Written by:
Menu
Written by:
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.
Advertiser Disclosure: This video may contain links through which we are compensated when you click on or are approved for offers. The information in this video was not provided by any of the companies mentioned and has not been reviewed, approved, or otherwise endorsed by any of these entities. Offers are current only as the time of the video publishing date and may have changed by the time you watch it.
Equilibrium Wealth Advisors is part of an affiliate sales network and receives compensation for sending traffic to partner sites, such as Milevalue.com. This compensation may impact how and where links appear on this site. This site does not include all financial companies or all available financial offers. Terms apply to American Express benefits and offers. Enrollment may be required for select American Express benefits and offers. Visit americanexpress.com to learn more.
In just 15 minutes we can get to know your situation, then connect you with an advisor committed to helping you pursue true wealth.
Add me to the weekly newsletter to say informed of current events that could impact my investment portfolio.
Important Disclosures:
Securities and advisory services offered through EWA LLC dba Equilibrium Wealth Advisors (a SEC Registered Investment Advisor).
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
In 15 minutes we can get to know you – your situation, goals and needs – then connect you with an advisor committed to helping you pursue true wealth.
EWA, LLC dba Equilibrium Wealth Advisors, is an SEC-registered investment advisory firm providing investment advisory and financial planning services to clients.
Investments in securities and insurance products are not insured by any state or federal agency.
To view EWA’s public disclosure, registration, Form ADV and Part 2B’s, click here.
To view EWA’s Client Relationship Summary (CRS), click here.
*See reference 1 and reference 2 for more information about the above-mentioned statistic.
COPYRIGHT 2024 EWA, LLC. ALL RIGHTS RESERVED
In 15 minutes we can get to know you – your situation, goals and needs – then connect you with an advisor committed to helping you pursue true wealth.