May your points take you on many adventures, such as this one aboard United Airlines. Points earned through travel credit cards not affiliated with a specific airline can be redeemed for travel on all of the major carriers.
We've nibbled around the edges of this concept in the past, but today we're directly addressing the notion of smartly using credit card points to travel further for less money. Note that we're not talking here about using points to travel more luxuriously, i.e. in various first class arrangements, for that is another topic for another time. That's a very valid approach, but we're focused here on the basics of using your points to save your money for travel's finer things (dare we say wine?).
Wine:Thirty Flight flies often with little or no cash spent on tickets. We do this by following three simple rules: Use your credit card(s) to cover as many of your daily expenses as possible, always earn more than one point per dollar spent, and use the points you earn to book free airline tickets. This method of travel has serious aficionados, and if you're going to be a true geek about it (like I am and Meghan is not), then we recommend you start with the very good Beginners Guide to Miles and Points over at the (also quite good) One Mile at a Time blog. Our intent here is to develop a basic strategy for travelers simply not interested in devoting huge amounts of time to studying the technique.
Broadly speaking, there are two types of travel credit cards:
- Cards that are not affiliated with a specific airline, and earn you points that can be spent on most or all airlines, and
- Cards that are co-branded with a specific airline, and earn you points (often called "miles") that can be spent only on that airline (or its partners).
We think that the category one type of cards above are usually a much better value for casual to moderately intense travelers, so we'll focus on those here. For context, the category two cards are what you hear being hawked by the flight attendant (who we are sure is sick of talking about them) as you sit trying to nap on your plane.
Rule One: Use your credit card(s) to cover as many of your expenses as possible
We'll begin with a few basic facts. First, the idea here is to maximize your rewards by participating in the incentive programs that airlines and credit cards offer. Second, pay your balance every month; don't get in over your head. Third, it's generally OK to open multiple credit cards as long as you don't get carried away. The bottom line is that, long as you pay off your balance each month, it doesn't make any sense to pay cash for anything you don't absolutely have to. Use your travel-points-earning credit card instead.
The most valuable cards change somewhat over time as their incentives change, but as of this writing we've felt that the Chase Sapphire Preferred (valuable rewards at a $95 annual fee) and the Citi Prestige (outrageously valuable rewards but with a $450 annual fee, though you do get $250 of that back in automatic travel credit each year) are some of the very best. On the annual fee, note that you'll almost certainly make up the $95 annual fee in travel rewards, and we find that we easily make up the $450 fee as well.
Also keep in mind that many of these cards will advertise a sign-on bonus. Chase, for example, will currently give you 50,000 bonus points if you spend at least $4,000 total on the card in the first three months of opening your account. Citi will do likewise with 50,000 bonus points if you spend $3,000 total in the first three months. These offers change from time to time, but they are great ways to maximize your point earning straight out of the gate.
Rule Two: Always earn more than one point per dollar spent
Wait, but how? It's easier than you might think. Many travel cards (such as the two we've recommended) have built in bonuses like earning two times (2x) points at restaurants, hotels, or gas stations. What's more, the points on several of these cards are worth extra when booking airline tickets. For example, using the Chase Sapphire Preferred card at a restaurant will earn you two points for every dollar spent, but then each of those points is actually worth 1.25x when used to book airline tickets through Chase's website. That means that every dollar you spend at a restaurant using that particular Chase card is worth 2.5 points ($1 x 2 x 1.25 = 2.5pts). To determine dollar value (important when purchasing airline tickets based on their dollar value), generally divide by 100, meaning that 2.5 points is worth $.025 a.k.a. 2.5 cents. It does't seem like a lot, but it adds up; another way to think of this is that employing this particular card in this particular way means that you instantly get 2.5% off (in the form of plane tickets) on every restaurant purchase you make, from the local sandwich counter to the swankiest romantic dinner.
The Chase Ink Business Plus card (which you need not be a business to sign up for, think self-employed consultants, home businesses, or independent contractors) offers 5x points on telecommunications and purchases at office supply stores. That means that a couple paying an average of $100 each per month for cell service and an additional $100 on home cable and Internet can rack up 22,500 points per year, or $225 in plane tickets, just by using this specific card to charge purchases they were already going to make ($300 x 12 months x 5pts x 1.25 multiplier = 22,500pts). The Ink Business Plus card is even more efficient when you use it to purchase gift cards to say Target or Starbucks at office supply stores for that same 5x multiple; the net effect is that you'd get 6.25% off (again, in the form of plane tickets) every purchase you make at Starbucks or Target. The trick is strategically mixing and matching cards so that you make purchases using the card whose return is most generous on the specific purchase type you are making.
Rule Three: Use the points you earn to book free airline tickets
This one's pretty easy. Travel rewards credit cards from big issuers like Citi and Chase provide a website through which card holders can book rewards travel. Typically a user logs in, searches for flights just as they would on Google Flights or the airline's website, and then books flights using points rather than actual money. We generally think that those points aren't appreciating in value, so it doesn't make a lot of sense to sit on them for years. That said, we also like to maintain a reserve for a rainy day (how much that should be is a personal choice for you to make based on your spending and travel habits). Travel credit cards yield the most reward value when being used for travel, but beware the things that will distract you from using your points to book tickets. Most reward schemes also allow you to redeem points for cash back, usually in the form of a statement credit and usually at a rate of 100 points per dollar. This is a poor value. For example, redeeming 50,000 Chase points for cash back will give you $500 in statement credit (50,000 / 100 = $500). Those same points could be used for $625 of travel because Chase values points at 1.25 x when booking air travel (50,000 / 100 x 1.25 = $625). The same analogy holds up for using your points to buy stuff. They are almost always most valuable when used for travel.
A final word on traveling further for less money vs traveling more luxuriously...
I mentioned earlier that this post would primarily address using credit card points to travel further for less money. This is a personal preference type thing, where we generally prefer using our points to book economy class tickets. Because these are cheaper than business and first class tickets, they require less points, so we can travel more often. There is a perfectly valid argument to be made for using your points to book premium cabin seats, and there are a number of methods you can use to get the most value doing this. Again, another topic for another time.