The Servepocalypse And How To Budget Your Miles

Serve card
Reminiscing about all the great times we had together

The Servepocalypse:

For those of us who eat, sleep and breathe the points game the news that American Express was killing the Serve card was a bit like hearing that they were going to have to amputate our right arm. In terms of easy avenues for manufacturing spend, the Serve card was indeed just as indispensable as our dominant hand. The ability to liquidate $5,000 per month in gift cards in a fairly easy way has long been the backbone for many people’s mileage earning strategy (myself included), especially when it enhances your usual spending to allow for higher rates of credit card churning.

To provide a concrete example, if you and your squeeze spent about $5,000 per month on your credit cards, you could burn through about $60,000 per year in spending, which if every penny went to meeting minimum spends could translate into 15 to 20 credit card signup bonuses (assuming a $3,000 spending requirement). If we use an average bonus of 50,000 miles/points, then we are looking at a cool 750,000 to 1,000,000 miles/points per year. Not a bad haul.

If you both had a Serve card and were willing to invest the time and effort to max it out each month, then you could add another $10,000 in spending per month ($5,000 each). This would triple your total spend and bring your annual credit card spending to $180,000. While I don’t actually think that most couples could or would get 45 to 60 new credit cards each year (though this dude signed up for about 140 new cards per year), the potential for earning tremendous amounts of miles and points was very real. With a moderate amount of effort, you could rack up millions of points per year.

Some enterprising individuals would manage Serve cards for their parents, grandparents, children, cousins, neighbors and anyone else who they could convince to let them open a prepaid financial product in their name. These individuals were moving six figures through their credit cards each month, racking up huge point balances and most likely eroding their sanity, as I know from first hand experience that trying to liquidate large amounts of gift cards can be a frustrating experience. Still, at the very least, the ability to essentially “purchase” points at $0.01 per piece, by purchasing gift cards and then loading to your Serve card, was a really nice way to top up point balances without having to pay the $0.025 to $0.035 rates that airlines typically charge for buying miles.

Those days are over for most of us though. While some of us mysteriously avoided the chopping block (inexplicably, I have yet to receive a shutdown notice, while my wife’s account was closed), the time for easy manufactured spending is clearly drawing to a close.

What this means in practical terms is that going forward our potential to earn points will be more closely tied to our actual spending. In light of this, we should be thinking about our actual travel needs and how to make sure that our rates of earning are sufficient to meet those needs.

128,516 miles traveled since November 2014.
128,516 miles traveled since November 2014.

Last year I flew over 100,000 miles almost exclusively on points and burned through over 1 million frequent flyer miles on our various adventures. Considering the loss of manufactured spending options and the devaluations that either occurred in 2015 or are slated for 2016, it may be time to fine tune my burning rates to match my earning capabilities.

Now that the heady days of seemingly limitless mileage earning potential belong to the dusty annals of travel hacking history, I am taking a good long look at how I earn and burn frequent flyer miles.

Budgeting Your Miles:

I budget my money using the principle that each dollar needs to be assigned a task. Whether it be rent, groceries, vacation or retirement, every little dollar is given a purpose and this helps me to manage my money. If you have more tasks for your money to do than you have dollars to do those tasks, then you have a problem.

The same concept applies to frequent flyer miles. If you have more travel planned than you have miles with which to book the flights, then you need to figure something out to make sure that your mileage spending matches your mileage earning.

First things first, assess your travel needs:

  • How many trips will you be taking?
  • In what class of service?
  • How many miles will be required?

Now, look at your mileage earning capabilities:

  • How much spending can you direct through credit cards?
  • How many credit cards can you sign up for?
  • How many bonus miles will you get for signing up and meeting the spend?

If you plan on doing two trips from the US to Asia in the next year and you wish to fly in business class, then you can estimate that each round trip will put you back between 100,000 and 160,000 miles, for a total of 200,000 to 320,000 miles per person, depending on which frequent flyer program you use.

If you wanted to do those same trips in first class then you should estimate that you will need 280,000 to 440,000 per person. That would translate into 6 to 9 credit card signup bonuses and would require $18,000 to $27,000 in spending on these credit cards just to meet the minimum spending requirements to get the bonuses.

If we took our hypothetical couple that spends about $60,000 per year on their credit cards, then we can see that $54,000 ($27,000 each) in credit card spending is sufficient to handle the minimum spend requirements for their caviar at 39,000 feet lifestyle.

If, however, this same couple only had enough time or spending to manage 10 new cards between the two of them, then they would have to reconfigure their travel plans to match up with their earning rate. Ten cards would get them 500,000 miles between the two of them, which is roughly enough to do two international trips in business class or one in first.

Alternately, they might consider adjusting their travel plans to match their earning rate. Maybe instead of two trips to Asia, they might consider one to Asia and another to Hawaii or another cheaper award destination. Another strategy is to pump up their mileage balances by purchasing miles from the airline to ensure that they have sufficient miles to book award tickets for both of their trips.

Screen Shot 2016-01-13 at 1.03.54 PM
Cathay Pacific first class ticket costs

To be certain, the fact that our hypothetical couple can still take two trips to Asia in first class each year, despite the end of manufactured spending and the award devaluations, is insane in a very good way. First class tickets run between $18,000 and $26,000 on many of these routes, so if they were to pay for those tickets with cash instead of miles they would be spending more on the tickets than they did on all their other expenses for the year! To put it another way, using miles and points to book premium air travel is still an incredible deal.

The death of the Serve card is one of the biggest negative changes to the miles and points game in the last several years. While it eliminates an easy method of manufactured spending, with careful budgeting and planning, we can still earn huge sums of miles and points per year and turn those miles into incredible travel experiences.

Hit me up with all your questions and comments!

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