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Are you ready to move beyond credit scores and credit card myths? Are you itching to dive into the different types of credit cards and which ones are right for you and your travel goals? Then, you’ve landed in the right place! You’ll also get answers to your questions about paying credit card annual fees and meeting minimum spend requirements to earn signup bonuses. Let’s get started!
At the bottom of this post, you’ll find your tasks and the resources you’ll need to complete them. Remember to reach out if you have questions.
The Ultimate Guide to Travel Hacking: Credit Cards Part 2
Step 1- Know the types of credit cards & the miles and points they earn.
Not all miles and points earned with credit cards are created equal.
Some credit cards earn points that can be transferred to airlines and hotels. Co-branded credit cards, like American Airlines or Hilton, earn miles and points specifically for those programs. While other credit cards earn cashback rewards.
In this post, we’ll be looking closely at transferable points credit cards and co-branded credit cards. I’ve included a post about cash back rewards cards in the further reading links below. Take a look at the chart below to compare each type of credit card.
Example Credit Cards
Type of Points or Miles Earned
Transferable Points Credit Cards
Chase Sapphire Reserve or Preferred, American Express Gold Rewards, Citi Prestige
Points are transferable to a variety of travel transfer partners.
Transferrable points offer a high level of flexibility. They can be used for a fantastic value. Their value is protected from airline and hotel award chart devaluations.
Transfer partners can change, sometimes with limited notice.
Co-Branded Airline/Hotel Credit Cards
AA Citi Platinum Select, Chase British Airways, American Express Hilton Surpass
|Points and miles are brand-specific. They can only be used for that airline (and its alliance partners) or hotel.||Brand-specific points and miles help you target a particular travel award and demonstrate brand loyalty.||The value of brand-specific points and miles can change for the worse if an award chart devalues.|
Cash Back Credit Cards
|Barclays Arrival Plus, Capital One||Points are a fixed value of 1 cent per point.||Fixed-value cash back points can be redeemed for travel expenses without rewards programs, like car rentals, train tickets, and activities.||
Using these points for flights and hotels typically returns an especially poor value.
Stop and think: What types of credit cards do you currently have? What type would like to apply for? If you have a transferable points credit card, who are the transfer partners?
Use the Google spreadsheet below or from Credit Cards Part 1 to organize all the credit cards you currently have. Add a column to show the type of credit card or sort them into groups by type.
Step 2- Understand bank rules.
Banks have rules and you have to do your best with whatever information is known.
In particular, travel hacking beginners should pay careful attention to Chase’s 5/24 Rule. This rule points to Chase denying credit card applications for anyone who has applied for 5 or more credit cards from any bank within a 24-month period.
Chase’s Ultimate Rewards Program earns high-value points you can transfer to 11 airline and hotel partners. You’ll need a Chase Ultimate Rewards earning credit card to take advantage of this program. In addition, Chase offers several co-branded credit cards, like the United Explorer card or the Chase Marriot card.
Every bank has its rules, but Chase’s 5/24 rule is special.
Consider that American Express allows customers to earn the welcome bonus on a specific credit card only once per lifetime. You can also have no more than 4-5 American Express cards at a time. Whereas Citibank allows customers to apply for only 1 Citi credit card within an 8 day period and no more than 2 Citi credit cards in a 65 day period.
The gigantic difference between these rules and Chase’s 5/24 rule is they don’t extend to credit cards from any bank, just their own. It’s for this reason, beginners must first look at the Chase Ultimate Rewards family of credit cards.
- If your goal is to earn and redeem miles and points for award travel, again and again, your first credit card(s) should be:
- the Chase Sapphire Reserve,
- or Chase Sapphire Preferred,
- Chase Freedom (Unlimited or Original version) and/or,
- Ink Preferred, the Chase business card.
Stop and Think: How does the 5/24 rule affect you? How many travel credit cards have you applied for in the last 24 months? Do you have or are you planning to apply for a Chase Ultimate Rewards credit card?
Step 3- Should you pay the annual fee on your credit card?
This is such a common question and concern. Who likes paying annual fees to the banks?!
Travel rewards credit cards typically have annual fees. The good thing is the fee is usually waived in the first year, leaving many of us wondering whether or not to pay it when the fee is due the following year.
To keep or cancel is a different decision for each person, but the question is the same.
- What value am I getting out of this card and is that enough to justify the fee?
Many cards come with bonus categories, an anniversary bonus, lounge access, award discounts, and/or waived baggage fees. When you consider these benefits (and many others), paying the fee may make sense for you. Or it may not.
For example, American Express only allows the welcome bonus once per lifetime on each of their cards. It might be better to keep the card, take advantage of the card’s perks, and continue to build the age of your credit accounts and improve your credit score.
Or maybe you have another American Express card in mind and need to close a card in order to qualify for another. Again, have a plan and do what’s right for you.
Step 4- Which credit cards should you apply for?
Chase’s 5/24 rule may determine the first few credit cards you apply for, but what other credit cards are right for you?
Go back to your travel goal. Which airlines operate the route you need from your departure airport? Use the airport Wikipedia pages to help you. What airline miles and hotel points will you need to book your trip? Know your bank transfer partners. While there is overlap, Chase, American Express, and Citi each have unique airline partners.
Step 5- How do you meet the minimum spend and earn the welcome bonus?
Oh no!…That minimum spend is $3k in 3 months! Another card is $4k in 3 months! How can I afford to meet thousands of dollars in minimum spend on a tight budget?
This can seem like a legitimate obstacle and it certainly should be considered seriously. There’s no sense in applying for a credit card and missing the welcome bonus because you didn’t meet the minimum spend.
Travel hacking is about spending wisely and making your money work for you. It’s NOT about spending more. Exactly the opposite! You’re redirecting the money you already spend and putting it toward the minimum spend. You absolutely shouldn’t spend money you can’t afford to pay off at the end of the month.
Put away your cash. Put away your debit card. Use your credit card for ALL your bills and everyday expenses where credit card payments are accepted. Use a service like Mint to track your budget.
Or deduct your transactions from your bank account as you would with your debit card so the money in your account accurately shows what you’ll have after paying your bill in full at the end of the month.
You’ll need to know your budget and what you normally spend on everything from your bills to groceries to haircuts for your kids. How much of this can be paid with a credit card? Use this information to figure out how much minimum spend you can handle at one time.
If you don’t know, try tracking your expenses for a month before applying for any credit cards. The majority of people who’ve done this have been surprised when they’ve realized how much minimum spend they could actually handle.
You can even use a bill payment service like Plastiq to pay bills and go toward that minimum spend.
Use the Google Spreadsheet below to track your budget.
- What’s your 5/24 status?
- Use the link to the Google Spreadsheet below to track your budget and calculate how much you can spend on minimum spend requirements at any given time.
- Read the posts about Annual Fees and Minimum Spend Spend Requirements in the “Further Reading” resources below.
Google Spreadsheet with Added Budget Tracker
Check out the 5 Travel Hacking Organization Tools blogging pal and fellow travel hacker, LeAnna, recommends.
Which travel rewards credit cards would you like to apply for?
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