(approximately 20 minute read)
Let’s get to earning points/miles and using them to fly free and stay free (well, sorta, those pesky fuel surcharges and Mr. Tax always gotta get their cut). I want to get everyone to understanding how simple this is to do, but at the same time understand how creative and in depth you can get.YOU CAN DO THIS!
First off, let’s get to the honesty and, afterwards, let’s get past all of the doubts and worries.
Honestly, YOU NEED DISCIPLINE
Does that scare you? It shouldn’t, but hopefully, it should make you feel that you should take this seriously. I’m not talking the kind of discipline it takes to do open-heart surgery or perform complex maneuvers to maintain commercial plane safety like an air traffic controller! (shameless plug)
I write “discipline” to mean this:
Can you pay your bills on time?
Can you follow simple rules without deviation?
Are you willing to learn?
So, do you have discipline? Well, if so, let’s keep going?
THE DOUBTS AND WORRIES
Worry – Do I have to have perfect credit to do this?
It helps, but it’s NOT necessary. You do need “good enough” credit to qualify for some credit card offers. Even if you are in the process of rebuilding your credit, earning points will help you with that as well. Let me show you why?
If you don’t listen to ANYTHING else in this post, listen to
SuitcaseRace’s® MOST IMPORTANT RULE OF EARNING POINTS:
ON ALL CREDIT CARDS THAT YOU USE TO EARN POINTS, DO NOT CHARGE ANYTHING ON IT THAT YOU WERE NOT GOING TO PAY CASH FOR AND/OR PAY OFF IMMEDIATELY. ALL BALANCES MUST BE PAID OFF IN THEIR ENTIRETY EACH MONTH!
Everything I write on this entire blog depends on this. Almost every benefit you earn goes out of the window when you tack on and have to pay ANY credit card APR interest, fees and carry balances. Got it?
Doubt – I can’t pay all that credit card off each month.
Then, ask yourself WHY did you put it on the credit card in the first place. If your answer is to pay off a large debt over months, that is VERY understandable and a reasonable thing to do only utilizing lower interest rate cards or great 0% APR offers. You are NOT wrong in doing so. However, for the purpose of earning points in this blog, you need to either (1) get a new credit card that you will ONLY put charges that you can pay off ENTIRELY that month or (2) do NOT do this type of earning until you are ready.
WE ARE NOT SPENDING MONEY WE DO NOT HAVE! NOPE! NOPE! NO! FULL STOP!
Don’t even read any further if this is a problem.
MAKING IT SIMPLE:
It’s a few days after Halloween, so, before I scare you all off, let me give you a very quick scenario of just how easy this is. Let’s say that you apply and are approved for a new credit card that requires you to spend $500 in the first 90 days to get a sign-up bonus of an additional 20,000 points. Everyone reading this, more than likely, has a phone/internet/cable bundle bill that you always pay almost as religiously as you pay your rent/mortgage. So, let’s randomly say that bill is $175. All you would have to do is charge this one bill that you were already going to pay onto this new credit card each month. $175 for 3 months consecutively is a total of $525. For doing absolutely NOTHING else other than charging this bill and paying it off for 3 months, you will have earned 20,525 points (20,000 sign-up plus the 525 points you get for paying for purchases you charged) AND, for your credit score, you earned 3 months of perfect on-time credit. You can’t tell me that’s not easy.
In that scenario, what did it take?
DISCIPLINE to make the charge, DISCPLINE to NOT charge anything else on that card and DISCIPLINE to pay those charges off each and every month without failure. At the end of the day, it is that simple. THIS is what we do.
This brings me to that big worry that is often just big confusion:
Worry – What’s the difference between miles, points and cashback? Which should I get?
I believe this question is what confuses most people when starting to earn. Having a simple, useful understanding of the difference will help you decide which want to earn. I will offer a brief explanation, but don’t let this discourage you or put you to sleep.
MILES
Miles are usually associated with airlines. They are normally earned by flying on that specific airline AND/OR, in addition, major airlines usually partner with major credit card companies to offer co-branded credit cards that allow you to earn miles by spending on those specific cards. Airlines also offer additional ways to earn in multiples of miles with tons of promotions, levels of travel and levels of status. For example, if you have already flown enough or earned enough to achieve an airline’s status, you may even be given multiple (2x, 3x, 4x) times the earning on each flying mile. Alternatively, the biggest caveat to earning miles is that you are restricted to using those earned miles with only that specific airline or that airline’s partners.
POINTS
Points are usually associated with credit card companies. American Express (AMEX) has membership rewards points. Chase has Ultimate Rewards points. Citibank has ThankYou points. These are a few. They are normally earned through spending on those respective cards. These points provide the most flexibility because you can use these to book travel and/or hotel stays through the credit card’s travel portal, transfer these points to partner airlines as miles, or use these points like cash to pay for charges. Points can oftentimes be the most flexible.
CASHBACK
Cashback is as it states. It is cash that is received back after spending. Depending on your desires, this money is like a constant percentage discount on everything you buy. For example, the AMEX Blue Cash Preferred card offers 6% cashback on grocery purchases. That is very, very good if you want money.
Figuring out which of those that you should get is the crux of earning and this decision is where your personal situation dictates how each effectively helps you. More than likely, you will do a mixture of all of these.
That is why I urge you not to worry.
Which should you get then? Well…..
Are you a budgeter?
The budgeter wants their money to stretch, go a long way and even have their money earn more money. They would probably like cashback credit cards like the Chase Freedom Unlimited, AMEX Blue Cash and others.
Do you need flexibility?
Flexibility mostly comes using points-earning credit cards. You gain the option of being able to transfer points to other programs. Cards like the Chase Sapphire cards, AMEX Platinum, Capital One Venture cards and others offer this ability.
Are you a traveler? If so, are you more of a domestic traveler than an international traveler?
Domestic travelers may want to stay loyal with a particular airline. They maximize the benefits of doing so and can gain that airline’s status while also earning miles on a card like Citi AAdvantage, Chase United Explorer, AMEX Delta Skymiles, amongst others. Alternatively, the international traveler needs more flexibility to transfer points to airlines like Singapore Airlines, for example, that are not always USA-based. Points cards allow this.
Do you have a partner or spouse to assist each other?
One person can get the miles and the other points or double-dip in multiple programs and combine points using a few points-earning cards.
Do you have status? Do you need status? Do you want to earn status?
Miles, miles, miles credit cards and flying and staying loyal to an airline is the way to go here. For example, spend on an AAdvantage card for a year and end with American Airlines status.
Each person has their own circumstance and there is NO ONE SIZE FITS ALL.
Let’s go through some scenarios.
I’m an international traveler. I live where American Airlines has a major airport hub since they are based at Dallas/Fort-Worth Airport DFW. I can also use my miles to fly on American Airline’s Oneworld partner airlines to get most places in the world. (As you learn more, you will learn about the main alliances- Oneworld, SkyTeam, Star Alliance and others). For example, if you live in Chicago or Houston, that major airline is United Airlines. Somewhere like Atlanta, it would be Delta Airlines. If you live near the major, major hubs like John F. Kennedy JFK Airport in New York or Los Angeles LAX Airport in California, all major airlines hub there. Why all of this matters is the ease of USING the actual miles that you do all of this to earn. For me, if I had decided to get a Delta-branded credit card to earn what they call SkyMiles, I would rarely use them to fly directly out of DFW Airport. I would most often be left with always flying first to a Delta hub then on to where I actually wanted to get to AND it costing me MORE miles than simply using an airline with a hub near me. It is an ineffective use of miles.
American Airlines , member of Oneworld, uses AAdvantage miles
Delta Airlines, member of SkyTeam, uses SkyMiles
Unites Airlines, member of Star Alliance, uses MileagePlus miles.
So, I chose one of the AAdvantage (American Airlines-branded) credit cards to earn miles. On completing my sign-up offer, I received my bonus miles and used some of what I earned for flights. On approval, any mileage credit card will either (1) sign you up for a mileage account (ex. AAdvantage) or (2) have you enter your existing mileage account number during your application process . This ensures that all rewards and miles earned can be deposited into your existing account. Signing up for mileage accounts is usually free. I had an existing AAdvantage account and number at American Airlines from flights even before I started earning miles with credit cards. More than likely, you do also.
Let’s get to another example.
Let’s pretend that I signed up for my AAdvantage card 3 months ago. I would’ve needed to spend $2,500 in those 90 days to earn a bonus 50,000 points. These offers go up and down regularly. After I spent and earned, I would now have 52.500 or more points to use. “Or more” because I would have earned 2x miles for restaurants and gas stations purchases and other posted incentives, but that’s more for a later time. If I am that domestic traveler, I could use as low as 7,500 AAdvantage miles to book a one-way flight to certain destinations in the USA (15,000 round-trip) and still have enough miles for more flights, but I’m that international traveler. I would, more than likely, find an off-peak Award flight to Europe for as low as 22,500 each way (45,000 round-trip) and use it for that. My out-of-pocket cost would be the fuel surcharge ($5.60 USD one-way in this case) charged for the Award redemptions. Yes, there is always some small fee that is passed through to you. It could be low as $5 each way up to those expensive London Heathrow Airport fuel surcharge charges that the whole earnings world absolutely hates.
Worry – Did that spending of $2,500 in 90 days scare you? It really shouldn’t because I’d bet you already spend that or more right now and I’m gonna show you how. You may not know that you do, but you do.
Let’s pause and reiterate THE MAIN RULE:
ON ALL CREDIT CARDS THAT YOU USE TO EARN POINTS, DO NOT CHARGE ANYTHING ON IT THAT YOU WERE NOT GOING TO PAY CASH FOR AND/OR PAY OFF IMMEDIATELY. ALL BALANCES MUST BE PAID OFF IN THEIR ENTIRETY EACH MONTH!
Check out this small breakdown of items the average ole Texan probably spends monthly:
I would suspect that the average person pays $1,000 monthly no matter what. Multiply this by 3 (as in 3 month’s worth) and you get $3,000 in needed spend for some credit card bonus spending requirements. Many of you spend quite a bit more, so that amount in 90 days can sustain a much healthier credit card sign-up bonus requirement. Pause here and do a quick worksheet of what you bills you pay NO MATTER WHAT each month and see. You will be surprised.
With that being said, I have another credit card that is American Express that earns AMEX Membership Rewards points. When I earn those, I can transfer them to different airlines or different programs or simply use them to buy travel (flights and hotels) and goods through the American Express portal. Those Membership Awards can be used at many other retailors that partner with American Express like Amazon to cover the cost of purchases. There are so many credit cards with so many benefits that no one place can truly cover them all at one time.
Additionally, you can also get hotel-branded credit cards that earn points that you can use for hotel and resort stays at their brand AND transfer their points to miles on different airlines that partner with them. This allows you to stay and fly.
So, STOP USING CASH. Cash is definitely king. Listen, I don’t want you to stop HAVING cash and investing it, but I want you to stop PURCHASING with cash. Always keep cash available. Invest, invest, invest. However, at some point in your points earning journey, you will come to the realization that the better policy is always getting something for every purchase and transaction that you make. You should look at it like that from now on. Banks surely do, so you might as well be getting something in return, as well. The best part of charging everything on a credit card is that you will usually be getting some type of added benefit on things that you are going to buy anyway. Each credit card comes with its own set of benefits. For example, many cards give purchase protection for the first 90-days which guards against damage and theft of your item. It also gives you a chance to dispute that charged item if it was not as listed when you purchased it. With cash, you would just be out of the money with no recourse.
On a side note, NEVER use your debit card. DO NOT think of the debit card as a credit card! To me, using a debit card is THE riskiest thing you can do. With so much fraud, credit card skimmers and scammers out there, you’re opening your checking/savings account up to being victimized very easily. Given the choice, I would always opt for cash over a debit card every time. Pause for a second, scroll back up to the top of this post and look closely at the first photo. That’s all beautiful cash. We love to use it in small towns abroad, street vendors, ma/pa establishments and many places that don’t or can’t readily accept credit cards. Cash is still king.
Let’s do another example:
Two people decide to buy an item from a vendor at a market. One person uses a debit card and the other uses a credit card. Someone steals their credit card info and makes an unauthorized purchase(s). When the debit card user realizes and alerts the bank, the amount of the unauthorized purchase(s) is frozen until investigated. Sometimes the whole account is frozen. This can create headaches and havoc for other payments coming out of that bank account until the fraud is resolved. Alternatively, when the credit card purchaser reports their fraud, the credit is given back to them instantly while the bank investigates and they can continue to use their credit. In the example, pretend you used a credit card to purchase a vacuum from the vendor that broke within 90 days. Certain credit cards would either reimburse your repair cost for it or replace it. Very few, if any, debit cards do that. Some credit cards even extend the warranty period of that vacuum for an additional year or more.
Even without the benefits, using the credit card, would have earned you something simply for the purchase. Let’s say that vacuum cost you $100. That’s a normal earning of 100 miles (1 mile for every dollar spent) on a miles-earning card or 200 points on a Chase Venture card with 2x earning (2 points per dollar spent) or 1.5% cashback of $1.50 on a cashback card all by simply charging your purchase on an earning credit card instead of cash/debit card. Your money stays safe in your bank and may earn some interest on it until you use it to pay that credit card off.
But, what about cash discounts or the cash price like at gas stations? Again, this becomes a personal choice. The $0.05 per gallon that I would save by paying with cash is easily surpassed by the points/benefits that I gain by using any of my credit cards. So, stop using cash and start earning using credit cards.
Nothing is perfect. Realize that. I will acquiesce and admit that when you charge, created is a paper trail of every transaction that you make. For some folks, this may make you nervous and be a deal breaker. Understandable. This is the epitome of Big Brother, governmental overreach and control. If that level of privacy is needed, this is NOT for you. For me, for example, I like that American Express gives me a breakdown of every category on how I spent my money in the year. It has helped me to realize how much I eat out and how much I spend on utilities among other things. It has helped me budget wisely, so, it does not bother me to know there is a record of me buying underwear quarterly. 🙂
To recap up until this point, to get started is as simple as applying for a credit card, start charging simple things to it, paying them off, earn the points/miles/cashback and use them to fly or for lodging or simply the money back. It really is that simple. Rinse and repeat. It can get even better than that, BUT to get started, you don’t need anything further than what you have read up to here.
SPEND THESE EARNINGS
Let’s get from Houston (IAH Airport) to Chicago (ORD Airport) on United Airlines in economy for as cheap as we can.
Option 1 – Miles
You earned miles from any method above like getting a Chase United Explorer card that has a 50,000 mile bonus after spending $3,000 USD resulting in 53,000 miles. Login to your United MileagePlus account, search for reward flights and see the cost. Here’s an example for an economy flight on December 7. The cost is 7,800 miles on a Saver Award, usually the lowest possible at the time. Select that, pay $5.60 USD and 7,800 miles deducted from your account and flight reservation is set up.
Option 2 – Transfer Points to Miles
Let’s say you went the route of getting a Chase Sapphire card and earned an introductory 60,000 Ultimate Reward points after spending $4,000 USD resulting in 64,000 points. Login to your Sapphire Account, head over to the travel Ultimate Rewards section and choose transfer. Since on our United MileagePlus account above we found out that we needed 7,800 miles for the flight, we need to transfer enough points from our Ultimate Award account to miles in our United MileagePlus account to cover that flight. In this scenario, miles transfer on a 1:1 ratio where 1-point equals 1 mile. Depending on what transfer partner you choose, the transfer time can vary from instant to a few business days, so please check. You will need your MileagePlus number. Remember, the MileagePlus account is free to setup on United Airlines website. As you can see from the image below, points with this transfer partner must be transferred in 1,000-point increments, so you would have to transfer 8,000 points to 8,000 miles to cover the 7500 miles you need. After the points are transferred, refer to Option 1 – Miles above, go back to your MileagePlus account, find the flight and purchase.
Option 3 – Use your points in the Chase Travel Portal
You can go to the travel portal of Chase, search and find the flight and use Chase Ultimate Rewards points to purchase it. The search will return flights from many airlines and not just United. Chase even gives you the option to use points on Basic Economy on United flights, if you so choose. At the time of this writing, you can’t even use United MileagePlus miles at United to buy United Basic Economy flights. Unreal, however, you can use Chase Ultimate Reward Points to do so – a hidden points perk. While on the portal, you can compare the monetary price of each flight purchased there with the monetary price of purchasing the flight from the airline’s own web site. Sometimes, it is better through the portal. Sometimes, it is not. This is another benefit of flexibility that I wrote about earlier. If you wanted even cheaper, in this example, you could use only 5,488 Ultimate Reward points and $0 USD for a Basic Economy flight versus the 7,800 MileagePlus miles and $5.60 USD for that Economy Flight OR 7,888 Ultimate Reward points and $0 USD versus the 7,800 MileagePlus miles and $5.60 USD for the same Economy flight on each.
As you can see, there are so many options available. That is why there is so much confusion between miles, points and cashback. You don’t need to know all of this at once. All you need to know to start is to get a credit card that works for your lifestyle, spend on it, pay it off and use the earnings as you see fit.
THE ADVANCED STUFF
I don’t pretend to be an expert by any means. I have just done this for many years. Once you get adept in earning with credit cards, you will more than likely graduate to securing multiple cards, attaining additional cards and double-dipping with your significant other, getting cards at several different times during different promotions and using business cards alongside your personal cards. Learning what card transfers to what program is one thing and taking advantage of transfer bonuses is a completely other technique. Using Southwest Airlines as your domestic transfer airlines is a technique in itself. Southwest Airlines has one of the best companion pass programs available. You can earn the pass with only credit card sign-up bonuses and purchases alone with no need to fly. When I mention transferring here, I am talking about using a Southwest flight to travel domestically to a domestic spot like San Francisco where you can then board a Japan Airlines Award flight to Tokyo simply because Japan Airlines doesn’t fly out of DFW Airport. Moreso, adding stopovers on these international flight Awards (using certain programs) is an old added benefit that is slowly going by the waste side, but for now, is another treat. There is so much more. Stay with us!
STOP USING CASH because non-invested cash is not earning you rewards!
We intend to continue this conversation on our YouTube Channel or in our forums as we go along. Please ask us questions and let’s get to earning and traveling!
I pray that you have received value from reading this and thank you.
1 comment
Good read!
I’ve started this process with my monthly budget but I don’t have a credit card that gives me points.