Credit Card Reviews Industry Roundup: For Issue # 3 of the Credit Card Reviews Industry Roundup, Credit Card Expert Jason Steele asks the following question: What's Your Best Tip For Maximizing Rewards Programs with Your Credit Card?
For Issue # 3 of the Credit Card Reviews Industry Roundup, Credit Card Expert Jason Steele asks the following question:
What's Your Best Tip For Maximizing Rewards Programs with Your Credit Card?
Here are the responses from this week's industry experts which include Dia Adams, Geoff Whitmore, Bill Hardekopf, Ari Charlestein, Gerri Detweiler, and Susan Johnson Taylor:
Once you have made sure your financial house is in order and you are indeed ready for a rewards credit card, it’s time to take the single most important step to guarantee you’re getting the most from your travel rewards points: Set a goal.
Every decision you make after setting a goal will be much easier because it either will or will not get you closer to your goal. Your goal doesn’t need to be detailed, but make sure you have an idea how you want to use your miles and points. Burning is harder than earning.
I’m floored by how many people I meet that are shooting in the dark. Those people end up with random scraps of points and miles in about 12 different programs that add up to exactly nothing. Or even worse: they don’t bother signing up for any rewards programs thinking they’re not worth the effort.
However, once you’ve set a goal, you can find a credit card that earns you points and status towards that goal. You can evaluate each offer and see how it measures up against both your spending patterns and your stated goal.
An example: if you want to go to Europe, a card with a regional budget airline such as Southwest will not help you. However, if your heart is set on Disney World, Southwest is a great choice to help your family get to Orlando.
Geoff Whitmore - Founder of WalletPath.com
There are several things you can do to maximize rewards programs with a credit card. The best tips I can give is to take full advantage of each credit card purchase you make by maximizing a category bonus, earning transferable points or focusing on earning points for a specific purpose, such as an upcoming trip.
My main strategy is to earn transferable points since I don’t always use the same airline or stay at the same hotel. I value flexibility and rewards points that can be transferred out to numerous travel loyalty programs. While some rewards credit cards give you the option to redeem your points directly through their travel portal, this isn’t always the best redemption ratio as your points are usually worth 1.0 cent.
By transferring points directly to my airline or hotel loyalty account, I can book the same flight or hotel for significantly less and stretch the value of each reward point. Transferable points are a nice compliment if you have a co-branded airline or hotel card since you can combine the points to make an award redemption easier. For example, I hold the Chase United Explorer card for its free checked bag perk, and will often transfer my Chase Ultimate Rewards points into my United account if I'm low on United MileagePlus miles.
Having the flexibility to transfer rewards points is a huge perk, and will make redeeming your points much easier. Finally, I also recommend applying for a premium travel rewards card if you fly frequently. You can receive complimentary travel perks like travel credits, TSA Precheck/Global Entry application fee reimbursement, and airport lounge access. If you maximize the perks premium travel cards can literally offer you thousands of dollars in savings every year.
Bill Hardekopf - CEO of www.LowCards.com
In order to maximize your credit card rewards, it is important to start with the rewards card that works best for you. There are hundreds of credit cards on the market that offer cash back, mileage or points, so don't jump on the first offer you receive in the mail, or resort to just using the card in your wallet because it is already there. Finding the right rewards card will take some effort but it will be worth your time.
Start by determining where you spend your money. Take your credit card statements and checks from the past year and categorize them. What have you spent on groceries? Gas? Food? Add up your expenditures for each category to determine what your spending might be on an annual basis, assuming you will put everything on your new credit card. It is important to do this since so many cards have different levels of rewards for various categories.
Secondly, determine what type of rewards you would desire. You want to generate rewards on something that you enjoy and will use. Is it Cash Back? Miles? Points? Narrow your search to the three or four cards that pay well with the rewards you prefer.
Then, simply calculate the rewards you will earn on each of these cards based on your annual historical expenditures. This will determine the best rewards card for you. What works for you may not be the best card for your friend because of your different spending patterns and the type of rewards you each desire.
The credit card “game,” as I call it, is rich with opportunities to extract huge value out of your loyalty programs. But while earning points (and bonuses) on airline or hotel-branded cards is great, nothing beats the value of “transferable points” currencies. These are AMEX Membership Rewards points, Chase Ultimate Rewards points, Citibank ThankYou points, and (to a lesser extent) Starwood Preferred Guest hotel points. The reason they’re so valuable, is that - unlike their co-branded counterparts - these points can be transferred to several different airlines/hotels, instead of being locked in to just one.
For example, both AMEX Membership Rewards and Citibank ThankYou points can transfer at a 1:1 ratio (or better) to over a dozen airlines! The trick though, is to think outside the box when it comes to redemption. Instead of just redeeming directly with AMEX (for example) at a $0.01 valuation on each point, transfer them to a partner airline and book yourself an amazing international first or business class ticket directly with them. This way, the value of your points goes from a measly $0.01 each, to a beastly $.07 or more.
But don’t think that you’re locked in to flying on whatever airline you transferred the points to. No, no no! Thanks to airline alliances (and non-alliance partnerships), transferring to “airline x” actually gives you access to fly on even more airlines. One of my favorite examples of that is AMEX’s partner All Nippon Airways (“ANA”), a Japanese airline. While most people have no intention of flying on ANA, what they don’t know is that you can book a round-the-world award with their miles, including up to eight stopovers - flying on any of the 27 Star Alliance partners - in business class for as little as 115,000 miles. Now that is what I call “maximum value.”
Gerri Detweiler - Head of market education for Nav. Coauthor of Finance Your Own Business: Get on the Financing Fast Track.
Consider a Small Business Credit Card
If you have a small business-- or even a side hustle-- consider getting a small business credit card. Many of these cards offer lucrative rewards, including generous sign up and category bonuses. These benefits alone may help you earn rewards faster than you would with a consumer card. You may also be able to achieve status with an airline, hotel or rental car company more quickly. That can earn you perks like free checked bags or upgrades.
Plus, you may be able to get a consumer card and a small business card and earn additional rewards. For example, not long ago, I took advantage of a hefty sign up bonus for a Southwest Rapid Rewards personal credit card and one for a Southwest Rapid Rewards business card. By combining the sign up bonuses from those two cards with miles earned from flights and spending, I’ve been able to earn a Southwest Companion Pass two years in a row, which means family members have been able to fly free with me at least a dozen times.
Another benefit is the way these cards affect credit. Most small business credit cards help you build business credit, but they won’t show up on your personal credit reports unless you default, which means you can protect your personal credit from the activity of your business. If you use your small business card heavily to earn rewards, for example, you probably don’t have to worry about high debt usage bringing down your personal credit scores as long as you don’t fall behind on payments. Many people think a business card is difficult to get unless you have a full-time business. Not true: many card issuers will look primarily at the owner’s personal credit scores, and will consider income from all sources, not just the business.
Susan Johnson Taylor - Covers money and credit cards for online publications including Bankrate.com, CreditCards.com, DailyWorth.com, Learnvest.com and U.S. News & World Report. Her Twitter handle is @UrbanMuseWriter
Know your bonus categories, including any restrictions. I have the Citi Prestige Card which gives me 2x points on dining and entertainment purchases and defines those categories pretty broadly. Other cards offer bonus points on dining too, but the entertainment category bonus is pretty unique to Prestige, so I always try to buy event tickets with Prestige (also because Prestige has missed event protection for concert or theatre tickets). If I know it’s someone who’ll pay me back, I'll even buy my friend's ticket and let her Venmo me later (or buy a round of drinks), so I'm essentially earning points on someone else's dime.
I don't think Prestige caps your rewards but some credit cards do, so that's important to be aware. If you max out your bonus points for, say, groceries or travel, you should reallocate spending in that category to another card where you can earn more than 1 point/dollar.
If you’re trying to earn a signup bonus, see if you can do it with purchases that will also qualify for bonus categories. For instance, when I was earning the signup bonus for my Southwest Airlines Rapid Rewards Visa and helping my mom plan a trip that involved flights on Southwest, I offered to book my mom’s flight for her, since flights on Southwest earn two points per dollar spent and count towards the signup bonus. Southwest is pretty flexible and allows you to rebook with no change fees, so I could have bought a flight for myself even if I wasn’t sure exactly when or where I planned to travel (as long as I traveled within a year of the date I made the original booking).