Sipping champagne in first-class when flying sure beats crunched legs and fighting for peanuts in coach. Even better is if you don’t have to pay for such luxury VIP treatment as you head toward your stay at a five-star hotel for free. This and more can be yours if you can master the way of the credit rewards buff.
If you’ve already dabbled in rewards points, you’re better off than the 31 percent of people who say they’ve never redeemed any card rewards. But there is so much more to explore!
If you have a healthy credit score and pay your bills in full each month, there’s no reason why you shouldn’t take advantage of the benefits that rewards credit cards have to offer. However, taking your rewards game to “wow” levels requires a bit of ingenuity and skill.
“It’s important to manage your expectations when you’re just starting out,” says Jake Serfas, lead financial strategist with O’Dell, Winkfield, Roseman & Shipp, a wealth management firm. “You can’t just expect to get a lavish vacation by spending more on your credit cards. It requires a tremendous amount of discipline to not only stay on track, but to maximize rewards programs.”
Still, a little inspiration goes a long way, which is why we turned to three credit rewards power users for an inside look into their point prowess.
Meet the pros
John Perri, creator of the John the Wanderer Blog
Favorite reward experience: Traveling first-class on Cathay Pacific from Los Angeles to Hong Kong.
“I got to relax in the private cabin aboard the 777-300 and drink a couple of bottles of very expensive champagne, and enjoyed lobster and caviar up in the air. In addition, the ground experience using the first-class lounge at The Pier and The Wing in Hong Kong was incredible, from the private room overlooking the tarmac to the table service meal.”
Lee Huffman, travel blogger at BaldThoughts.com
Favorite reward experience: A romantic vacation for two to Italy in December 2016.
“We flew business-class from California to Rome and stayed in five-star resorts in Rome and Milan. If we had paid retail for this vacation, it would have been about $12,000. By using airline miles and hotel points, we paid around $1,000.”
Jamie Larounis, founder of The Forward Cabin
Favorite reward experience: Traveling to Australia twice in 2016.
“I was in Qantas first-class, regarded as one of the best premium airline products out there, for less than a $100 in taxes and fees. I stayed at the Park Hyatt Sydney completely free, with a beautiful room overlooking the Sydney Opera House. A ticket like this to Australia normally would run in the $10,000-plus range, one-way, and a room at the Park Hyatt can easily cost over $1,000 a night for such a prime view.”
Now that you’ve been inspired by the lavish experiences that could be funded on your credit card company’s dime, here’s how they do it:
1. They treat their credit cards like debit cards and out-earn fees.
The bigger the bonus, the higher the spending that might be required to earn those points in a short time frame. And if you’re carrying cards with high annual fees — the cards that offer the biggest rewards — you’ll have to spend a certain amount per year in order to come out on top.
Huffman finds that perks, including primary rental car insurance, airport lounge access, free checked bags, priority boarding and top-tier loyalty program status usually make the fees worthwhile. He also receives one free night every year on his Marriott, Hyatt and IHG hotel credit cards, which he says are worth far more than what he pays in annual fees.
Successful rewards hackers have the discipline to crunch the numbers and spend just enough on their plastic to maximize points, but only on expenses they’d have anyway. In other words, they plan out their spending and pay the balance off every month to avoid paying interest.
“I do my best to treat all purchases like it is a debit card. I want to be sure that I do not add debt because the interest outweighs the miles and points earned on the cards,” says Perri. To keep himself accountable, he sets up automatic payment from his checking account to cover the statement balance on his cards.
Bonus tip: Huffman goes a step further by paying off credit debt every time he uses his card. “One of the tools I recommend using is Debitize. Whenever you use your credit cards, it pulls the purchase amount from your checking account and pays the credit card company,” he says.
2. They know their credit scores at all times.
Qualifying for elite rewards cards and growing your credit limits require that you maintain stellar credit scores, and with so much activity on multiple accounts, being diligent is key.
“My credit score is vitally important to me,” says Huffman, “so I’m very mindful of how my actions affect my score.” That’s one of the reasons he pays off his cards before the statement closes, so that the temporary large balances are not reported to the credit bureaus. Otherwise, his debt utilization (the amount of debt carried as compared to the total credit limit) might seem like it’s high with the amount of spending he does on the card. Credit utilization is the second most important factor affecting your score, right behind making on-time payments. It’s also helpful to contact each card issuer to find out when they report balances and payment activity to the credit bureaus as the reporting times may differ from card to card.
Larounis points out that other activity, such as opening and closing accounts, which point collectors do routinely, can temporarily ding your score. “It’s minor things like that that are worth keeping track of,” he says. So, carefully spacing out applications and account closings is key.
Bonus tip: Besides keeping your credit pristine for qualifying purposes, it’s also a good idea to monitor your statements, says Serfas. “The potential for ID theft could be higher for those with a lot of open accounts,” he says.
3. They routinely open new cards for bonus points.
Our three hackers each say they have a few trusty cards they maintain over the long term, but they’re always on the look out for enticing sign-up bonuses that can be earned by opening new accounts.
“It’s the best way to earn a ton of miles and points,” says Perri. “Once I’m no longer getting value out of the card, I will downgrade to a non-fee version, if possible, but will keep it open because that helps with building credit,” he says, as well as keeping his scores intact.
In addition to bonuses, Huffman says it’s worth it to reevaluate your wallet every year. “Card benefits and hotel and airline loyalty programs change all the time, so what works today may no longer be beneficial for you next year,” he says. That’s why he recommends shopping around to see if a different program or credit card better fits your needs.
Larounis thinks about two criteria before opening a new account: “How many points I’ll receive just for opening the card and meeting a spending threshold, and how much of a return I’ll get from the card with usual spending. In other words, what are the category bonuses and credit card perks that make it worthwhile to use the card,” he says.
Also, unless you plan to stay loyal to one airline or hotel chain, look for programs that allow you to transfer points, says Perri.
Bonus tip: Look carefully at bonus point requirements and have a spending plan in place to meet that before you apply to avoid racking up unnecessary charges.
4. They are detailed oriented and organized.
When using multiple cards with different promotional period deadlines and rotating spending categories, it takes some savvy to figure out which card will give you the most value for a particular purchase. “You don’t want to pay for an airline ticket with a credit card that only earns 1 point per dollar. Put it on the card that earns 5 points per dollar,” says Larounis.
For instance, Larounis explains, let’s say you spend $2,500 on airfare on the American Express Platinum card, which carries a $550-plus annual fee. That $2,500 converts to 5x the points when booked directly with the airline or with American Express Travel, which would mean you earn 12,500 points. With those points, you can get you a one-way ticket anywhere in the U.S. So as long as that one-way ticket is more than the annual fee of the card, you’ve already made back your fee with that one purchase.
Keeping track of program specifics takes a bit of work, they say, but apps such as AwardWallet or ThePointsGuy’s WalletMaximizer can help you keep tabs on changing points values and monitor your miles.
Bonus tip: Perri says he uses an old-fashioned spreadsheet. “When I am trying to reach specific spend thresholds, I set up an Excel spreadsheet so I can be sure that the account opening bonuses and other bonuses are met in the right timeframe,” he says.
5. They set clear goals.
There’s nothing wrong with building up points and then redeeming them for cash, statement credits or gift cards if that’s more your style. However, if you’re looking to capitalize on elite, reward-funded travel experiences, you’ll need a purposeful spending game plan.
“When my wife told me that she wanted to visit Paris in 2011, that’s when I had to get serious, because there was no way I wanted to pay thousands of dollars for a single vacation,” says Huffman.
Whatever your personal goal, do the research to learn what it will take to achieve it, such as how many points you’ll need for free flights and hotel stays, says Larounis.
Bonus tip: Work those categories to reach your goals, says Larounis. For example, say your card is giving bonus points for spend at office supply stores, but you don’t frequent them all that much. However, since many of them also carry gift cards to popular merchants, you could stock up on cards to your favorite restaurant or retailer, thus earning more points than you otherwise, he says.
6. They understand the ins and outs of the travel industry.
Besides learning how to earn points, figuring out the best times to redeem them is also an art. “For first-class travel, you often need to wait until the last minute to book using miles and points,” says Perri. His strategy is to book award travel in economy and business class well in advance, and then a day or so before the flight, call in to redeem the additional miles to move up to first class.
He suggests being open to different airports, departure and arrival days, and connecting airports as well.
Whatever you do, don’t hoard your points, says Huffman. “Don’t accumulate miles and points like they are a travel 401(k). Airlines and hotels will reduce the value of your points every year or two, so your best strategy is to focus earning rewards toward a specific vacation, redeem for that vacation, then start all over again. In the travel world, that strategy is called ‘earn and burn.’”
Bonus tip: Perri uses two cards in tandem to boost his airline miles. “Pick a credit card in a specific airline program you use with a large sign-up bonus, as well as a card with the ability to transfer points between a number of programs. Earn the sign-up bonuses on each, and then maximize your everyday spend on the card that offers transferability,” he says.
Think you’ve got what it takes to become a world traveler thanks to credit card points and miles? Serfas recommends starting off slowly and working your way up. “If your bills are $3,000 a month, start by putting 25 percent of that on your cards to make sure you have the discipline to make the payments,” he suggests. Once you feel comfortable, you can try tactics to boost your spending.
Huffman’s plan is genius: “I set aside specific online savings accounts for annual expenses, such as car and home insurance, school tuition, property taxes and Christmas shopping. I time the application for new credit cards a month before those bills are due so that I can more easily meet the minimum spend. Then I use those cards to pay the bills in full for a discount,” he says. Other smart moves include using cards for big home improvement projects, or even for the down payment on a new car. Of course, this only works if you pay off those credit bills in full.
“The key is to have self-control and not spend more than you would if you were using a debit card, writing a check or paying cash,” says Huffman. “Travel rewards are awesome, but not worth going into debt.”
Editor’s note: This story, “6 habits of highly successful card reward experts” originally was posted on CreditCards.com.