Investing with Rewards

Hey everyone!

You know what I find really interesting?

All the stats on this blog, any blog, really.  Come to think of it, I guess I just like statistics!  (Hey, anyone that tells you travel hacking doesn’t attract folks with a geek side…is lying.)

It’s not a big blog over here in my corner of the internet, by any means, but there are enough people stopping by every month that I’m starting to see some trends.  One of the more interesting trends is seeing which posts are the most popular.

My write-up and first impressions on the American Express Platinum Card for Charles Schwab is still holding down third place for all time popularity!

I wrote that one when I opened up the card in July of 2016, and it continues to bring in an audience.  Last year, it was in 4th place for total views, even though it was only up for less than half the year!  Given the popularity, I thought I’d do some experiments with the Schwab card.

The big draw to this card is the ability to convert Membership Rewards into cash, at a rate of 1.25 cents per point.  Points have to be transferred into a Schwab brokerage account.  Sweetening the deal, any cash in my Schwab brokerage account can be freely moved to my Schwab High Yield Investor Checking account for daily use.  Come to think of it, I keep meaning to write up a post on that checking account.  It’s awesome for international travel, since the account reimburses you at the end of the month for any ATM fees and foreign transaction fees incurred during that month.  This saved me around $10 in Mexico, and I wasn’t worried about carrying a ton of cash around with me during the trip.  I just dropped into any ATM, and pulled out some cash!  Because of the fee structure, it’s a fantastic checking account for nomads, just note that Charles Schwab will pull your credit report to approve you.

Anyway, there’s one thing that makes this experiment interesting.  Sometime between when I opened up my Schwab Platinum AmEx and today, they’ve changed the way the redemptions work.  Previously, points were redeemed in increments of 10,000 Membership Rewards points.  For each pile of 10,000 points you traded in this manner, $125 was deposited into your brokerage account with Schwab, yielding 1.25 cents per point.  Definitely not maximum Membership Rewards value – but a respectable rate, especially considering the old adage, “cash is king.”

Now, they’ve opened up more transfer options.  There are multiple increments, from 1,000 all the way up to 250,000 Membership Rewards points.  All of these transfer levels continue to yield 1.25 cents per point.  With that low value transfer of only 1,000 points, I was prompted to run this experiment (as I was a little nervous to part with a whole 10,000 Membership Rewards previously).

Obviously, this ability to transfer your Membership Rewards into cash at a decent rate makes the Schwab card a great addition to any Membership Rewards portfolio.  The best part, is that the Schwab card allows you to transfer any MR points you have, not just those originally earned from the Schwab card.

The Process

So, here’s how it’s done…

Step 1 Invest with Rewards

Under “Use Points” select “Invest with Rewards.”  Note that this option will only show up if you are a current cardholder of the Schwab Platinum AmEx.

Step 2 Confirm

Next, you’ll have to confirm your card information.

Step 3 Confirm Card

Once that information checks out, you’ll select the number of Membership Rewards you’d like to deposit into your Schwab brokerage account.  Since I only have one brokerage account with Schwab, my choice was easy.  Otherwise, you’ll get to choose the amount of points, as well as which account to send the points to (in the form of a cash deposit).

 

After that’s all sorted out, the American Express website will bring up a confirmation page, and then you’ll get another confirmation via email  shortly thereafter.  The email from American Express explains that the Membership Rewards you used will be pulled out of your account immediately, and the credit will be applied to your Schwab brokerage account in the next 4 to 6 business days.

Confirmation Email

You can see I’ve been busy…

Timeframe

I transferred these points around 5PM on Saturday, April 1st.  Citing the email I received, I could expect the cash to be deposited no later than Monday, April 10th.  To be honest, I figured it would post sooner than that – the 10th seemed very far away.

Funds Posted

The cash showed up the next business day!

But I didn’t think they would post that soon though!  The $12.50 Invest with Rewards transaction was in my Schwab brokerage account no later than 3PM on Monday, April 3rd.  I’m not sure if it’s always this fast, but next business day sounds good to me!

 

Final Thoughts

Investing with Rewards is a great feature, and super easy to use.  Membership Rewards are already a very flexible currency to have in your pocket, and the Schwab Platinum card makes them even more useful.  Of course, you can redeem MR points back as statement credits on any Membership Rewards earning card, but Investing with Rewards is much better, for two reasons:

  1. You can earn more points by Investing with Rewards.  When you redeem for statement credits, you lose the ability to earn points on those purchases, since you’re essentially erasing those charges from your credit card.  Discover has a similar option.  You can redeem your Discover cashback as a statement credit, or as a transfer to your checking account.  I always choose the transfer, so I can continue to earn cashback on my Discover it card.  The same scenario applies here.  By transferring the points into cash through your Schwab account, rather than through a credit card statement credit, you’re able to earn the full Membership Rewards possible.
  2. The rate is better.  When you Invest with Rewards, you’re getting 1.25 cents per point.  However, when redeeming for statement credits, you’re only netting 0.6 cpp.  The Schwab AmEx Platinum more than doubles the cash value of your points!

I hope this post helped explain the utility of the American Express Platinum Card for Charles Schwab, and you’ll consider getting it if you have a pile of Membership Rewards you’d rather turn into cash.  Given the speed with which the Invest with Rewards transactions are processed, this options is extremely useful for your average consumer, as well as any travel hackers with a whole host of points to burn.

If you do open it, keep in mind that there’s one outstanding question:  Does American Express (or Charles Schwab, for that matter) send out a 1099 tax form for Investing with Rewards redemptions?  Well, the card is still fairly new, so we can’t be certain.  Discussion on Flyertalk indicates that no 1099 has been issued yet.  I’m inclined to say there won’t be any issued, since these are technically credit card rebates.  Who knows, though?  2016 was the first year the cards were offered, so there may be some growing pains within the portfolio.  If you’re planning on redeeming a lot of points all at once, cross you fingers!  Due to the taxes levied on 1099s, it may make this redemption path much less appealing.

*Keep in mind, I am in no way a tax professional, and am not intending to give anyone any tax advice.  Please consult your tax professional if you have more questions.

Well, I hope this was informative!  I think I may hold onto this Platinum card one more year, as I’m still locked in under the $450 annual fee (my fee will post in July).  Between the $200 airline credit, the new Uber credits, and the 5x Membership Rewards on all the flights I booked, the card more than pays for itself!

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