Travel on Points and Miles
Have you watched in envy as travel influencers on social media seemingly travel the world non-stop for little to no out of pocket expenses and wondered how in the world they make it happen? Although some of what you see on social media is of course over inflated, the reality is that through earning credit card points and miles, you can start earning nearly free travel yourself! So how does travel on points and miles work?
Earning Points and Miles
There are many ways to earn points and miles through utilizing credit cards. By signing up for a credit card, you are often eligible for a ‘sign-up bonus or welcome offer’, which can earn you a certain amount of points if you spend a specified minimum amount of money on the card within a given time frame. For example, the welcome offer may be something like ‘Earn 60,000 points by spending a minimum of $4000 in 3 months.’ After meeting the minimum spending requirement, the 60,000 points are yours to redeem for travel! Those 60,000 points are typically worth at least $600 worth of travel. By repeating this process with multiple credit card offers, you are able to earn and redeem thousands of travel reward points!
Types of Credit Cards
As you start exploring the world of traveling on points and miles, you will find that there are lots of different types of credit cards out there. These include credit cards that are specific to hotel and airline brands, such as the Southwest Airlines Credit Cards or the Hilton Honors Credit Cards. When you earn points and miles through these credit cards, you are earning the points and miles specifically for that particular airline or hotel only and can be redeemed for travel only at those airline and hotel chains. Because of this, these credit cards are a little more restrictive in their use.
The other types of credit cards you will find are transferable point cards through the major banks. The biggest players in this arena are Chase, Citi, Capital One and American Express, although there are others as well. Some examples of cards you will see from this type of travel reward credit card are the Chase Sapphire Preferred and the Capital One Venture X. The advantage to having these credit cards is the points and miles earned can be transferred to their hotel and airline travel partners, which means you often have a larger selection of travel options to book with. Because of this, these are more flexible points to earn and have.
Credit Card Annual Fees
One of my major reluctance initially to jumping into the world of credit card points and miles was signing up for cards that required me to pay an annual fee. While there are some credit cards out there with no annual fee requirements, the majority of the cards charge anywhere between $69 – $99. However some of the more luxury credit cards can charge annual fees ranging from $250 – nearly $700! The catch is, those annual fees are generally in exchange for some pretty good benefits, such as a free night certificate for a hotel stay, travel credits, lounge access at airports, and much more. You just have to decide if the benefits for a particular card outweigh the annual fee and if you will actually use all the benefits that come with the card. In general, the first year having the card is definitely worth the annual fee since you have also earned the welcome bonus. After the first year, you need to decide if the benefits are worth paying another year’s worth of annual fees.
Rules of the Game
Chase has an unwritten rule called the 5/24 rule that specifies if you have opened 5 new credit cards in the past 24 months from any bank, you will not be approved for another card from Chase. Most business credit cards do not count towards the 5/24 count, however if you are already over 5/24 and try to apply for another Chase business card, you will likely be denied. Another thing to keep in mind is that if you are an authorized user on a card, this does count toward your 5/24 number.
Will My Credit Score Be Affected?
The thought of your credit score dropping is a very real concern for many people interested in dipping their toes into the travel reward sphere. There are several factors that make up how your credit score is calculated, including credit card utilization (how much of your available credit you are using at any one time), payment history (how often you have made on-time payments), derogatory marks (history of bankruptcy, accounts in collections, etc), age of credit history (how long you have been managing credit), total accounts (including credit cards, bank accounts, loans, mortgages), and hard inquiries or pulls on your credit history, which happen each time you apply for a new loan or credit card.
We are certainly not financial advisors but one major recommendation in the points and miles world is to pay off your credit card in full and on time each month! If you are struggling with credit card debt or have a hard time remembering to pay bills on time, this may not be the most ideal hobby for you to pick up. Another thing to consider is that if you are in the market for a big purchase, i.e. a new car or house, you may want to take a break from credit cards for a while.
What Tools Can Help Me?
You’ve earned your points and are ready to redeem for some awesome travel, so now what? There are some amazing tools and search engines at your disposal to help with your redemption, some free and some for a cost. Visit our Resources page to find our favorite tools to help utilize our points the most effectively!
Ready to start?
Are you ready to start earning travel reward points and miles? Visit our Best Starter Credit Card page for recommendations on which cards to start adding to your wallet and get started on your journeys!
