A few years ago, we had an empty nest and were finally in a position to be able to start doing a little more traveling. That was when I started exploring how to use points and miles to help reduce the cost for our travel expenses and stretch our travel budget even further.
It seemed so complicated to me. I read tons of posts and articles on best practices and tried to figure out how to get started. Although I was learning a lot, I didn’t realize that there were so many things to consider or that I should have a strategy that I was following. So I had already made mistakes before I really even got started.
Some Things That Went Wrong for Me.
- In order to take advantage of a 0% interest promotion when we bought new furniture in May 2017, I had to open their store credit card. It was a great way to pay for a big purchase over time without having to pay interest. But it was still a new open account that I would probably not use again in the future. (1)
- We opened a card by Citi way back in December of 2017. When it came, the terms were very different than those that were advertised when we applied. In my frustration, I closed the account immediately without ever using it. Dumb move. (2)
- Next I opened a local bank credit card that didn’t have many perks because I needed a card that wouldn’t charge Foreign Transaction Fees on our trip to Europe in 2018. I should have done some research and opened a Travel Rewards card from one of the big banks instead. It probably would have offered me a better sign up bonus, had some elevated spending categories, and travel benefits beyond just the No Foreign Transaction Fees. (3)
- Because we were using IHG hotels regularly, I decided to opened a card with them that year as well. I was already using their loyalty program and they were constantly promoting their card. It seemed like a good idea. There is nothing wrong with having this card because it gives a good points return when I stay with them and offers 2x points on dining and grocery. At the time, that was the best return I had. However, it probably shouldn’t have been the first travel rewards card that I signed up for. Live and learn. (4)
- After that I decided that it was a better idea to upgrade a very old Rewards Card account we had with Capital One to a Venture card rather than applying for a new card. I am still not sure if maintaining the old account (because it was one of our oldest accounts and we wanted to maintain our excellent credit score) was a better move than getting a big sign up bonus if we had opened a new account.
- Although it wasn’t a card on my radar, last year Southwest had a promotion in January that if you signed up for their credit card and met the spend requirement, you earned 30,000 points and a 1 year Companion Pass. Sorry, not sorry, that I did this. Sorry because it was card (5) in 24 months. That meant I was now in 5/24 Limbo (I will explain this rule later). I am not sorry though because I got a huge amount of value out of this card in 2019. With the Companion Pass I was able to fly my husband to Texas and my daughter to Portland Oregon for just the cost of the taxes and fees. By combining my points with the Companion Pass, my husband and I both flew free to Hawaii. Not too shabby for a card with a pretty low annual fee.
Now that you have seen some of the things I got wrong, here are some pointers for you to help you be successful. Things that I wish I had know before getting started.
#1 Understand the 5/24 Rule (Read this twice…it’s That Important!!)
Chase Bank offers some of the best Travel Reward cards on the market. They offer high performance cards like the Sapphire Preferred and Sapphire Reserve, a line of strong business cards in the Ink series and many co-branded Hotel and Airline cards. That being said, they can be picky about approving new card applications. One of their hard and fast rules is the notorious 5/24 Rule.
The 5/24 Rule says that you can only be approved for a new Chase card if you have opened less that 5 new credit card accounts of any type within the last 24 months. If you have opened more than 5 accounts, you must wait until the month after the oldest account moves out of this range before being able to be approved for another Chase credit card.
I numbered the new accounts throughout my list of my mistakes at the top so you can see how that path landed me in 5/24 Limbo. Now I would have to wait until January 2020 (1 month after the oldest account dropped off) before being able to apply for any new credit cards from Chase. What a bummer.
Since American Express doesn’t use this rule, I opened my American Express Gold card in May of 2019 during my Chase Time Out session. It gave me a chance to focus on that card and earning points for airfare in the fall of 2020. But, it also meant I had to wait for 2 accounts fall off before I could open another Chase card.
# 2 Joint vs Individual Accounts
Most of us married folks tend to sign up jointly for loans and credit cards. Having 2 people tied to the account may strengthen chances of getting approved, but it also limits the available plays in the points and miles game.
First of all if you apply for every Travel Rewards credit card together, you will both hit the 5/24 wall at the same time and you will end up having the exact same cards, perks and benefits. But if you apply separately, you can mix things up a bit more. Maybe player 1 gets an airline card while player 2 gets a hotel card. You can cover more bases in the travel world by having a broader range of Travel Rewards cards.
Additionally, when player 1 opens that airline card they can earn the sign up bonus. By not signing up for a joint account, player 2 would still be able to sign up for that same card at some point and earn a bonus too.
#3 Take Advantage of Free Loyalty Programs
One of the simplest ways to earn points and miles doesn’t even require you to open a credit card accounts. Long before I started getting Travel Rewards cards, I had Loyalty accounts with Hertz Car Rentals, IHG Hotels, Best Western Hotels, and Delta airlines. Almost any major travel related business has a Loyalty program that you can sign up for at no cost. In order to earn points and get valuable discounts, start signing up for these programs whenever you make a hotel, airline or car rental reservation.
If you do eventually get their credit card, you can link it to your loyalty account in order to increase your points return every time you book with them.
#4 Universal Points Cards
Most major banks that offer Travel Rewards cards have a universal points system. Citi has Thank You Points, American Express has Membership Rewards Points, and Chase has Ultimate Rewards Points.
A co-branded card is a credit card that’s issued by a retailer and bears the name of both the retailer and the credit card company. Co-branded cards are often co-sponsored by a major merchant such as a chain store and frequently offer benefits related to the retailer.
Points usually transfer at a 1:1 ratio to other co-branded accounts from the same bank. It is a very good idea to have a card that earns universal points from the same bank that you have any co-branded cards from. It wouldn’t make sense to have a universal American Express card if you have all Chase co-branded cards. No transfer potential.
My husband signed up for the Chase Sapphire card last year so that we would have a universal transfer card with Chase and earn the 60,000 points sign up bonus. We easily transferred 45,000 of those points to his World of Hyatt account (a co-branded hotel) in order to use them for 3 Rewards nights at the amazing Hyatt Centric hotel in Waikiki.
#5 Understand the Value of a Redemption
When I first started building a surplus of IHG points, I would randomly redeem them for a Reward night if I simply had enough points available. I didn’t realize that just because I could get that room for free, didn’t make it was the best use of my points. I was periodically cashing in 20,000 to 30,000 points for an $89 a night room when it would have been better to save those points to use for a higher priced room, or during peak season or for a multiple night redemption that would get me an additional free night. With IHG if you book 4 consecutive Reward nights, the 4th one is free.
Staying the course in order to get the best redemption can be hard. I have been building up my Membership Rewards points bank without spending any since last May. I know the big picture is to use those points for our airfare to Portugal this fall. Even though it can be tempting to use the points for other little things, I have remained disciplined and kept my eye on the bigger prize and best redemption.
#6 How to Maximize the Value you get from your Credit Cards
It’s a good idea to know the perks and benefits that come with your credit cards in order to get the most value from them. Most Travel Rewards cards have an annual fee. You will want to be sure that you get at least enough value out of your cards to offset the cost of that annual fee.
If you are paying a $250 annual fee, but not using any of the benefits, it might not be worth keeping the card (or signing up for it in the first place). On the other hand, if you can take advantage of benefits, credits and offers that reduce your out of pocket expenses enough to offset that fee, it is worth keeping.
You should also consider the earning potential for any card that you sign up for. Look at any elevated earning categories that the card has (like dining, groceries or gas) and try to use that card for those categories in order to earn the most points you can. It’s also great if your cards each have some different elevated earning categories so you can capture the best level of point returns on a bigger share of your spending. Having two cards with just the same high returns on dining doesn’t net you as many points as having one card with a high return on dining and another card with a high return on gas or groceries.
You may want to create a little cheat sheet for your wallet that identifies which card you should use to get the best return for specific purchases like gas, dining, groceries or entertainment.
Read my post Why You Should Complete a Simple Annual Credit Card Points Review for a deeper dive into analyzing costs vs value on your credit cards or Maximizing Returns on Spending With Cash Back Credit Cards for strategies on earning the most points with your credit cards.
#7 Read and Understand the Terms and Conditions for any Offer
When you are about to apply for a new card that has a hefty sign up bonus, it is a good idea to make sure that you understand all the terms and conditions of the offer first. Make sure you know the rules of what purchases count and which do not, and don’t fall into the trap of buying Gift Cards to help meet the bonus spend requirement on any American Express cards. This could negate your offer entirely!
American Express has a Rewards Abuse Team (RAT) who are there just to find people who may be intentionally trying to take advantage of the system. What sometimes happens is they penalize people who inadvertently make the wrong move because they didn’t fully understand the terms of the offer.
Read my recent post Credit Card Sign Up Bonuses for a more in depth discussion on reaching your spend requirement for credit card sign up bonuses and things to watch out for as you do.
#8 Have a Plan
So you have decided that you are ready to get started using points and miles for travel. Good for you! Before you start randomly applying for credit cards, take a look at your needs. Once you determine what you want to achieve, it is easier to see what card you will need to get you there.
Do you have any trips planned for the next 18 months?
If so, is there some part of that trip that you are hoping to cover the cost of with points and miles?
Do you need a card that has No Foreign Transaction Fees, Reimburses for Global Entry application fees or has Primary CDW car rental coverage?
For example, I knew that we would be going to Portugal in the fall of 2020. First I opened an American Express Gold card in May of 2019 in order to start earning as many Membership Rewards points as possible to apply to the airfare. Then I also added a Delta Gold American Express card this year that came with a large sign up bonus. The points from these two cards can be combined to go even further. I gave myself plenty of time to meet my points goal, made good card selections that work together and I am currently on track for Rewards flights for both my husband and I.
The great thing about having the American Express Gold card is that it is a universal card for earning Membership Rewards points. There are plenty of transfer options with those points, it has solid earning potential and many useful perks and offers that help to offset the $250 annual fee.
If you don’t have any specific plans, you might want to start out with a Chase Sapphire Preferred card. It is a solid card with an affordable annual fee that provides premier travel coverage and benefits. It also earns those all important universal Ultimate Rewards points that can easily be transferred to a number of hotel or airline co-branded loyalty programs that are within the Chase family.
#9 Changing Your Ways
Before embarking on my personal points and miles adventure, I understood that using a credit card to pay for groceries, hotels, dining, and other day to day purchases was a great way to earn points. But one of the hardest things for me, was changing my way of thinking about how I pay our regular monthly bills. Previously, I had just used the bill pay feature from my online banking site for those payments. It was fast and easy, but I wasn’t earning any points.
You spend a lot of money every month on cable, internet, phones, garbage, utilities and subscription services. Paying those bills with a rewards card can earn you a lot of extra points or miles every year. Some of your cards may have elevated points categories for paying certain bills like the World of Hyatt Card which gives you 2% back on gym memberships. Another option is if you have a card with a high level of return on all purchases, like the Capital One Venture which gives you 2 points per dollar across the board.
#10 Some Best Practices
Once you have scored your first big redemption, it is easy to get addicted to using points and miles for travel. Be the Tortoise, not the Hare! You will make better decisions for the long haul when you take a slow and steady approach rather than racing around making random choices. Doing too much too fast can sometimes end up undermining your plans.
- Wade in, Don’t Dive! It is recommended that you only open 2 new credit cards per year and that they be about 6 months apart. If you are married, you may want to alternate opening new cards with your spouse.
- Always pay your credit card bills in full each month. If you are paying interest on your credit cards, you aren’t really getting ahead.
- If you have a plan in place for opening new accounts in order to reach a specific goal, try not to get distracted by other tempting offers that may pop up in your path.
- Keep a notebook or spreadsheet for the credit cards that you open. Log the dates you open accounts so you can keep track of your 5/24 status. This also helps you keep track of when your annual fees will hit and when you might receive any anniversary perks on your account.
- Don’t leave money on the table! If you do earn free hotel nights or other perks that will expire, make sure you use them before they expire.
- Read articles by the Pros that will give you helpful tips and keep you informed of what’s new or changing. But don’t try to keep up with them because a lot of them travel all the time. They earn zillions of points per year and can fly around in first class and stay in the best hotels. If you are like me, you have a job and a set amount of vacation to work within and need to be a little more realistic with your expectations.
- Learn the basics before going big. It took me almost 18 months before I planned my first big budget trip using mostly points and miles.
I know this seems like a lot, but it is achievable. Just make a realistic plan and take one step at a time to work towards your goal. Don’t expect to be a pro over night. You can save a lot of money and stretch your travel budget so much further by utilizing points, miles and loyalty programs.
I hope you take at least one helpful nugget away from this post that gets you moving in the right direction and that it helps you start planning and saving on your travel!