Can Churning Turn into an Obsession & Does it even Make Sense to Churn?

Discussion in 'General Discussion | Credit Cards' started by NYCUA1K, May 4, 2013.  |  Print Topic

  1. NYCUA1K

    NYCUA1K Gold Member

    I do not churn but part of my biomedical research folio includes brain imaging studies in kids with obsessive compulsive disorder (OCD), which has naturally gotten me increasingly curious about the following:
    1. Could 'churning' turn into a compulsive obsession or addiction, whereby churning for the sake of churning becomes the objective because it is just such an exciting "game", and not because of the need to earn bonus miles/points for that dream vacation?
    2. Also, with all the minimum spend requirements, is it possible that the money spent to meet these requirements on multiple credit cards could be enough to afford that dream vacation, so that the practice might not even make sense at all, and its driver might simply be a "yes" answer to the question posed above?
    With respect to item 2, let me give a quantitative example to show what I mean. As this ultimately humorous exchange with HaveMilesWillTravelwould easily establish, I apply for CCs for their utilitarian value. In order to maximize the points that I get for every stay at Hilton properties overseas without paying a foreign transaction exchange fee I applied for the Hilton-branded Chase Citi Reserve visa card, which had the following sign up bonus, instead of points:
    With meetings lined up during which I stayed on average 4 nights at Hilton properties, I easily met the minimum spend of $2,500 and received the two certificates for free weekend nights, which I will be using at the end of June as part of a 3-night reward stay at Hilton Shanghai. The sign up bonus could as easily have been points, but we will work with a case that I have first-hand knowledge of to see whether the two free weekend certificates were worth the minimum spend of $2,500. To compare apples and apples, I just searched for rates for paid stays, not only at Hilton Shanghai but also at Waldorf=Astoria Shanghai on the Bund. First the rates for Hilton Shanghai:

    HILTON-PVG.png
    The property also has a Presidential Suite, which did not display, but the highest room rate on the property for end of June is $200, meaning that for a $2,500 spend, I could spend 10 nights in an Executive Panorama Suite on this property or nearly a month in a King Deluxe room!

    How about at W=A? I dummy-booked exactly for the two weekend nights that I would be staying across town at Hilton Shanghai, courtesy of 2 free weekend certificates "earned" by spending $2,500 on the Citi Reserve as a sign up bonus:

    CHURN vs CASH.png
    For $2,500, I would be able to afford one of the most expensive suites on the property or stay in the "cheapest" room and still have enough money to pay for the plane ticket to get there!

    Could churning turn into an addiction or an obsession, and does it even make sense to churn? What am I missing?

    I acknowledge that depending on one's persuasion, some may find the preceding 'provocative'...but please feel free to chime in under the cover of anonymity;)
     
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  2. LeeInDC

    LeeInDC Silver Member

    1. Yes, it can become an obsession. Although I personally do it because it's an exciting "game" AND because I want/need more miles and points for future trips.

    2. The purchases I make to meet minimum spend requirements are ones I make anyway: gas, groceries, restaurants, cable, phone, rent, etc. This money could not be set aside for a hypothetical vacation somewhere because the $2500 (or whatever amount) will be spent regardless. The only question is what payment method will I use. So why not put those purchases on cards with high sign-up bonuses?

    Also, using your free night certificates at the Hilton Shanghai may not be the most valuable use since it is not an expensive property. Of course, that's something for each person to consider and if it's your only upcoming stay then it's better than nothing. But for many people there will be better options. For example, the Conrad Hong Kong runs close to $500 a night during the same time period. And while I don't have the Reserve card and have never used these certificates, it appears they can be used at the WA Shanghai so that would be something for you to consider.

    Someone else will probably state all of this in more detail or more eloquently but I'm late for a Derby/Cinco de Mayo party and didn't have much time to think about what I was writing!
     
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  3. MSYgirl

    MSYgirl Gold Member

    When discussing compulsions (or addictions), it makes sense to me to look at the person instead of the action. I think anything can be compulsive or addictive, and it can depend on the person's internal management of the id/ego/superego battle or other neurological differences (genetic, physio, or psych). There are some instances where I have not listened to my own caution and done something anyway because I wanted the reward, but I have control enough to avoid going to dangerous extremes (although being a newbie on here, that may change over time). In your example, I would sit back and do the math as you have to see if the 'reward' is actually even an advantage or just appears as one. Someone else may be clouded in judgment by the prize and start to seek out that prize obsessively regardless of the cost or effort.
     
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  4. Wandering Aramean
    • Original Member

    Wandering Aramean Gold Member

    You realize that none of those rates actually let you stay the night, right??

    You also seem to be suggesting that the minimum spend to get the card benefits is being directly applied to the value of the benefits. Were it an annual fee that would be closer to accurate. For minimum spend, however, I think we can assume that most people aren't simply buying something and throwing it away; rather, they are buying things they get other value from as well. Maybe it is gift cards, by which they are time-shifting the spend. And maybe it is other typical household expenses that they'd be buying anyways. The $2500 in 3 months number is well below the average CC spend for an American on a per month basis.

    As to the originally posed questions, yes it can become an obsession much like nearly anything else. And, yes, it can make sense depending on the person and the situation.
     
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  5. MSYgirl

    MSYgirl Gold Member

    I was wondering about those 'no overnight stay' notes. So, even the upscale places rent by the hour/day like the seedy ones? ;)
     
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  6. Wandering Aramean
    • Original Member

    Wandering Aramean Gold Member

    Sure...who says someone looking for a few hours in a room necessarily doesn't also want a bit of luxury in their stay from time to time. :D
     
  7. MSYgirl

    MSYgirl Gold Member

    Definitely not arguing that, especially with some of the stops I see people need on the RTW trips. I guess I just have a dirty mind. :rolleyes:
     
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  8. HaveMilesWillTravel
    • Original Member

    HaveMilesWillTravel Gold Member

    I wouldn't just focus on churning.

    How often do you visit MilePoint and FlyerTalk each day?

    I just came back from a two hour visit to CLE ;)
     
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  9. Wandering Aramean
    • Original Member

    Wandering Aramean Gold Member

    I was more or less implying the same thing, just with a touch more class. :p
     
  10. NYCUA1K

    NYCUA1K Gold Member

    I happen to know Shanghai very well and I get more "value" by redeeming the two night certificates at the Hilton, where I will be closer to friends, than I would at the W=A on the Bund, where I stayed before and would require a lot more commute to do the things that would make the 3 days in Shanghai worthwhile. That is the inherent subjectivity of "value"!!! Your suggestion that I look for better "value", in fact, supports my view that the constant rant about "devaluation" makes little sense when there remain so many affordable properties in the Hilton portfolio that could be more convenient than the now unaffordable high-end properties! Why stay at the W=A when the Hilton is so much, much cheaper and more centrally located and closer to more fun?!
     
  11. NYCUA1K

    NYCUA1K Gold Member

    The situation is realistic. Like I said, rather than being offered 2 free weekend night certificates, it could have been points or miles. I agree with the previous poster who said that:
    Do folks, who are churning, carefully assess whether the value of the bonuses that they would get would exceed the monetary value of just going out and getting what they would get through minimum cash spend? It all has to be taken case-by-case, but that becomes impossible if the churning "game" is an obsession. One would play the game not because there is some ultimate gain in it, but because it feels good to play it...I have been to Vegas or Lyon and played the slot machines…It is called addition or obsession!
     
  12. Wandering Aramean
    • Original Member

    Wandering Aramean Gold Member

    Which part? Where you are comparing room rates which don't actually include a night in the hotel or the part where you are assuming zero value for the qualifying spend? I don't think either of those are realistic.
     
  13. mikeschu
    • Original Member

    mikeschu Gold Member

    Could churning turn into an addition or obsession? Sure, just like everything else that can be overdone. Churning without specific strategies is more like a shopping addiction but just in reverse - you're looking for deals vs. actually taking the time to consider what is the best move.

    As for "does it make sense to churn", there isn't an answer to this. It's really dependent on each individual situation, but it comes down to two factors: the desire for yield/return and the allocation of money (and spending).

    Unless you're Ben Bernanke, I'm going to assume everyone involved has a limited amount of funds that they can spend per month in income and (potentially) savings. I'm also going to assume that we're talking about generally rational people in that expenditure obligations are met every month; i.e. you're not going to default on the credit lines or go bankrupt, perform fraud, etc....

    In some (but not all) cases, it is more profitable to churn a card than allocate spending on a given credit card. The US Airways card is a great example. You get 40,000 points on first purchase and 1 point/dollar on most purchases (keeping the math simple). Let's say you can throw $2000/month on credit cards at most. If I can churn the card every 18 months, it makes no sense whatsoever to keep the card assuming everything remains constant; I will receive more points by churning the card (40,000 vs 36,000). Some cards may not work like this - I can't think of any off of the top of my head, but it requires sitting down with your budget and the credit card terms and conditions (specifically with annual fees and earning tables and using realistic reward valuations) and "doing the math" on each card.

    This leads to the second point: allocation of money. Your spending example is flawed because it assumes that CC spending is only for travel. Most people choose not to spend their limited money like that because we have other expenses to cover like food, shelter, utilities and so forth. It makes sense to place these expenses on a credit card because they recur and especially when more yield can be realized for spending in certain categories (e.g. travel, but also gas & groceries). People who are in the CC/churn game are pretty good at optimizing their limited spend to extract the maximum return, assuming they're rational and have a plan for spending and reward usage.

    But I think there's a third question you're implicitly hinting on: is miles earning worth it? That is also an individual decision based on what your goals and spending patterns are. For some people, the answer is no. It depends on looking at the budget and balance sheet, available spend and a realistic look at the opportunities available to you. And I think we have all asked this question with the points devaluations and changes to FF programs in recent years....
     
  14. NYCUA1K

    NYCUA1K Gold Member

    I guess, I am failing to see the difficulty here. I applied for a Chase Citi Reserve card for which the sign up bonus was that I would get 2 certificates for free weekend nights in a standard room at most Hilton properties, if I spent $2,500 in 4 months (actually these terms, which are in effect now, are a bit better than those that were in effect back when I had applied: $3,000 in 3 months). That was the sign up bonus; no points or anything else but they could have offered points or miles or whatever else, and the condition for getting it would have been to spend X amount over a period of Y days -- the same requirements that churners have to meet. So, the lure for this offer was apparently for the free night certificates. So, how is the example realistic? I have actually used the two certificates to book a stay at real Hilton hotel in Shanghai for specific dates. Therefore, one can estimate the value of the certificates relative to the $2,500 that one had to spend to get them, by seeing how well one would at the same property on the same dates if given $2,500. It is clear that one do heck of a whole lot better spending the cash directly.

    Everything item involved in the scenario is real...
     
  15. mikeschu
    • Original Member

    mikeschu Gold Member

    There's the flaw in the logic: hotel spend is not equivalent to CC spend to get hotel reward. You're conflating the use of cash (buying the hotel room for a night) with cash equivalents based on rewards (the free night certificates).

    The rewards are based on all CC spending (at least for now - don't want to think of that T&C change). I can spend $2500 on gas and groceries to get the certificates. I don't need to spend $2500 at Hilton to get the free certs.

    Another perspective: The Hilton card isn't a store charge card like a Macy's card; the Hilton card is a Visa or MasterCard credit card that's branded by Hilton and earns Hilton rewards instead of cash (or nothing).
     
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  16. NYCUA1K

    NYCUA1K Gold Member

    I hesitate to say that I have gone over this post a few times and I am not sure I understand it. So, I will address everything I think it means.

    First, it seems to me that the question in the second line, answers the statement the first line, and the last line puts everything in perspective.

    "I wouldn't just focus on churning". Nor do I, or would I. I visit MilePoint (FT no more) several times each day and discuss varied topics, most of which rarely involve churning. So, I would not say that there has been "focus just on churning." But I do not lose perspective either, because just as "[you] just came back from a two hour visit to CLE", I was about Gotham City last night, listened to a Sinatra impersonator and his band at the Carnegie Lounge, even losing my DROID4 before coming back home late, and I have been writing a manuscript since I woke up this morning (publish or perish!).

    On the other hand if "How often do you visit MilePoint and FlyerTalk each day?"

    is meant to suggest that sites like MP and TOBB are addictive, they may be. But level-headed people can join sites like MP or TOBB and learn from other people's successes or failures, without using visits to the site as a treatment for some latent or underlying psychosis or neurosis. Quite a bit is written every day about how much we learn from others here or at TOBB. Well, there is another dimension that is just as rewarding: I think that I have learned a heck of a whole lot about miles and points and travel and UA terms and conditions and about HHonors, etc..., by earnestly trying to find answers to questions that are posed here daily by veteran or new MP members. There are many new things that I have learned that turned out to be very useful, which I would otherwise not have bothered looking up if posters had not asked about them. Whenever a member’s question has intrigued me, I have usually found myself digging deeper into subject matters that I would otherwise not have had any interest in. By the same token, I have also started a thread out of genuine wonder: Am I missing something about churning? If not, why are so many people into it?

    As for the practice of churning, I feel that it makes sense only if the required minimum spend is in the ballpark of money that one was planning to spend, regardless. I have now pursued sign up bonuses twice, but the benefits did not require that I actively try to meet a minimum spend requirement: I got the Citi Reserve HH visa so that I could use it to get 10 HH points/$ (i.e., double my points) with each stay. But I already had booked several extended stays at Hilton properties so that I was already going to spend the money. The other sign up bonus was to get 2 free nights and 2 suite upgrades by spending $1,000 in 3 months on a Chase Hyatt visa card (acquired because I wanted the automatic Platinum status in Hyatt GP that comes with it). It was tax time, and I owed so I paid my taxes with this card and also met the requirement. Earning the free nights and suite upgrades at Hyatt properties was a smart move, not only because I was going to pay my taxes, anyway, but also because it can be demonstrated to be worth more than the $1,000 (unlike the $2,500 for 2 free weekend nights spend on the Citi Reserve). Such a measured utilitarian approach to "churning" would maximize benefits while avoiding the potential for it to become an obsession and addiction.Take it or leave it...

    At the very minimum, one must compute the potential benefits!
     
  17. HaveMilesWillTravel
    • Original Member

    HaveMilesWillTravel Gold Member

    tl;dr (yet)

    My question was simply whether of all the topics we cover on these forums churning is the only one worth talking about (re addiction). I think the whole miles/points game is addictive. And the number of times we all seem to be visiting sites like MilePoint is evidence or a symptom of that addiction. And my two hour visit to CLE is an example of another symptom. "Normal" people don't fly across the country to eat a bagel and then fly back, even if the airfare is cheap enough to make the numbers work. They sleep in their comfortable bed instead of a domestic F seat. They don't need that "EQM fix" :)

    And as far as churning is concerned, I think I have myself under control.
     
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  18. NYCUA1K

    NYCUA1K Gold Member

    Well, it seems that with that shotgun answer, I managed to touch upon some key elements in your post...;)

    I look at the whole mile/point thing the same way I just described my approach to the practice of churning. Maximize the benefits and minimize the losses by incorporating things that I would have done anyway. Most of my travel 8 months out of 12 every year is for business, so I use the trips and stays to maximize my miles and points in order to greatly defray the costs of my personal extended travel once a year. I do 2-3 MRs during the year but they are always calculated to coincide with things I would have done anyway but incorporated into my mile/point calculations to achieve a desired objective (requal elite status, get the points that I need for my free travel later). Going to EZE in August is a MR but it is also my summer/fall vacation (I am too lazy but I had meant to post something about why EZE and not another location), and going to HNL in Nov is a MR, but I always do that as part of my B-day break. Otherwise most of my visits to MP are no different than visiting a local joint to unwind by discussing various topics, but with the convenience of not having to leave the comfort of my home. What better way to make the vibes of a wonderful trip last long after the trip ended than to relive it on MP!!!

    ...hardly an obsession.:)
     
  19. Seacarl
    • Original Member

    Seacarl Gold Member

    Depending on how, where and when you use them, 2 free weekend nights could be worth between $200-$1000.

    But I'm not sure of your point on the $2500 of spend. You're not paying $2500 for these 2 nights, you're merely shifting spending, for which presumably you are getting $2500 of value, to the HH card from another card (or from cash or check). Since I normally use my Chase Sapphire, my opportunity cost for general purpose spend is 2500 UR points to move them to the HH card.

    It's not much different than your Hyatt example where you got 2 nights and suite upgrades after spending a certain amount. The signup bonus can be valuable, but to make sure you are for real, and not a churner, they require a certain spend, and then hope you'll stick.

    But whether the signup bonus is points or free nights, it seems like you can get a significant value for the initial signup, but much less value (or none) in renewal years. And the cost is completing the application, taking a credit inquiry, and redirecting some spend.... And maybe an annual fee, and the chance that you'll stick or need to cancel. I don't churn, either, but I've signed up for some cards because the sign up is attractive and/or because the annual benefits are attractive. With the HH cards that includes Diamond status for $40,000 in card spend.
     
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  20. NYCUA1K

    NYCUA1K Gold Member

    Your distinction is arbitrary and the premise incorrect because loyalty points or miles are currency.
     
  21. Wandering Aramean
    • Original Member

    Wandering Aramean Gold Member

    This math only works if there is absolutely no other value realized from the $2500 in spend. If you buy gas for your car then you are getting additional value there, over and above the value in the two free night certs you get. The $2500 is not an annual fee which ONLY gets you the free nights.
     
  22. NYCUA1K

    NYCUA1K Gold Member

    Although it requires the introduction of the subjectivity of value (how each person values what they buy), I will grant you your wish and redo the math, based on my spend to meet the $2,500 spend requirement: every dime of it was spent to pay for stays at HH properties, which is the only spend I use the card for. So, at 10HH points/$ at Hilton properties, the card brought in ~25,000 HH points -- hardly enough for even a one-night redemption in a standard room at Hilton Shanghai, but because I would have gotten at least 25K points from the stays anyway, the additional 25K would allow me to redeem for one or two nights in a standard room. By contrast, I could stay for 10 nights in a Panorama Suite or a month in a standard room for $2,5000; heck, I could even afford a suite at W=A!I

    Clearly the additional assumption did nothing to invalidate the original exercise, nor the inescapable conclusion that the value of the Citi Reserve HH visa is in its long-term utilitarian value (10HH/$, no forex fee) for which I got it, and not in its short-term remuneration of 2 free nights after spending $2,500. In other words, it is not a good churning card that one acquires and just gets rid of asap. Significantly, your insistence on incorporating the additional "value" that one can get out of the required $2,500 spend is simply an echo of the principle encapsulated below -- churning makes sense if the money was going to be spent for other worthwhile endeavors, anyway:
    At the very minimum, the churners need to compute the pros and cons of potential new churns!
     
  23. Wandering Aramean
    • Original Member

    Wandering Aramean Gold Member

    And nights in hotel rooms, something you arguably needed anyways. ;)

    Had you put that same spend on other CCs what would the value have been? That's what you have to compare to as that's the opportunity cost involved.

    If you put it on a 2% cash-back card they you're losing out on $50 in credit in exchange for the 2 free nights. Surely you cannot suggest that the $50 is more valuable, right? You've already shown the room rates above. Had you used a Chase Sapphire Preferred you'd get 5000 points (2x for hotels) and those can be quite valuable when transferred to a 3rd party partner; many value the Chase points at ~2 cents each. That would be around $100 in value. Still far less than the cost of the two nights in the hotel, though in both the cash-back and the Chase example the points are more fungible, possibly offsetting the lower defined dollar value.

    No matter what, the repeated claim that it cost $2,500 to get two free nights is absolute hogwash. You got other things for that spend and it was money you would be spending anyways for things you already needed. The worst case scenario is that you have some loss of opportunity cost where the same charges could be placed on other cards. And while that certainly becomes subjective based on valuation of various card programs and the returns they offer, in no scenario are you getting nil value for the initial $2,500 spend.
     
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  24. LarryInNYC

    LarryInNYC Gold Member

    There's a line in the sand between taking advantage of credit card offers to collect travel benefits, and allowing the hobby to affect your behavior in ways that lead you to spend money you wouldn't otherwise spend.

    There are a lot of cases in which people change their behavior significantly in order to "maximize" their points and they do things that for me, personally, would be crossing a line. Staying at a hotel in my hometown (or checking in and not staying), routinely photographing my seat or the food on an airplane, or spending a week entirely in airplanes to have "experienced" different "products" or collecting enough points to take another week's vacation at some other time are all things I have no interest in doing. But everyone's entitled to their hobby -- I have my own weird ideas about traveling that no doubt would make other people roll their eyes.

    In my case, I don't spend money I wouldn't otherwise spend or make flights or hotel stays I wouldn't otherwise make in order to earn points.

    I do go to some effort to maximize my points earning by:
    1. Making decisions on which merchants to use based on points. If I need something, and it's available through an office-supply store or an online merchant at the Chase mall (but costs the same as not going through the mall, which is not always true), I'll buy it there.
    2. Attempting to route expenses I would have anyway through a more "earny" merchant. I'm awaiting the delivery of the computer that I bought on Amazon, using gifts cards from Staples. (In this case there actually was an opportunity cost of time that I spent having to acquire and then scratch off and enter all those gift card codes).
    3. Selecting the "best" credit card to use for a particular purchase (I now use my Amex Gold at Fairway because it earns double points).
    That said, I can think of a couple of times last year I chose to spend a night in a Radisson hotel on an overnight business trip in order to earn their 50,000 point bonuses rather than driving a bit further and staying at my in-laws. So perhaps I'm not totally immune.
     
  25. marcwint55

    marcwint55 Gold Member

    Having spent 6 nights at the WA recently, I wouldn't think of staying anywhere else. The view from our room every night of all the beautifully lit buildings and the boats all lit up in different colors was one of the nicest views I have ever experienced, and I have experienced quite a few.

    I am very curious about the things that make Shanghai worthwhile to you.
     
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