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How Much Are My Points Worth? | Understanding Earning & Redemption Values - YouTube
Channel: Trip Astute
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Hey, Happy Mardi Gras everyone! Hope you
all are having a great week. It's Ernest
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from Trip Astute. In this video, we're
focusing on point valuations and why
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it's important to understand how much
your points are worth when evaluating
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and using credit cards for travel.
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(light chiming music)
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First off, I want to thank Jorge for sending
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over some Mardi Gras supplies from New
Orleans. I really appreciate the love.
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Also, I want to give a shout-out to
Masoom for suggesting that I explore
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this topic. Today, I want to focus on the
topic that seems to come up a lot during
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my credit card consultations. It's the
issue of point valuations. I often get
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the question, "how do I know how much a
point is worth?" and "how do I know if I'm
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getting a good earning and redemption
rate? So in this video, I want to take a
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step back and focus on some points and
miles basics when it comes to
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understanding your point values. For
those of you who've been doing this for
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a while, this might seem like basic
information. But I'm hoping that you all
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can share your tips and knowledge with
others who are new to the hobby and who
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can benefit from your experience. Before
we jump in, if you're new here, welcome to
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our channel. Trip Astute is a travel
channel that is focused on sharing ways
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to make travel easier, affordable, and
more enjoyable. Traveling can be
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stressful and expensive, so we're looking
for ways to help you maximize your
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experience through travel tips, points and
miles, and innovative gear. If that sounds
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interesting to you,
please consider subscribing. A few weeks
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ago in my AwardWallet video, I mentioned
how we can be confusing that a 1.5
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percent card could earn me more points
or value than a two percent card. Since
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it's also a recurring theme in a lot
of my consultations, I figured I'd break
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down the topic of measuring points value
into three parts.
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Number 1: Assessing the value of your
points currency. Number 2: Understanding
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how it relates to your cards earning
rate. And number 3: Determining the actual
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redemption rate for bookings. So let's
start with assessing the value of your
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points currency. Point values are
important to understand when you're
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collecting or investing efforts into
building a collection of cards. The
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easiest way to get a baseline on how
much a points currency is worth is to
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look at The Points Guy's monthly
valuation. The Points Guy releases a list
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every month and does a great job of
breaking down his team's perceived value
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for each point currency. They usually
show the
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previous months value and compares it to
the current month, and notes the reason
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why there might be a change in valuation,
I've heard people criticize The Points Guy
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for their valuations, but I think it's a
good starting point. Pun intended.
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Obviously, your experience or situation
may be different. For example, a lot of
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people get the most value per point when
redeeming for business or first-class
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redemptions. For a lot of people,
including myself, the focus is trying to
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squeeze more travel through economy
class redemptions, which means that the
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target value per point is probably going
to be lower than someone who travels in
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business or first-class. So if that's you,
you might be getting slightly less value
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than what The Points Guy lists. For
example, The Points Guy values Chase
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Ultimate Rewards points at two cents per
point. When I tend to measure the value, I
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usually use 1.5 cents per
point since it's a bit more conservative
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and it's the least amount that I would
redeem, since I can get that rate on the
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Chase Travel Portal with the Sapphire
Reserve. Obviously, I always like to get
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the best redemption value that I can get,
but I'm willing to redeem my points at a
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minimum of 1.5 cents per
point. Also, while measuring the value of
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points is a quantitative judgment,
there's also a qualitative or emotional
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component that factors into the value.
For example, The Points Guy also values
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American Express Membership Rewards
points at two cents per point. Though
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if I were given the choice between
50,000 Membership Rewards or Ultimate
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Rewards points, which are both valued the
same by The Points Guy, I would choose
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the Ultimate Rewards points, only because
I feel like I have more options to
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redeem the points. You might feel
completely different about it, which is
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totally valid. Though for my travel
style,
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I value Chase points more, which means
that it's a more valuable currency to me,
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which might not be captured by looking
solely at the numbers. The same holds
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true for hotel and airline points.
Assuming I could get a hotel or airline
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point at the same value as I could get a
Chase Ultimate Rewards point, I would opt for
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the Chase point. This is because there is
value to me in having that extra
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flexibility to use the points in
different ways. Again, that might not be
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factored into the actual numerical value,
but it's something that I consider.
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Understanding how much a point is worth
also plays into understanding the value
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of a welcome offer. For example, as of
March 2019, the American Express Hilton
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Aspire card offers a welcome offer of
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150,000 Hilton Honors points for spending
$4000 within the first three
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months of account opening. If you factor
that Hilton points are worth 0.6 cents
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per point, then the offer is worth $900.
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Another popular card is the Chase
Sapphire Preferred. Also, as of March 2019,
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it's offering a welcome offer of 50,000
Ultimate Rewards points after spending
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$4000 within the first three
months of account opening. If we go with
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The Points Guy's valuation of two cents
per point, you're looking at $1000
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worth of travel. If you use a
more conservative 1.25
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cents per point, then you're looking at
$625,
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which I would argue is probably more
realistic for the average traveler. So
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now that we understand how much a points
currency is worth, you can now understand
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how much a card actually earns. A common
example of how earning rates might be
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affected by the points value is the
Chase Freedom Unlimited. I've talked to a
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few folks who have asked me why I use
the Freedom Unlimited for a lot of my
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non bonus spend when I could be getting
2% cash back with a Citi Double Cash or
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another card. My response is that even
though the card earns 1.5 X or 1.5% on
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all purchases, it's actually earning a
rate of 2.25% since I value Chase
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Ultimate Rewards points at 1.5
cents. Again if I use The Points Guy's
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valuation of two cents per point, I would
be looking at a 3% return.
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So even though the card has an earning
rate of 1.5 X or 1.5%, it has an
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adjusted to earning rate of 2.25%
when I factor my value for the points
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currency. The way I calculate the
adjusted earning rate is by multiplying the
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cards earning rate with the points value.
This gives me the adjusted rate. So,
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here's another example. Suppose you have
the Chase Sapphire Reserve or Preferred
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card and the World of Hyatt card, and you
stay at a Hyatt Hotel. Which card should
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you use? If we break down the points, we
can see that the Hyatt card has a 4 X
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bonus on purchases at all Hyatt Hotels, while
the Sapphire Reserve and Preferred card
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have a 3 X or 2 X bonus on travel
purchases. If each Hyatt point is worth
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1.7 cents according to The Points Guy, then you're earning about
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6.8
using your World of Hyatt card. If we use
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The Points Guy's value for Chase Ultimate
Rewards points, you'll see that it still
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makes more sense to use the World of
Hyatt card since it earns more at Hyatt
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hotels and resorts. This can also work
the other way. For example, a friend of
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mine was interested in earning Delta
points. While getting a Delta-branded
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card from American Express is not a bad
idea, I suggested that it might be better
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for him to get an American Express
Membership Rewards card like the Gold
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card that could earn points at an
increased rate. For example, since my
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friend spends a lot on dining and
groceries, he could earn a lot more
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Membership Reward points which could
then be transferred over to Delta. Even
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with a transfer fee, he would likely be
able to get more points with an American
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Express charge card then a Delta card
when it comes to his daily spend. I know
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that there are other variables that have
to be weighed and considered like qualifying
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miles and other card perks. But for
simplicity sake, don't assume that
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branded credit cards are always the best
card for earning that specific points
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currency. Now that we know how to measure
the adjusted earning rate of a card by
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factoring the value of the points
currency, how do I know how much value
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I'm getting in my redemption or booking?
To calculate the value of a booking, I
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divide the cash value of the booking by
the equivalent number of points needed.
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This gives me the per point value.
Knowing this information can help inform
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whether I want to transfer points to a
travel partner or book through a travel
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portal. For example, we recently booked a
five-night stay at the Hyatt Place Moab
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in Utah since we'll be exploring some of
the national parks in September. If I
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book the five-night stay using cash, it
would cost me over $1400
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to stay at the hotel. However, it
only costs 8000 points to stay
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per night, so at 40,000 points
total, I'm getting a per point value of
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3.6 cents per point, which is
great. You can use the same method for
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any type of booking where you can
compare both the cash and points cost. In
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fact, we did a video a while back on
when to use to Chase Travel Portal and
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why it's sometimes a better deal than
transferring points to a travel partner.
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In that video, I basically used the same
method to calculate whether I'm getting
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at least 1.5 cents per point.
If not, it makes more sense for me to use
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the Chase Travel Portal to book the
hotel or flight, since I can redeem Chase
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points at 1.5 cents because I have the
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Sapphire Reserve card. Definitely check
out the video for more information on
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the process. Now, if you're watching this
video and saying, "All this math is making
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my head spin. Isn't there an easier way
for people who don't want to spend time
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figuring all this stuff out?" The answer
is yes. There are a lot of flat rate
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travel reward cards out there that will
give you a flat 2% back towards your
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travel expenses. Since these cards
typically redeem at one cent per point, you
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only have to think about the front part
of the equation. And actually, for most of
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these cards, you don't have to think
about it at all since they earn a flat rate.
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These cards can be a great way to earn
and redeem points toward travel without
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the hassle of trying to figure out best
redemption rates. An example of such a
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card is the Barclaycard Arrival Plus.
As of March 2019, there is a limited time
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welcome offer for 70,000 bonus points
after spending $5000 on
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purchases in the first 90 days. This
offer is worth about $700
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since each Barclaycard Arrival
mile, which is not really a mile but
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really a point, is worth one cent per
point. The card earns two points per
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dollar, so it's essentially a 2% cash
back card that you can apply toward travel
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expenses. It does have an annual fee of
$89 but it's waived the first year. These
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types of cards are great for those who
want a simple way to earn and redeem
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points. While you can usually squeeze more
value from a flexible points program
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like Chase's Ultimate Rewards or American
Express' Membership Rewards, they do
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require a lot more time and effort to
research redemption rates. In fact, even
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if you're heavily invested in a program,
it's often worthwhile to have one of
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these flat rate cards to cover
miscellaneous travel expenses. What do
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you all think about point values? I'd
love to hear how much you think your
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favorite points currency is worth. Please
share your thoughts and any additional
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tips in the comment section below. If
you're interested in applying for a new
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credit card, we would love it if you used
our link in the video description or on
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our website. It's an easy way to support
our channel, especially if you found our
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content to be valuable and helpful. Also,
if you need any help with determining
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what your next card should be, sign up
for our free card consultation service.
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You'll basically fill out a
questionnaire and schedule a 15-minute
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video or audio call with me to review
your recommendation. If you enjoyed this
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video and found it useful, please give us
a thumbs up and consider sharing the
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video
others. It really helps with growing our
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channel and our community. Until next
time, travel safe and travel smart.
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