Beginner Guide: getting started
By Aaron Anderson
Want to Get Started?
This is a basic “getting started” beginner’s guide from me to you. This article discusses the basics; including what are points and miles and what are the different loyalty programs out there. Then, the most important part, how do you get started?
You’ve probably heard of or have seen on social media people taking free vacations to somewhere exotic in the world. Something like this, right?
Be honest, you thought it was a scam didn’t you? Well I’m here to tell you that you can absolutely travel the world for free….or at very little cost to you, relative to what you could be paying with cash.
Enter: credit card sign up bonuses!
Credit card companies are competing fiercely for your business. They are promoting their products by offering huge sign up bonuses in hopes they will gain your loyalty over the years. You can take advantage of these bonus offers in a few simple steps: by applying for a credit card, getting approved, meeting the minimum spending required to get the bonus points….. and voila! You have earned yourself points to put towards a new trip.
What are points and miles?
Miles: Airline loyalty programs have created a currency that allows you to redeem earned “miles” for flights. You can earn miles either through credit card bonuses, credit card spending, or flying. You cannot redeem a mile earned for a mile flown: meaning if you have 50,000 miles from credit card spending and bonuses, you cannot redeem them for 50,000 miles flying in the air. Most airline companies have award charts or dynamic pricing. Airline companies basically set the price for award flights when you pay with miles.
Points: Generally speaking, points are what you earn from credit card loyalty programs other than airlines loyalty programs. Points allow for much more flexibility and CAN be redeemed for flights; along with hotels, rental cars, and even cash back and shopping.
The process:
First, you have to get approved for the credit card. Second, you have to meet the minimum spending required in order to qualify for the bonus offer. A typical spending requirement would be $3,000 of NORMAL spending within a three month period. I cannot stress this enough…only spend what you would NORMALLY spend on your credit card. Don’t buy things you typically wouldn’t buy just so you can hit the minimum spending and qualify for the bonus offer. Plan ahead and make sure you have enough NORMAL expenses to put on the credit card so you can, without a doubt, earn the bonus offer. Offers are changing constantly, so make sure you understand the offer before you apply for the card.
Plan now, go later
Understand the timeline of earning points and miles. First you apply for the card and wait 1-2 weeks for it to arrive in the mail. Then you have to meet the minimum spending—which may take up to three months. The bank will tell you that it’ll take 8-14 weeks to receive the bonus points. You should plan on that, but in my experience, it typically only take 3-6 weeks in every case.
Now, what kind of offer can you get? Typically, these bonus offers range from 50,000 points to 100,000 points. There are certainly a plethora of cards offering more or less points, and we will help you understand the value of those points…. Again, this is a beginner’s article. You will learn over time. Just remember, this is a marathon, not a sprint.
What are points worth?
Well, they can be worth anywhere from .5 cents apiece to 2 cents apiece…and even more depending on how you redeem them. Many banks have travel portals where you can book travel directly on their websites. You can typically redeem points through bank travel portals from 1 cent per point to 2 cents per point.
Strategy
In order for you to maximize the value of your points and miles, you need to have a PLAN:
- Know your credit score. With most rewards credit cards you have to have a 650+ credit score. Other cards require you to have an even higher credit score. If your score is below 650, then work on building your credit over the next 6-12 months.
- Plan out where you want to go and how many points or miles it will cost you.
- Plan who is going to come with you.
- Plan out how many cards you need to get in order to go on the trip you have planned.
- Plan out your expenses over the next 3-6 months. What expenses can you put on a credit card? Write down these expenses and total them up. Make sure that you have enough Normal expenses to meet the required minimum spending to get the bonus points.
My Story
I first heard about travel rewards credit cards shortly after my wife and I bought our first home. We were planning on doing some basic renovations and had the cash to pay for it, but we thought, why don’t we try to get a few free trips out of our spending…and so we did! We had the cash to cover the costs of our home renovations, so what we did is put all of our expenses on credit cards and paid off the credit cards IMMEDIATELY. By following through with this strategy we saved us thousands of dollars on future vacations.
Thanks to points and miles we have taken vacations to Paris, London, Orlando (3 times), Mexico, New York (2 times), the Maldives, Maui (2 times), Oahu, and Japan. These vacations have cost us little to nothing in regards to the actual TRAVEL expenses of the vacation (i.e. flights, hotels, and rental cars). On many of these vacations, we even took our kids, parents, and in-laws—and paid with points and miles!
Important Things to Know
Annual fee: Most travel cards have an annual fee. The most common annual fee is $95-$99. Some banks will waive the fee for the first year, which will be stated when you apply for the card. Some cards do not have an annual fee. Most cards that do not have an annual fee are basic, entry-level credit cards that typically come with a low welcome bonus offer.
Required spending: I cannot stress this enough—this is normal spending that you put on your credit card. Don’t go and spend more money than you would typically spend just because you are trying to hit the minimum spending required to get the bonus points. Don’t go down that path.
Credit check: Yes, credit card companies will have to check your credit and yes your credit score will take a hit; but it will be minimal. If you are disciplined and don’t carry a balance from month to month and don’t ever miss a payment, then your credit score should go up over time. My credit score has gone from 756 (2016) to 812 (2020) and that’s after applying for 17 credit cards over three years! Everyone has their own path. I’m not advocating that you apply for 17 cards within a three year period, but this is the path that I have gone down—and it’s been great for me. My credit score has increased over time and has allowed us to take vacations for a lot less money.
Redeem: Time to put those points and miles to use! There are many ways to redeem your points and miles. If you have a co-branded credit card, you will be redeeming directly through the airline or hotel chain whose name is branded on your credit card. If you have a generic credit card with banks like Chase, Citi, or American Express, then you will be earning points specific to each bank. In those cases, you can redeem in three main ways:
- Cash back
- The company or bank’s travel portal
- Transfer points to travel partners.
There is incredible value for each way to redeem, but the most bang for your buck will be to either redeem through the banks travel portal or to transfer to travel partners. Travel partners include different airlines and hotel companies that banks have partnered with for you to redeem travel.
And you're off!
Here is a breakdown of different travel rewards currencies:
- Chase Ultimate Rewards
- American Express Membership Rewards
- Citi Thank You Rewards
- Capital One Miles
- Bank of America Premium Rewards
- Barclays Arrival Miles
Here are the most common and popular hotel loyalty programs and banks they are associated with. You will earn points with each hotel co-branded credit card.
- Marriott (Chase)
- IGH (Chase)
- Hyatt (Chase)
- Hilton (American Express)
Here are the most common airline programs and the banks they are associated with. You will earn miles with each airline’s co-branded credit card—except for southwest, you will earn rapid rewards points.
- Alaska Airlines (Bank of America)
- American Airlines (Citi and Barclays)
- Delta Airlines (American Express)
- Hawaiian Airlines (Barclays)
- Jetblue Airlines (Barclays)
- Southwest Airlines (Chase)
- United Airlines (Chase)
There are other programs out there, but these are the most popular programs with the most lucrative sign up bonuses. Get to know them!
It’ll take time to learn the “ins and outs” of earning points and miles, but again, it’s a marathon, not a sprint. Take some time and have some fun with it. And if points and miles overwhelm you, just contact me and apply to our VIP program. I will do a one-on-one consultation and map out a strategic plan for you by helping you make a travel plan, apply for travel credit cards, and book your travel with your points and miles.
Whatever you decide to do, start now. The world is waiting!