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By now, most people are familiar with the various credit card rewards programs available for airlines, hotels, and more. When used responsibly, these cards can become invaluable tools, potentially saving thousands on travel expenses.
Credit card rewards programs are incentives that credit card companies provide to encourage cardholders to use their cards for purchases. These programs typically award cardholders points, miles, or cashback rewards based on their spending. These rewards can be redeemed for various benefits, including free flights, hotel stays, merchandise, or statement credits. These programs come in many forms, with some cards offering bonus rewards in specific categories like dining, travel, or groceries, while others provide flat-rate rewards on all purchases. It’s important to use these programs wisely because credit card companies rely on a percentage of users who mismanage debt to profit from the card’s high interest rate (usually between 15 – 20% APR).
Generally, travel cards offer a sign-up bonus, such as “spend $3,000 in the first three months and earn 90k bonus miles.” While these cards also come with ongoing benefits, such as earning 3x points for dining or travel expenses, the most significant value often lies in these sign-up bonuses.
The key is to align opening these cards with substantial expenses you have already planned. Instead of spending more money than initially intended, use the card to cover the costs and qualify for the new sign-up bonus. This strategy requires proactive planning, but the goal is to accumulate as many points as possible through these sign-up bonuses. Remember, credit card companies make these offers enticing for a reason. It’s crucial to manage this responsibly and avoid spending beyond your means by budgeting and doing your homework to ensure success.
Misconception #1: Spending on a credit card is always a bad thing.
While it’s true that overspending can lead to financial trouble, maintaining a low credit utilization by using a credit card responsibly can improve your credit score over time.
Misconception #2: Opening new credit cards or having several open simultaneously will hurt your credit score.
While hard inquiries can cause a short-term dip in your credit score, they can also have positive long-term effects. They establish an additional payment history on your credit report (assuming you pay off the card on time and in full), increase your total credit limit, and naturally keep your credit utilization low.
Misconception #3: The card benefits are great, but not worth the annual cardholder fee.
If you use reward points and miles wisely, it’s challenging not to break even. Many high-end travel cards offer statement credits that offset a significant portion of the annual fee. The remaining value comes from using points to book travel. For instance, a sign-up bonus of 100k points could cover two round-trip flights. All it takes is effort to find the best deals and plan.
We have compiled a list travel credit cards here: https://milevalue.com/best-credit-cards/?aff=ewa. This list is regularly updated to help ensure it features the top offers, sign-up bonuses, and more.
Let’s examine a hypothetical / real-life example of how to maximize credit card points for free travel. This case involves a family of four, including a husband, wife, and two children, embarking on a journey from the US to London and beyond, exploring destinations in Europe in 2023.
First, British Airways was chosen for the flights because they offer a “Travel Together” ticket. To qualify for this perk, cardholders need to spend $30,000 on their card within a calendar year (as of writing this article in 2023). Once earned, the Travel Together ticket is valid for two years, and with this ticket, the cardholder can book a business class ticket for themselves and bring along a companion for free. When you use your points to book a business class flight, your companion’s ticket will be entirely covered by the Travel Together ticket, including the base fare, although fees and taxes still apply. It’s a great way to maximize the value of your credit card rewards and enjoy a more luxurious travel experience.
Step 1: The husband applied for the British Airways Visa Signature Card. This card offered a 75,000-point welcome bonus after spending $5,000 within the first few months. To qualify for the coveted “Travel Together” ticket, an additional $25,000 was spent on estimated tax payments, bringing the total to $30,000 spent. This resulted in a total of 105,000 points, combining the 75k welcome bonus and additional points from the extra $25,000 spent.
Step 2: The wife repeated the same process, opening the same card and spending an additional $30,000 to secure another Travel Together ticket, along with an additional 105,000 points.
The result was 210,000 points and two Travel Together tickets. The husband and wife used the 210,000 points to book their flights and brought their kids along for free using the Travel Together tickets.
Step 3: They applied for the Chase Ink Business Preferred card, which offered a sign-up bonus of 100,000 points after spending $15,000 in the initial months. These points were transferred to Chase Ultimate Rewards and, from there, to World of Hyatt, where they booked a luxurious 25,000-point-per-night stay at Park Hyatt in Europe—for free! This incredible deal provided four nights of accommodation, with an estimated cash value of $4,000 to $6,000.
Costs: Now, let’s break down the costs involved. The annual fees for all three credit cards combined amounted to $300. Additionally, there was a fee to pay taxes to earn introductory bonuses and obtain the companion passes immediately, totaling approximately $1,500. So, the total costs came to $1,800, but in return, they saved a minimum of $20,000 in free travel, making it a highly cost-effective way to explore the world in style.
Harnessing the power of credit card rewards programs can be a game-changer in optimizing your travel experiences. When used responsibly and strategically, these programs can unlock substantial savings, upgrade your flights and accommodations, and even open the door to unforgettable adventures. By dispelling common misconceptions and taking advantage of sign-up bonuses, you can embark on your dream journeys without breaking the bank while enjoying the benefits of responsible credit card management.
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