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The Czervik Principle: Why cash beats miles, points or other credit card rewards in 2014

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When choosing between credit card rewards, here's why miles and points should take a backseat to cashSorry to be a buzz kill on New Year’s, but 2014 is shaping up to be a bad year for frequent flier mile fanatics and other collectors of “points” doled out by credit card companies, airlines and others. There’s a massive devaluation of points and miles going on, requiring consumers to spend more to get rewards like plane tickets and hotel stays. And that’s just one example of why the world needs the Czervik Principle.

There’s a scene in “Caddyshack” where uptight ’80s authority figure archetype Judge Smails demands “satisfaction” from Al Czervik (Rodney Dangerfield) for a long list of indignities that include hitting him in the groin with a golf ball, sinking his tiny sailboat and threatening to turn his beloved golf club into condominiums.

Czervik’s reply: “You demand satisfaction? Well I’ll tell you what’s satisfying: cash.”

Hence the Czervik Principle: when it comes to credit card rewards and other rewards programs, consumers should prefer cash over “points,” “miles,” “Schrutebucks” or whatever a business decides to call its noncash rewards.

The Czervik Principle comes into play when you’re signing up for a rewards credit card, where you typically have two choices: One is a card that gives you a cash rebate of a certain percentage (usually around 1 percent, with higher percentages for some types of purchases) of the dollars you spend. The other is a card that gives you miles or points that can be redeemed with an affiliated vendor, or can be spent on some kind of online marketplace provided by the bank that’s issuing the card. For every $1 you spend you usually get 1 to 1.25 points or miles, with some cards carrying annual fees giving you much more.

The problem with points

There are a couple of big fundamental problems with points/miles/Schrutebucks. First, they’re worth basically whatever the company who’s going to be redeeming them says they’re worth. Companies are free to change the value of users’ points at any time by raising the number needed to get rewards, and often do.

Delta Air Lines, Southwest and United Airlines have both announced changes going into effect this year that will substantially increase the number of frequent flyer miles needed to snag business-class international tickets, effectively devaluing the miles held by many travelers.

In fact, the cost of business class travel to Europe in most programs has increased from 90,000-100,000 frequent flier miles per ticket to 125,000-200,000 miles per ticket over the last two years, says Brian Kelly, of

“There is a huge devaluation going on and you need to be earning a lot more miles in order to keep up with it and still get great value from these programs,” says Kelly.

And that’s not even taking into account corporate bankruptcies, which can quickly wipe out the value of “points.” Sure, it’s unlikely that a Delta or United will go belly up anytime soon, but if they do, there’s no guarantee backing up your points or miles the same way the FDIC backs up the dollars in your bank account.

The second reason I hold to the Czervik Principle is more subjective: Keeping track of your miles and changing around your travel plans to either earn more miles or make sure you don’t have to redeem too many miles to get a ticket can be time-consuming and tedious.

Sure, there are plenty of people who enjoy the process of maximizing their rewards and reveling in all the first-class upgrades they get, and live the high life for a low price while doing so. But cash offers you the ultimate flexibility to spend your rewards how you want. You can use it to book travel whenever the hell you want, or invest it, or spend it on a Ferrari-red golf bag that plays Journey songs at top volume (aka The Full Czervik). And that flexibility is worth something, too.

Spend points like there’s no tomorrow (there may not be)

Admittedly, the Czervik Principle isn’t perfect. There are lots of cases where it’s possible to get more value from points or miles than you would hard cash. According to a 2013 study by IdeaWorks, a loyalty program consulting firm, frequent fliers generally get about 1.4 cents’ worth of airfare for every mile they redeem on economy-class United Airways flights, more than the 1 cent to 1 cent ratio you’re going to get with cash. High-mileage clients can get up to 5 cents’ worth of value per mile when trading them in for business class upgrades.

For situations like that, there’s one important corollary to the Czervik Principle: like cash, actual real products and services in your hand now are more valuable than a big horde of miles or points.

As we’ve seen, points are probably only going to get less valuable. So if you get an opportunity to trade miles for an upgrade to first class, do it! And if you’ve already saved up points or miles for a big vacation, there’s no time like the present to go ahead and book it.

What do you think? Are you a believer in The Czervik Principle or do you prefer to keep earning those points or miles?

(Photo: Warner Bros.)

{ 9 comments, please add your thoughts now! }

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9 Responses to “The Czervik Principle: Why cash beats miles, points or other credit card rewards in 2014”

  1. Karl says:

    I believe in Czervik principle:

    -FLEXIBILITY-I spend cash where, when and how I like
    -VALUE-buy what I need vs what is offered
    -SIMPLICITY-life is less complicated with cash

    Good article.

  2. I think I’m making the switch from cash rewards to points/miles at just the wrong time. But we’re wanting to travel hack a bit in the coming years, so we’ll give it a go, even if it’s not as good as it used to be.

  3. Meagan says:

    Lol! Love the gif!! Just got my first rewards card and its cash. Love it! Usually use it to pay down the balance

  4. Glenn Lasher says:

    I had a rewards card at one point, and one of the things you could get with the rewards points was . . . cash. Since the online marketplace for this card never had anything I wanted, I would just call them up when I’d accumulated the minimum number of points (2500) and have them send me a cheque.

    It worked out to being 1%.

    I now carry a credit card that has no rewards on it whatsoever, but it also has a far lower interest rate. I consider this a better deal.

  5. Great post. As one such “fanatic” who even writes books on the subject matter, I must say it’s very fair. Cashback is a great thing, especially when combined with quarterly 5% bonuses available on several cards. There are very serious pre-requisites for folks who want to benefit from mile- and point programs.

    1. Must never carry a balance, always pay in full every month.
    2. Must hunt down huge sign-up credit card bonuses; unless your expenses are unusually large, normal credit card spend won’t get you anywhere.
    3. Must be willing to learn a few tricks here and there.
    4. Must REALLY love traveling, otherwise why even bother?

    That’s why cashback cards will always work best for most people. One exception is Ultimate Rewards program for some Chase cards (Freedom, Sapphire, Ink) since it’s exceptionally easy to turn UR points into cash.

  6. Claes Bell says:

    Thanks, Andy. Seems like a “hybrid” card like that could be a good option to get the best of both worlds.

    • Tim says:

      Many cards are “hybrid” cards, where you can redeem points for cash or a loaded prepaid card. many, though, are charging more points to redeem for cash, so the effective savings rate is different.

  7. Tim says:

    I vote for cash back. i like the cap on 1.5%, b/c it is really no fuss. so long as it remains no fuss, it will be my primary for everything. even if i get more points say for gas or groceries on another card, I have to purchase $x for y points to redeem $z which takes time to do, so what is really the effective rate for using that card for more points if the effective “reward” or “cash back” isn’t there? Maybe that should be another post: calculate the effective return rate of say a cash back card you can redeem the cash at any time without a minimum vice a reward card you redeem points for cash after you accumulate a minimum reward amount.

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