This subject encompasses several points that I feel are each important to touch on, so I decided to break it up into two parts. Today you’ll get an introduction to building miles, and tomorrow we’ll finish the discussion. My hubby is the expert in this, so he has taken over these last two posts (mostly ;).
The most important thing to do before getting into the miles/points game is to figure out what you actually want to do with them. Do you just want to travel as much as possible or do you want to build points for luxury vacations? Are staying in high end hotels or flying intercontinental first/biz class what you’re after? It sounds simple, but coming up with goals is really important because it will shape your miles and points strategy. Plus it gives you something to look forward to. Miles/points are far from the perfect currency, but if used correctly they will allow you to experience luxuries that would otherwise be out of reach for most people.
It’s important to distinguish between miles/points that can be transferred to many different travel partners and those that can only be used in a single travel program. For example, Chase Ultimate Reward points can be used to book travel (hotels, flights, cruises) directly through Chase’s travel web portal, or those same points can be transferred to 11 different airline and hotel partners at a 1:1 rate. AMEX membership rewards points and Citi ThankYou rewards points act in the same way, but not always at a 1:1 ratio. These points are different from say United Airlines Mileage Plus miles or Hilton Honors points which can only be redeemed within their respective loyalty programs. This makes “transferable” points inherently more valuable because of the extra flexibility they provide.
So how do you gather miles and points?? Obviously if you take a flight and have a frequent flyer account with that airline you will earn some miles, and if I stay in a Marriott property I will get some Marriott points. Traditionally, this is how a majority of people try to build miles and points, but unfortunately, unless you are spending tens of thousands of dollars on airline tickets and hotel stays, it will take a ridiculous amount of time to build any real value. A much quicker way to build a substantial amount of miles is through credit cards and their correlated shopping portals. I’m not going to get into the pros and cons of credit cards, or their do’s and don’ts, or talk about financial responsibility. You are your best judge. Needless to say, credit cards are an excellent tool to boost you mile/point balances.
It is important to establish that not all credit cards are created equally. Depending on your goals and — almost equally as important — your spending habits, one credit card may offer significantly more value than another. On top of that, many credit cards offer very lucrative sign up bonuses if you spend a certain amount of money within 3 months of account opening. We’re talking 30-100K points/miles or $250-$1500 bonuses just for opening a credit card and meeting the minimum spending requirement. This is how we see things: you’re going to buy groceries, eat out sometimes, and buy yourself a new pair of shoes once in a while anyways, so why not get a return on those purchases? If used correctly, credit cards offer you the chance to optimize your spending.
Using Credit Cards to Realize Your Travel Goals
I divide people into 2 main camps: (1) those who don’t care how luxurious a vacation is and just want to travel as much as possible, and (2) those who want to use points for luxury travel that would otherwise be difficult to achieve or fiscally justify.
If you are in the first camp, then your miles and points strategy is pretty easy. You shouldn’t be focusing on accumulating Hilton, Marriott, etc. points or American Airlines, Delta, or United miles. You should find a credit card that offers the most cash back. Or if you spend a substantial amount in certain categories, find a credit card that offers bonus points in those categories which can later be used to purchase travel. The reason you’ll want to go this route is because you will get MUCH more value purchasing a cheap economy ticket/hotel room outright with the cash back vs. trying to accumulate enough points/miles to use those for a free night’s stay or flight. For example, a round trip economy ticket from San Francisco to Japan can usually be purchased for under $1000 and sometimes for as cheap as $500 (check out the last post on how to find cheap flights). To buy that ticket in miles on say United, it would take 70,000 miles. If I just used a straight 2% cash back card it would take me $40,000 of spending to get enough cash back to buy an $800 flight to Japan (of course that can be expedited, but read on). But to get that 70,000 mile United ticket using a United Mileage Plus credit card, I would have to spend $70,000. That’s a huge difference. For the cost of one trip bought with miles, you could almost buy 2 round trip flights to Japan with cash and not be limited by award seat availability. You will find the exact same situation when comparing booking your average hotel ($100-$300 per night) with money vs using points.
Considering that I predominately spend money on restaurants, travel, and groceries, and assuming that I was part of this first camp, here is what I would have in my wallet:
- For all travel/dining (hotels, cabs, Uber, flights, parking, trains, fast food, sit-down restaurants), Chase Sapphire Reserve – 3 points per dollar on travel/dining, 1 point per dollar on everything else. Points are redeemable for 1.5 cents per point through chase. So you get 4.5 cents for every dollar you spend in this category. The annual fee is high ($450 per year), but you get a $300 dollar travel credit, Global entry, priority pass, rental car insurance, plus more.
- For groceries, gas stations and department stores – AMEX Blue Cash Preferred – 6% on groceries, 3% at gas stations and department stores, 1% on everything else ($95 annual fee).
- For everything else – Citi Double Cash card which gives you 2% cash back on everything with no annual fee.
In the next post we’ll talk about how to build miles if you’re in the second camp of people, as well as share more mile-building strategies. Hope you are finding this TRAVEL MORE series helpful so far. Thanks for reading!