Introduction to Credit Card Rewards

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Over the past three years, I have literally saved tens of thousands of dollars on travel using credit card rewards. I know what you’re thinking – this must be some type of scam. I get it. I used to think the exact same thing … until I opened my first card, earned the points, and booked a round trip flight from Chicago to LA for $11.20.

 

It’s actually a lot easier than you think. And this page will show you exactly how to get started with credit card rewards and detail all of the best strategies.

 

Please do not attempt these strategies if you cannot pay your cards off in full and on time every month.

My #1 Most Recommended Rewards Card for Beginners

This is my #1 most recommended card for those who are just starting out. The Chase Sapphire Preferred Card currently has a 60,000 point sign-up bonus (after spending $4,000 in the first 3 months). Plus, it’s super easy to redeem the rewards with travel partners or directly through the Chase Portal. $95 Annual Fee.

The Four Types of Credit Card Rewards

But before you apply for your first card, it’s important to understand the four different types of credit card rewards. Let’s do it!

1. TRANSFERABLE POINTS CARDS

Transferable Points Cards basically work like this: You earn transferable points with your credit card through strategic spending and sign-up bonuses. Those miles and points are accumulated and stored in your account. Then, when you’re ready to book a trip, you can transfer those points to an airline or hotel partner for some seriously sweet redemptions!

 

There are three main players in the transferable points space: Chase Ultimate Rewards, Citi ThankYou, and Amex Membership Rewards. Transferable Points Cards are my personal favorite because you can get an insane amount of value out of them.

 

Important: If you cancel your Transferable Points card before using or transferring your points, you will lose them all.

Chase Ultimate Rewards

Chase Ultimate Rewards (“UR”) points are incredibly powerful because of the extensive partnership network that Chase has. As of 2019, here are all of the Chase UR partners.

Airline Partners:

 

  • Aer Lingus AerClub
  • Air France/KLM Flying Blue
  • British Airway Avios
  • Iberia Plus
  • JetBlue TrueBlue
  • Singapore Airlines KrisFlyer
  • Southwest Airlines Rapid Rewards
  • United Airlines MileagePlus
  • Virgin Atlantic Flying Club

Hotel Partners:

 

  • World of Hyatt
  • IHG Rewards Club
  • Marriott Rewards
  • Ritz Carlton Rewards

For your first rewards card, I always recommend starting with the Chase Sapphire Preferred (more on this later).

Citi ThankYou

Citi ThankYou Points operate similarly to Chase UR points where you earn points or miles and then transfer them to a partner in the Citi ThankYou network. As of 2019, here is a list of all the Citi ThankYou partners:

  • Asia Miles
  • Avianca LifeMiles
  • EVA Air Infinity MileageLands
  • Etihad Guest
  • Air France/KLM Flying Blue
  • JetBlue TrueBlue
  • Jet Airways JetPrivilege
  • Garuda Indonesia Frequent Flyer
  • Malaysia Airlines Enrich
  • Qantas Frequent Flyer
  • Qatar Airways Privilege Club
  • Singapore Airlines KrisFlyer
  • Thai Airways Royal Orchid Plus
  • Turkish Airlines
  • Virgin Atlantic Flying Club
Citi Premier Credit Card

Amex Membership Rewards

The last of the big three is Amex Membership Rewards. As of 2019, here is a list of all the Amex Membership Rewards partners.

Airline Partners:

 

  • Aer Lingus AerClub
  • Aeromexico
  • Air Canada Aeroplan
  • KLM and Air France Flying Blue
  • Alitalia Milemiglia
  • ANA Airlines
  • Asia Miles
  • Avianca Lifemiles
  • British Airways Avios
  • Delta Skymiles
  • El Al
  • Emirates Skywards
  • Etihad Guest
  • Hawaiian Airlines
  • Iberia Plus
  • JetBlue TrueBlue
  • Singapore Airlines KrisFlyer
  • Virgin Atlantic FlyingClub

Hotel Partners:

 

  • Choice Privileges
  • Hilton Honors
  • Marriott Rewards

Currently, the best Amex card offer is the Platinum Card. I definitely recommend you check out this card and others in the Amex Membership Rewards family (Terms Apply).

American Express Platinum Card Image

2. BRANDED AIRLINE/HOTEL CARDS

Unlike the Transferable Points Cards where you can transfer your points to a number of different partners for redemption, Branded Cards are tied to one specific airline or hotel.

 

For example, if I were to open a Southwest Airlines Rapid Rewards Premier Credit Card, the points that I earn would automatically transfer to my Southwest account. Consequently, these points could only be used to book Southwest flights (or their travel partners in specific cases).

When opening a Branded Card, it’s important to strategically select an airline or hotel brand that you’ll actually use. The cool thing is that even if you cancel the credit card you accumulated the points on, you’ll still keep the points on your brand’s account! Some points expire after a specified period of time (usually at least 24 months), so make sure to look at the terms and conditions.

 

If you want to maximize your credit card rewards in 2019, check out the best Branded Card options.

3. CASH BACK TRAVEL CARDS

Cash Back Travel Cards are perfect for any non-airline and non-hotel travel expenses such as cruises, Uber, Airbnb, rental cars, expeditions, and so on. The key thing here is that, in order to use your points, the expense must be coded as “travel”.

 

The reason why I love these cards so much is that they typically offer lucrative sign-up bonuses and great travel perks. And plus they are super easy to use.

 

Here’s how they work:

 

First, you accumulate the points on your Cash Back Travel Card. Next, you book/pay for your “travel” coded expense on the card. Lastly, after the payment has processed, you log on to the credit card website and erase the cost of the purchase using your points. It’s that easy!

 

My personal favorite Cash Back Travel credit cards are the Capital One Venture and Barclays Arrival Plus. I’ve used these cards to cover thousands of dollars in non-airline and -hotel travel expenses. Check out some of the best Cash Back Travel cards.

4. CASH BACK CARDS

Cash Back Cards are exactly what they sound like. You earn points via spending and/or a sign up bonus and then use those points to add credit or “cash” back to your account.

 

If you’re not into travel, these cards are an excellent way to get immense value out of your everyday spending. If you are into travel, these types of cards can function similarly to the Cash Back Travel Cards (although the sign-up bonuses are often less lucrative).

 

My current Cash Back favorite is the Capital One Savor card. With its current offer, you earn a one-time $500 cash back bonus after you spend $3,000 within 3 months of account opening. Plus, you get awesome perks like no foreign transaction fees and no annual fee for the first year. I highly recommend checking this card out.

Capital One Savor Credit Card

There are so many other great Cash Back options in addition to the Capital One Savor card. Compare all of your Cash Back options and decide which card works best with your credit card rewards strategy.

HOW TO MAXIMIZE YOUR CREDIT CARD REWARDS

Credit Card Rewards can be as simple or complicated as you want them to be. Some people are super hardcore and others just like to keep it simple. It’s completely up to you!

 

I’ll go over some of the basic strategies and best practices when it comes to credit cards, and you can decide how deep down the rabbit hole you’ll go.

ALWAYS OPEN CHASE CARDS FIRST

Like I mentioned earlier in this post, Chase Ultimate Rewards points are probably the most valuable “travel currency” you can get. With that being said, there are some rules and restrictions around acquiring Chase cards. One of the most important restrictions to be aware of is the Chase 5/24 rule.

 

Basically, the 5/24 rule states that if you have opened 5 credit cards within the past 24 months, you will NOT be approved for any Chase credit card (with some exceptions). Since the Chase cards are so valuable, that’s why I recommend getting them first before you exceed the 5/24 rule.

 

If you’re wondering which card you should start with, I always recommend the Chase Sapphire Preferred. Currently, the card offers a 60,000 point bonus after you spend $4,000 within 3 months of account opening. That’s at least $750 in free travel when you book through Chase or its partners.

If you’re already over the Chase 5/24 rule, don’t worry! There are still plenty of great options for you.

SIGN-UP BONUSES ARE KEY

This is where most people get it wrong. Often times, people will get one rewards credit card and hold onto it for several years. However, this is far from optimal and results in TONS of points being left on the table.

 

So what exactly is a sign-up bonus? Typically, the offer reads something like this:

“Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening.”

Let me show you just how powerful these sign-up bonuses are with an example.

 

Chad spends $2,999 in three months on his Chase Sapphire Preferred card. He earns 5,998 points ($2,999 x 2 points per dollar spent).

 

Julie spends $3,000 in three months on her Chase Sapphire Preferred card. She earns 56,000 points ($3,000 x 2 points per dollar spent + 50,000 point sign-up bonus).

 

Since every 100 points are worth $1.25 (or more) with the Chase Sapphire Preferred, this leaves Chad with $74.98 and Julie with $560 in travel credit. That’s a $485.02 difference in travel credit from ONE DOLLAR more in spending!

 

Just for frame of reference, 60,000 points will get you a round trip ticket from the U.S. to Europe! All you have to pay is a little bit in taxes and fees.

 

Hopefully, now you see just how insane these sign-up bonuses are. Now let’s focus on hitting the minimum spend to actually earn these bonuses.

HITTING THE MINIMUM SPEND

The first thing to understand is that you definitely DO NOT want to make extraneous purchases just to hit a minimum spend. There are plenty of other viable strategies that don’t involve spending additional money.

 

1. Move all of your regular spending onto your new credit card. This should include bills, groceries, gas, entertainment, and anything else that you spend your money on in a given month. If your regular spending is too low to hit the sign-up bonus, don’t worry, you have a few more tricks up your sleeve.

 

2Prepay bills and utilities. Most companies including your insurance, electric, heat, gas, etc. are more than happy to accept prepayments. Plus, you get to put money toward your minimum spend that you would have spent in the future anyway. It’s a win-win.

 

3. Utilize friends and family. Adding a trusted friend or family member as an authorized user is a great way to increase your spending. The key word here is trustworthy. Plus, a lot of credit cards will grant you some additional points for each authorized user you add.

 

Using these strategies can really supercharge your spending and allow you to hit sign-up bonuses on more and more credit cards. One of my good friends opens up a new card almost every single month and hits the minimum spend!

DISPELLING CREDIT CARD MYTHS

The #1 question I get regarding credit card rewards is “But Grant, won’t this negatively affect my credit score?”.

 

The simple answer is “no”, but I want to take the time to break down how and why your credit score is affected by credit card rewards.

FICO Score Categories Graphic

PAYMENT HISTORY (35%)

Your payment history score is comprised of three factors: Size of payment, lateness of payment, and historical frequency of late payments. Even one missed or late payment can drastically reduce your credit score.

 

However, none of these factors should be affected by taking advantage of credit card rewards. Like I mentioned earlier, if you cannot afford to make your payments in full and on time, then you shouldn’t be attempting these strategies anyway.

UTILIZATION (30%)

Your utilization rate is calculated by dividing your total outstanding balance by all your available credit. For example, if you have three credit cards open with a total combined credit limit of $10,000 and have a $2,000 outstanding balance, your utilization rate would be 20% ($2,000/$10,000).

 

Utilization rate should not be negatively affected by these credit card rewards strategies. If you happen to have a high utilization rate at any given time, you can always pay your card down early. Credit card rating agencies have stated that a 10% utilization rate is ideal.

LENGTH OF CREDIT HISTORY (15%)

Basically, your length of credit history is determined by taking the average “age” of all your outstanding credit. If you opened a credit card three years ago, the “age” of that card would be 3 years. The longer your credit history the better.

 

This factor may be slightly impacted by using these credit card rewards strategies, but not significantly. Since you’re opening up a new card, by default, your average length of credit history will decrease. However, this barely moves the needle for most people who have had any type of existing credit (mortgage, auto loan, credit cards).

CREDIT MIX (10%)

Your credit mix score is impacted by the total number and type of credit accounts you have open. The more expansive and diversified your credit mix is, the better.

 

Your credit mix is actually boosted by utilizing these credit card rewards strategies. Each new card that you open adds diversity to your outstanding credit.

RECENT ACTIVITY (10%)

Your recent activity score is based on your credit history over the past six months. This includes number of new accounts, date of most recent account opening, and quantity of recent credit requests. Whenever you apply for a new credit card, the card issuer will perform what is a called a “hard inquiry” on your credit report to determine if you’re eligible for the card.

 

Implementing these credit card rewards strategies will slightly reduce your recent activity score for a very short period of time. In my experience, my credit score drops between 3-5 points after applying for a new credit card. However, my score always bounces back after about 3 months. If you’re applying for a large loan like a mortgage within the next 1-3 months, it might be worth waiting to apply for your new credit card. 5 points on your credit score could potentially make a difference with your mortgage lender.

IS IT Worth IT?

Taking advantage of these credit card rewards strategies will not significantly impact your credit score. I have opened over 30 credit cards and maintain a credit score of 847. As long as you’re responsible and intentional with your credit cards, these strategies can unlock thousands of dollars in “free” travel!

 

Here are some general figures for just how much value you can get out of your points/miles:

 

Domestic U.S. to Domestic U.S. (Round Trip) = 25,000 points or less

Domestic U.S. to Europe/Africa (Round Trip)  = 60,000 points or less

Domestic U.S. to Asia/Oceania (Round Trip) = 80,000 points or less

 

Like I mentioned before, if you’re completely new to credit card rewards, you can’t go wrong with the Chase Sapphire Preferred Card.

My #1 Most Recommended Rewards Card for Beginners

This is my #1 most recommended card for those who are just starting out. The Chase Sapphire Preferred Card currently has a 60,000 point sign-up bonus (after spending $4,000 in the first 3 months). Plus, it’s super easy to redeem the rewards with travel partners or directly through the Chase Portal. $95 Annual Fee.

But, what are you waiting for? Get out there and earn yourself a FREE vacation! You deserve it.

 

Welcome to the world of credit card rewards!

 

The editorial content on this page is not provided by any of the companies mentioned, and have not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are the author’s alone.

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