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Are you itching to dive into the different types of travel rewards credit cards and which ones are right for you and your travel goals?
Then, you’ve landed in the right place!
In this guide, 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!
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 travel rewards cards, like the Chase Sapphire Preferred or the American Express Gold, earn points that can be transferred to airlines and hotels.
Co-branded credit cards, like the Delta Gold or Hilton Surpass, earn miles and points specifically for those loyalty programs.
While other credit cards, like the Blue Cash Preferred, earn cashback rewards.
In this post, we’ll be looking closely at transferable points credit cards and co-branded credit cards.
You can find out more about cash back rewards cards in this guide.
Take a look at the chart below to compare each type of credit card.
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, do you know who its airline and hotel transfer partners are?
Step 2- Understand bank rules.
Banks have application 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, beginner-friendly points you can transfer to 14 airline and hotel partners. And, 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 World of Hyatt Visa 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 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, followed by the co-branded cards offered by Chase.
- 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,
- Ink Preferred,
- Ink Cash,
- Ink Unlimited,
- Chase co-branded cards,
- Chase Freedom Flex, and/or
- Chase Freedom Unlimited.
Stop and Think:
- How does the 5/24 rule affect you?
- How many credit cards have you applied for in the last 24 months?
- Do you already have 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 can be 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, a free night certificate, 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 which improves your credit score.
Or maybe you have another American Express card in mind and need to close a card in order to qualify for a new card. It’s important to 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 and Google Flights to help you.
- What hotel points will you need to book your trip?
- Are there other bank application rules that dictate your next move?
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.
The most important fundamental of 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 that accept credit card payments.
Use a budgeting tool 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.
Questions to ask yourself (& answer!):
- What’s your budget and what do 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 the answers to these questions, track 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.
Which travel rewards credit cards would you like to apply for?
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