If you’re using a single rewards card that pays just one point or cent per dollar spent on your purchases, it may be time to rethink your strategy. With three or four hand-picked cards in your wallet, you can save enough points and miles to relax in first class or lounge in a luxury hotel suite. If travel isn’t your thing — or you don’t want to spend time studying the ins and outs of price tags — you can still make hundreds of dollars in cash back each year by rotating your spending between credit cards that suit your spending habits.
Melissa Frank, recruiting director for an educational technology nonprofit, has nine cards. The Long Island, NY native delegates different purchases to different cards — all trips go on her Chase Sapphire Reserve Visa ($450 annual fee, for example). Her points have taken her to South Africa twice in business class, helped her father treat her to a rainforest adventure in Peru, and reduced the cost of countless trips across the US. paid full price for a flight out of pocket,” she says.
🎬📺 Free Movies and Free TV Shows! 🎭🎬
Whether you want to dabble in credit card rewards or dive deep, these five strategies will help you get more value from your points and miles. You can combine tactics to earn even bigger rewards. (Unless otherwise stated, the cards we recommend do not have an annual fee; for additional choices in different categories, visit The Best Reward Cards, 2019.)
Don’t worry that strategies to maximize rewards will lower your credit score. That won’t happen as long as you avoid a few common pitfalls. In fact, your credit score can go up.
1. Focus on cash back. Best if: You want easy and immediate returns, value total flexibility with your rewards, or don’t travel often.
Cashback may not have the panache of high-end travel rewards, but it’s simple, versatile and doesn’t lose value over time like loyalty points do. Of credit card users who say rewards are the feature they most look for in a credit card, 67% prefer cash back over points or other types of rewards, according to a report by CreditCards.com.
Miguel Suro, a Miami attorney, and his wife, Lily, split their expenses across three cards: Amazon Prime Rewards Visa Signature, 2% back on gas and 5% back on Amazon.com purchases; Citi Prestige Mastercard ($495), for five points per dollar spent on dining; and Chase Freedom Unlimited Visa, for 1.5% cash back on everything else. But he and Lily are rethinking the strategy because free cashback cards with generous rewards make more sense to them as new parents. “When you first read about travel hacking, you’re excited about the promises of amazing first-class travel around the world. But it takes a lot of time and energy to do research,” he says. “Now that we travel less and buy a lot of baby equipment, cashback is more attractive.”
The easiest method to increase your cash reward percentage is to rely on a single card earning more than 1% per dollar spent. Citi Double Cash Mastercard pays a flat fee of 2% on all purchases, just like the Fidelity Rewards Visa Signature (but you must deposit your rewards from the card into a Fidelity account). Other cards, such as the Capital One Quicksilver Visa, give back 1.5% on everything.
Then put one or two more cards on top with higher payback in categories where you spend the most, such as dining, groceries, or gas. Dining is a hot category right now, with several cards including the Uber Visa and Capital One Savor Rewards Mastercard ($95 annual fee, excluding the first year), earning 4% or more in restaurants.
Sticking with cashback cards that offer fixed bonus categories is easiest. If you choose cards like the Chase Freedom Visa or Discover it, which increase revenues for new categories to 5% every quarter, you must activate the categories every quarter to earn the higher rate. (Recent 5% categories on those cards have included hardware stores, grocery stores, gas stations, and carsharing. The fourth-quarter categories are mostly focused on shopping.)
A few other cards, including the US Bank Cash + Visa Signature, you can choose the categories that will help you earn extra cash back, including options like TV, Internet and streaming services, home utilities, and cell phone bills. Stay away from store cards unless you’re loyal to that store and shop there often, says Ted Rossman, an industry analyst at CreditCards.com. “The sign-up bonuses are lacking compared to general purpose cards, and even the ongoing rewards aren’t as attractive,” he says.
Some cash back cards have a downside: they cap your bonus earnings every year or quarter and lower the rate to 1% once you hit your limit. You may not have to worry about breaking a $1,500 quarterly limit on gas and drug stores, for example, but a family could easily exceed the $6,000 annual limit for 6% cash back on groceries with the American Express Blue Cash Preference ($95). Track your spending so you can revert to a card that earns you more than 1% back until the clock is reset. At the same time, familiarize yourself with how your credit card issuer defines its categories. For example, it’s common for credit cards to exclude gas or groceries from the highest-earning gasoline or grocery category when you buy those items at superstores, such as Walmart and Target, or wholesale clubs, such as Costco Wholesale and Sam’s Club.
2. Target sign-up bonuses. Best if: you want to quickly earn a good pile of points or have a specific travel goal in mind. The Chase Sapphire Reserve made a splash in 2016 with its 100,000 point signup bonus. Mega bonuses are harder to come by these days, as publishers crack down on “churners” who drop a card after earning the bonus. Instead, issuers are focusing on ongoing rewards, such as high returns on daily spend, Rossman says.
Still, the average sign-up bonus currently stands at an all-time high of 20,153 points or miles, according to WalletHub. New cardholders can generally expect to earn up to 50,000 or 60,000 points on annual fee travel cards after spending several thousand dollars in the first three or four months. Signup bonuses on free travel cards are lower, and cash back cards typically offer $150 or $200 after spending $1,000 or less in the first few months. Discover it and Discover the Miles double any rewards you earn after your first year as a cardholder.
Sign-up bonuses are a handy way to quickly replenish your points supply, but new cardholders can fall into the trap. First, the size of a welcome bonus can be misleading. “The headline number isn’t as important as what those points are worth,” said Julian Mark Kheel, senior analyst at ThePointsGuy.com. For example, he says that a 100,000-point bonus on a Hilton Honors card isn’t worth nearly as much as the 60,000-point bonus you get with the Chase Sapphire Preferred Visa ($95). (ThePointsGuy.com displays ratings of credit card points and miles at ThePointsgGuy.com’s Monthly Rating Guide.)
Issuers also impose more restrictions on when you can and cannot get a bonus. American Express, which limits cardholders to one bonus per card per lifetime, will tell you if you qualify for the bonus before completing your application. With other issuers, you may need to read the offer terms because, says Kheel, some banks will give you a card even if you don’t qualify for the bonus, and you won’t realize it until after you use the card.
Illustration by Chris Gash
Your credit score will not disappoint
Holding multiple credit cards will not hurt your credit score. It can even increase your score. While your score will drop a few points every time you apply for a new card and the lender performs a “hard” investigation, investigations are a small part of your overall score.
Your credit utilization ratio — the amount you owe on your credit cards as a percentage of your cards’ limits — is a larger part of your credit score and should improve as you add new cards to your collection and increase your available credit. (See 6 Ways to Increase Your Credit Score FastF.)
To reduce the impact of new applications on your credit score and make it easier to meet bonus spending requirements, split your applications every six months or more. If you wait six months to open a new card, you can also get around Chase’s “5/24 rule,” which prevents you from opening a Chase card if you’ve used five or more credit cards in the past 24 months ( of all publishers). Many publishers also limit how many of their cards you can open in a one, two or three month period.
If you have a balance on you, move it to a card with a low or zero percent rate. Rewards cards typically have higher interest rates than other credit cards.
Best ways to cash out
You can get the most bang for your buck by redeeming the points and miles you earn with travel cards for travel, especially first class or business class seats on international flights. “You can get an $8,000 ticket for less than 200,000 miles,” said Brian Karimzad, co-founder of personal finance site MagnifyMoney.com.
If you want to celebrate a special holiday, one way to strategically plan your redemption is to work backwards: decide where you want to go, which airlines will take you there, and what hotels you might want to stay in. Then bet on cards with the best reward potential and best transfer partners. Before moving your points, check the going rate with each partner. Some tricks are counterintuitive. For example, you can use Virgin Atlantic miles to book Delta flights for less than Delta would need with its own miles.
Aim for a return of 2 cents or more per kilometer. (To calculate the value of your miles, divide the cash price of the ticket by the number of miles needed to book it.) It may be cheaper to book through the travel portal, especially if you can redeem your points for more than 1 cent each. If you’re redeeming travel points for non-trade statement credits, merchandise, or gift cards, the rate can be less than one cent each.
If you’re counting on a stack of points to pay for an upcoming trip, leave plenty of time to post your rewards as that can take up to 12 weeks. But avoid hoarding miles for more than a year or two as they will depreciate in value over time.
Cashback cards usually allow you to redeem the rewards as a credit, check, or bank account at a rate of 1 cent per point. Merchandise tends to be the worst value, according to WalletHub’s 2019 Credit Card Rewards Report. Gift cards sometimes cost a small premium if you buy them with your card earnings.
🎬📺 Free Movies and Free TV Shows! 🎭🎬