When you guys were partying last night, I just made a deal of my life haha. Here is my shopping list: 1) a return flight Boston – Sao Paulo during the carnival; 2) a domestic one-way flight in Brazil from Natal to Sao Paulo; 3) 2-day Mustang Convertible rental in San Francisco on Labor day weekend; and 4) one domestic one-way flight from Boston to New York in October. So, four flights and one cool car rental for the total of $66.60. Face value: $1,690. Here’s how.
Short Story Long
One evening I was talking to my roommate about my $300 return flight deal from Boston to San Francisco on Labor day weekend (Sep 4-7, you in?). Somewhere in the discussion he mentioned airmiles. My thought was: airmiles? Yes, I signed up for all these frequent flyer programs but never bothered checking them. I’m disloyal to brands, so I always thought that my airmiles are gone. I decided to check out my frequent flyer accounts.
It turned out that I had over 55,000 miles in total. Apart from that, I just received an offer from American Express to sign up for their Premier Rewards Gold Card. The card covers incidental airline fees up to $100 per year and they offered me a sign up bonus of 50,000 points. Cool! I started doing my research. It took me a while to figure out how to spend the points most effectively. Are you ready?
1. Boston -> Sao Paulo in February
First, I booked a one-way flight with United from Boston to Sao Paulo for the carnival. It required 30,000 airmiles + $5.6 fees.
2. Sao Paulo -> Boston in February
I figured out that I can transfer amex points to Delta frequent flyer program (1,000 amex points = 1,000 Delta points). The flight from Sao Paulo to Boston on President’s day costs 30,000 airmiles + $49.40 fees.
If I was to book a regular return flight from Boston to Sao Paulo during the carnival, it would be at least $1,000. I know because I booked in the past :-)
3. 2-day Mustang Convertible Rental through American Airlines
Many airlines allow you to use the airmiles to book hotels and cars, as well. As I’m doing a road-trip around northern California on Labor day weekend, I will need a car. I checked out what American Airlines can offer for me. Having done a quick search, I realized that they share rewards with National car rental, which, in turn, shares their car fleet with Enterprise. I was able to find a Mustang Convertible for 24,400 airmiles. Unfortunately, I had only 15,600 airmiles with American Airlines. They asked me to pay $35.20 to cover the missing airmiles to rent the car. I went ahead and paid using the amex card. The transaction showed up as an American Airlines transaction. Now, the cool thing is that I set up the amex card to cover American Airlines incidentals! Effectively, I’m paying $0 for the rental, which is otherwise worth $320.
4. Natal -> Sao Paulo in December
Earlier this year, I booked a flight to Brazil for $500 around the Thanksgiving weekend (Nov 27-Dec 6). Fantastic deal. As I was looking for cool stuff to do, I found out that they’ve got this crazy out-of-season carnival party in Natal, called Carnatal. The party is happening Dec 3-6. My flight back from Sao Paulo to Boston is on Dec 6 late at night. I wanted to fly from Natal to Sao Paulo in the afternoon. Currently, the prices are crazy: $300 for a one way flight. Booking the same flight through Delta, however, (which shares flights with Gol) gives me the same flight for 12,500 points + $6 fees. Done!
5. Boston -> New York in October
I wanted to see how far I can get for the 7,500 left from the amex signup bonus. I found a one-way flight from Boston to New York on a Friday. Additional fees are $5.6. Regular price is $70. Not an amazing deal, but why not?
Total cost: 95,600 airmiles + $66.60. Total value: $1,690
Beat me! As if that wasn’t enough, I was able to book a Corvette Stingray in San Francisco at Avis with a 20% discount using pre-pay and the amex card. So, during the labor day weekend, I’m getting a Mustang Convertible and a Corvette for less than the cost of the Mustang. How cool is that?
How Does This Shit Work?
You may be wondering: how does this shit work? How are they making money by giving airmiles and rewards? Loyalty is one factor. Another factor is that amex can give great rewards, because it charges merchants twice as much as Visa/MasterCard. Merchants don’t like amex, but the clients do. If you think about it, you will get to the conclusion that Visa/MasterCard and cash payers, subsidize my rewards!
Let’s say you are a merchant and you sell a product for $100. If I pay cash, the merchant keeps $100 for himself. If I pay Visa/MasterCard, the merchant keeps $98 for himself, and pays $2 to Visa/MasterCard. If I pay amex card, the merchant keeps $96 for himself, and pays $4 to American Express. Of course, as a client, we all pay the same amount, so the merchant has to set the price so that he makes certain profit on average. He adjusts the price so that he makes a profit, and a card company makes a profit. Consequently, amex users pay as much as others, but get superb rewards. Cool, eh?