How to Win at the Credit Card Points Game
Don’t you just want to slap people who brag about how they got to use points to pay for part or all of their vacation? I used to want to do the same, until I started earning a few points here, a few more points there, and holy smokes, this points thing actually works!
Last week I told you about my point multiplier strategy with hotel status. In the near future I’ll get into hotel loyalty programs, because even if you only seldomly stay at hotels, it pays to become a member. In the first of this two-part series though, I want to talk about a couple ways you can jumpstart your own point accumulation strategy.
Credit card points are a fantastic way to save money on travel, merchandise, and other rewards. But given the number of competing reward programs, I know it can be tough to know where to start. I got your back. The sooner you become an expert, the sooner I can learn from you!
Last thing before we get into the first two rules: There is a difference between rewards cards and cash back cards. Cash back cards do just that, give you back a percentage of your cash. If you would rather not mess around with point accumulation and just want a straightforward way of redeeming a little cash value, cash back cards are the way to go. Just know that cash back cards generally give back lower redemption value than their reward card cousins. Here’s a current list of the best cash back credit cards for you to consider.
Choosing the Right Credit Cards
The first rule to an effective point accumulation strategy is to choose the right credit cards for your natural spending habits. That wasn’t a typo. You did just read “cards.” There will never be the perfect card for all spending, because banks know that as long as people run late on payments, they can eagerly collect your money, with interest, via multiple credit lines.
Don’t pay with credit what you cannot afford to cover with cash!
There are cards that are better daily drivers than others. The Chase Freedom Unlimited, for example, gives you 3 points per dollar spent on dining and drug stores and 1.5 points on all other purchases. You can read my review of the Freedom Unlimited here. It is now the second best card I can recommend with no annual fee. I’ll tell you about my new favorite daily driver credit card in a couple weeks.
However, if you travel frequently, you would want to choose a credit card that offers rewards for travel expenses, such as flights, hotels, commuter expenses, and rental cars. Since the Freedom Unlimited doesn’t give extra points for travel, I took out the Sapphire Reserve, which is far and away my favorite premium card. It gives me 3 points on travel, and thank goodness Chase defines travel quite liberally. I’ll get into the other perks of the card in a future review.
But, what if you could earn five points in certain categories? Enter the Freedom Flex, which is also a no annual fee card, and offers bonus points on rotating categories each quarter. Five points on dining for three months? Heck yeah! Five points on Amazon shopping a different quarter? I’m there! Or, I would be if I didn’t already have the Amazon Prime Visa card, but you get the idea. Not every quarter will be useful, but for the quarters where you can milk the bonus categories, you will give your point savings a nice boost.
It’s important you get a credit card that works hard for you. The only way it will work hard is if you spend money on things you would already be spending money on anyway. If you don’t eat out a lot or don’t travel a lot, it makes little sense to get credit cards that excel in those categories. Recognizing your reality is going to be important for the next section, because I don’t want you to take out more cards than you can handle. The rewards won’t matter if you go into debt trying to earn them.
In fact, if you’re currently in debt, I would love it if you stopped reading now and revisit this article when your finances are in better shape. With a little discipline, you’ll get there, and then you can fully take advantage of the perks feeling more at ease.
Settling on the Right Credit Card Trifecta
The second rule to an effective strategy is to pick cards within the same ecosystem. The Freedom Unlimited, Freedom Flex, Sapphire Reserve, and its little sibling, the Sapphire Preferred, all belong to Chase’s Ultimate Rewards ecosystem. The advantage to sticking to the same ecosystem is that the bank will allow you to combine your points to gain greater value when you go to redeem your points.
In the beginning you don’t want to spread yourself across multiple ecosystems because it’ll be harder to accumulate enough points to amount to anything valuable. You’ll feel as though you’ve spent a lot of effort earning points and get discouraged when those points don’t go far enough to cash out for something you want. Pick the ecosystem that makes the most sense for you, but consider this next point carefully.
If you’re really committed to playing a long-term winning point strategy, consider starting with Chase. The reason for this is because Chase has a strict 5/24 rule, which means you will generally not be approved for a card if you opened five or more cards in the past 24 months. This is an unpublished but well-known rule based on crowdsourced data. There are some exceptions, such as certain business cards not counting toward your 5/24 total, which allows you to move from a trifecta to a quartet strategy, but that’s part of a more comprehensive tactic we can get into down the road.
Consider taking out the two Freedom cards. Then pick between either the Sapphire Reserve or Sapphire Preferred. This leaves you with two slots to either go in on another co-branded card through Chase or pick a card completely outside the Ultimate Rewards ecosystem.
My second best trifecta recommendation is based on the American Express Membership Rewards ecosystem. I’ll dedicate a post to that later, but for now, my recommendation is based on the undisputed fact that American Express has the most generous credit card offers for existing members. The Green, Gold, and Platinum cards present a compelling strategy of their own, and they are not the only cards that generate Membership Rewards.
Be careful here. I ranked the Chase Ultimate Rewards program first because of its application restrictions but also because two out of the three cards in their trifecta are no annual fee cards. If you were to take out the Green, Gold, and Platinum cards you would be paying $1,095 in annual fees, and although it is possible to dramatically reduce those fees, you are going to have to be strategic about your purchases without moving outside of your natural spending habits.
Chase’s Ultimate Rewards, American Express’ Membership Rewards, Capital One’s Venture Rewards, and Citi’s ThankYou Rewards are just a handful of the ecosystems out there. Because there is no such thing as the ultimate rewards card, you’re going to be better off intelligently choosing the cards that can compliment each other. And, make sure the cards allow you to move points between themselves and between transfer partners.
Final Thoughts
One of my elementary school teachers used to incentivize good behavior by awarding us points throughout the week. At the end of the week you got a different prize depending on the number of points or stars you had accumulated. Listen, I worked hard for my Snickers bar!
Or perhaps you remember squirreling away all those little tickets so that you could cash them in for some cool toy.
Accumulating credit card points is not all that different, except instead of glow in the dark super hero rings, you could score a free flight or free hotel night for doing what you would have already been doing anyway. Spending money is about as inevitable as breathing. If you’re going to spend money, you may as well use a secure method of payment like credit cards, and if you’re going to use a credit card, you may as well rake in points while you’re at it.
If you pick the credit card that fits your lifestyle, you’re going to have no trouble generating points with every purchase. If you’re dedicated to accelerating the number of points you generate, you’ll pick cards that compliment each other in the same ecosystem.
Put points into their proper context. Don’t get fixated on earning them. Remember, we’re talking about cents on the dollar. If you learn to approach point accumulation the way you ought to be approaching investments, a set it and forget it mentality, you’ll log into your account one day and realize you reached your first milestone, a substantial enough pile of points to redeem for whatever makes sense for your situation.
What do you think? We’re not done discussing the best ways to earn credit card points. If you have questions I can address in the next installment, drop me a line using the Contact form or leave it in the comments, and if you found the article helpful, consider using one of the affiliate links to apply for your next card. It kicks back a little change my way at no cost to you!
