Ground Rules

The points game can be intimidating and complicated, so let’s make sure we’re on the same page before we begin.  Below are a few highlights to help avoid some common pitfalls and frustrations associated with travel rewards credit cards.

1) Always pay off your credit card balance each month

If you are paying any interest on your credit cards, this game isn’t for you.  The types of credit cards that offer the largest sign-up bonuses and perks often have high (15-25%) annual interest rates.  Paying these exorbitant interest rates outweigh any benefit that you’d receive from the credit card benefits or points.  Instead, find a low-interest credit card without an annual fee and focus on paying off your credit card debt.

2) Use credit cards rather than cash whenever possible…

We earned the vast majority of our points with credit card sign-ups and have shifted to an almost completely cashless lifestyle.  I have a love affair with Excel spreadsheets, so we literally track every cent that we spend to make sure that we are staying on budget each month.  Certain credit cards can also earn 1.5x, 2x, 3x, and sometimes 5x on specific types of purchases.  So we actively use around five credit cards between the two of us to maximize the bonuses on dining, travel, gas, groceries, etc.  Credit cards make it easier to track expenses, so earning points is just icing on the cake.

3) …but only when it makes financial sense

Bottom Line:  If it costs extra money to pay for something with a credit card, it’s probably not a good deal.

For example, did you know you can pay your federal taxes using a credit card?  I saw the link on the IRS page and started to salivate over all the points we would earn.  Then I realized it costs an extra 2% in processing fees for the convenience of charging taxes to a credit card.  While that’s a lot of points, that 2% would also cost a lot of money.  I’ve also tried to pay home contractors with a credit card, but they would charge an additional 3% fee to use a credit card rather than cash or check.  Broadly speaking, credit card points are worth 1-2 cents/each, so paying 2-3% extra wouldn’t make financial sense.

On the other hand, some business give a discount for paying in cash.  My hairdresser gives a 10% discount for those paying in cash, and since she doesn’t take tips via Venmo yet *eye roll*, my monthly haircut is often the only time I’ll go through the outdated practice of going to an ATM, taking out money, and paying in cash.

4) You need a good credit score to get started

What’s a good credit score? Anything 720+.  For some of the more premium credit cards, you’ll likely need a score of 750+.

Don’t know what your credit score is?  Per federal law, you are entitled to a copy of your credit report from the three major credit bureaus (Equifax, Experian, and TransUnion) each year.  The three credit bureaus may report different scores and different information, so its worth taking a look at each one.

  • Link to the Federal Trade Commission website explaining the law:  FTC Website
  • Link to FTC-approved website offering free credit reports: (We also check each year using this website; it’s not a “hard pull” on your credit, so no worries with the report itself impacting your credit score)

At first, the idea of messing with our credit scores by applying for a bunch of credit cards scared me away from the points game.  Now, our credit scores have actually gone up since we started our journey on September 1, 2015.  I talk more about credit scores here.

5) When redeeming points, flexibility is key

Raise your hand if you have decided on dates and destinations for a trip, then got frustrated when you couldn’t redeem any of your award miles (🙋‍♂️).  What’s the point of having the miles if you can’t redeem them, right?  The Capital One Venture card’s advertising campaign tries to capitalize on this very frustrating but common scenario (but that’s for a separate rant here).

Bottom Line:  You need to go where the points will take you.

That probably means that you can’t use your points to attend your cousin’s wedding in Hawaii over Memorial Day weekend.  Holiday weekends are a popular time to travel to many different destinations, and airlines will naturally try to maximize the number of paying customers on those flights.  But if you search for an award flight on Emirates airlines when they first release award flight availability (330 days out), there’s a better chance you’ll find redemption options.

6) Award travel in business or first class provides the most value

Before we started saving points for our around-the-world trip, we probably had the same strategy as many of our peers.  I signed up for the United Explorer credit card for 50,000 MileagePlus miles, and when combined with the MileagePlus miles I already had in my account, we redeemed the miles for two free round-trip tickets (in economy class) to Colombia and Ecuador.  I thought I was a total points ninja.

We had a great trip, and I’m still happy with that award ticket.  But we redeemed a total of 80,000 United MileagePlus miles for the equivalent of $1,200 in airfare ($600×2).  That means that each MileagePlus mile was worth 1.5 cents, giving a return of 1.5% on our award miles.

Let’s compare that with our redemption on Emirates business class to the Maldives.  Between the two of us, we compiled 165,000 Alaska Airline miles.  Since Alaska Airlines is a partner airline with Emirates, we were able to redeem those miles for award travel for two in Emirates business class from Washington, DC, to Dubai, and then Dubai to the Maldives.  The cash value for that that itinerary was *gulp* $16,196.  That gives a valuation of 9.8 cents/mile ($16,196/165,000 Alaska Airline miles).  That return is MUCH better than our previous redemption to South America, and the experience in Emirates business class was something that we would have never paid for ourselves.

Each person has their own travel priorities, so maybe those 165,000 Alaska Airlines miles would be better spent on multiple economy flights in the United States.  Though for the greatest return on investment (and for the experience many of us wouldn’t be able to enjoy otherwise), business class redemptions provide the most value.

7) Award travel isn’t always free

Some airlines only charge small fees and taxes when redeeming airline miles.  Others pass along certain surcharges, which means that your “free” award ticket for travel may cost over $500 (like British Airways 👎).

Also, many credit cards do not have an annual fee or waive the first year’s annual fee for new members.  However, some valuable point-earning credit cards do charge an annual fee.  It’s important to be aware of some of the potential costs associated with earning and redeeming points so you can craft an appropriate strategy.

For example, for our around-the-world airfare, the award flights cost us about $440 each in taxes and fees.  While most of the credit cards we used to acquire the miles did not have an annual fee, we did have to pay the annual fee for some (like the $75 fee on the Alaska Airlines credit card).

Now that we’ve laid the ground rules, let’s get to the good stuff!

1. Ground Rules

2. But My Credit Score…

3. Credit Card Currencies

4. Finding Value in Points

5. Award Availability

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