 2.25%cb (assuming a portal return).
Thus your true cost of diamond is flawed. Your true OC is 2cents or 3HH points (minus foregone points) across the $40k. Using the accepted (though flawed because it doesn’t account for taxes) 0.43 value, you are at $516 minus forgone points valued at $33.28 = $482.72. That compares much less unfavorably to the $800 earned from a 2% cb card. All other costs/fees are equal.
Therefore I would conclude the true OC of diamond is $317.28. And if you account for the typically 15% hotel taxes as being covered by points as well, point values rise to 0.50 so the OC falls to $237.50.
The follow up question should now be how many stays until you break even by figuring out what actual value diamond has over gold (i.e. upgrade %, myway, extra 25% points, etc.).
I don’t know if I agree with the forgone 3HH for 2.25%cb since no one goes around saying their Arrival card is really 1.25% since they are giving up using a normal 1% cb card. I think they are substitutes and not really OC.
I will agree with your tax equation though since on my last trip, it increased my HH from 0.6c to 0.7c.
As for the upgrade %, extra 25%, etc, that’s up to every person to decide if they think that is worth the forgone cb of AGC + cb combo.
It’s not very fair to compaire “synthetic” gig – 2% cb + 2.25% AGC with “single” gig – 6x HH (equivalent of 2.5%cb if value 0.417)
All three here are quite independent.
If for example add EXTRA gig to HH 6x, like use another 2% cash back card, find some way to liquidate it for free (expired example, just to give idea: fee free Chase gift cards), and use GCs obtained by use of HH to somehow repay that 2% cb card.
Now that’s alternative “synthetic” gig – (HH 6x + 2% cb) or (2.5%HH cb + 2%cb). That is comparable.
Saying, that rather single earning thechniques should be compared against each other.
The problem with that logic is that you can’t add an extra gig to HH 6X. Buying those fee free Chase gift cards didn’t get you 6X HH. The only “add” is the 3X non-bonus spend 3HH + 2.25% AGC which only gets you to 3.45%, which is still below the Arrival/TCB route.
My problem with this is the assumption that the AGC will come back, and at the same rate. The last time they were pulled, they came back at a lower rate. It seems very unlikely that the portals will return with the same payout rate AND gift card max value. If they make the 2k cards eligible again, I’d expect a more modest payout rate, possibly 1.5% or less.
You’ve talked about killing leprechauns and unicorns, I am not sure there is much life left in this opportunity. We should be looking at things as if AGC MS is dead (which it currently is) and if it gets resurrected then it will truly be a miracle and maybe I’ll go to church. Until then, live in the present and focus on what we can do.
For me, it is a moot point. All the local grocery store MS options in my area have dried up and gas never existed. It isn’t worth it for me to forgo other points or cash back on non-bonused spend.
The problem is my blog is national, and so there will be different experiences for everyone. Like one commenter below, he says he can buy 6K in one go at a groc store, so it makes sense for him to MS on Surpass. Or if you have a redemption in mind that gets you 1cpm, then for sure, go to Surpass. But if you have no redemptions and just pondering if you should MS on Surpass for Diamond or go the AGC/FIA route, then this post is helpful.
I can tell you for a fact that AGC isn’t 100% dead right now. I can get 4% gross, which is close to the 4.25% I used to get with AGC/FIA. So for ME, I’d rather take that over Surpass to get Diamond and 240K points.
woah, even with the AGC/FIA route the gross was 3.25% (4.25-1% VGC fees) unless you were getting 4.25% gross on AGC/FIA also. anyways, how are you getting 4% gross now with the demise of AGC portals limiting payout?
eh, tricks up my sleeve BW?
I think travel plans are also a huge factor in these big MS commitments. If you are planning an Asian trip through Hong Kong, Seoul and Tokyo, then HH Diamond might be useful in guaranteeing lounge access. In fact any city with Conrads might make it worthwhile.
However, I think the value prop has changed drastically with the HH deval and since the $40K option was introduced, when previously 125K pts could get you 4 nts in almost any Hilton. So that 250K HH that got you Diamond also got you 8 nts. (That 4 nt AXON award now costs 300K HH.)
Correct. But even so, I don’t think I’ll forgo $667 for a ‘a chance’ for an upgrade at a Conrad. Now if I know I can also redeem those pts at say 1cpm, then it’d definitely be worth it then.
The FIA + AGC route looks better on paper, but it doesn’t play out that way in real life for me.
Another factor to consider is the ease of liquidating your AGC at the grocery store. I do about $5k per visit without problems with the HH. They check ID and card, etc. Doing that with AGC would probably get me stopped.
Saving time is another factor. I don’t always carry AGCs in my pocket, so I have to plan a visit with my AGCs. I always have my HH, so stopping in and not taking the extra time to plan a trip is hugely convenient. Also, in real life, my MS volume is higher with HH than AGC because I can do it spontaneously. I can make $0 because I don’t have AGCs on me, or I can make less optimal amounts using my HH. And that’s not counting the time spent ordering AGCs, making sure to tracks, etc.
You also have less float since you don’t have a ton of AGCs lying around. For some, that float can be used to make more money.
It’s been over a year and I still haven’t been able to get even one $2k AGC. I’ve done as much as 8 x $1k without any problems, so that doubles the AGC fees for me. (Any tricks to getting $2k approved?)
Of course, all this math heavily depends on the value you are getting per point. So it makes sense to have a redemption in mind to determine which route is best. I modified your calculator for my needs and it’s been helpful to see that.
For me, the higher volume of MS + saving time + ease of buying has me going the HH Surpass route most of the time. I still do the AGC route for the cash occasionally.
I’m jealous. My Kroger has instituted a 2K max per day per person. So for you, it makes sense to use your Surpass. As for AGC, try this – https://milesperday.com/2015/06/advanced-amex-gift-cards-questions-and-answers/
Not only is it a $5k, it’s $5k worth of Reloadits. Huge pajama factor for me. 🙂
Thanks for the info for the $2k cards in your link. I’ll have to get an FIA now. I have a SPG, but why would one buy AGCs with the SPG? All of the analysis I’ve seen from you (and others) indicate doing it with a 2% card for cash is better redemption options for SPG points.
Unless this is related to the free 30K SPG per month in your pajamas that I haven’t figured out yet…
I’ve gotten over 2c in value from SPG, and I only redeem them when I actually do get over 2c. Makes no sense when it’s less.
AGC is dead so u may want to wait on the FIA card.
No AGC now and I don’t currently have a card that gets 5X at grocery so HH Surpass is my go to at Kroger. I’ve gotten 1.72 per point for 6 nights (5K points per night) and 1.09 for 7 upcoming nights (10K/night). That only uses 100K points – I likely wont get that much value from the rest of the stash but still not a bad deal.
I think you’ve found the sweet spot in HH redemptions. If you are getting >1 cpm, then by all means, MS on your HH since now you’re getting >6% on your grocery.
While it’s great to get > 1cpm, the downside is I don’t think you can still call yourself a pimp if you are staying at a Hampton Inn, even if you were upgraded to the “suite.”