Two secrets for getting the most out of your credit card travel rewards
Gone are the days when the credit card in your wallet served one purpose – to pay for whatever you needed to purchase in that moment.
Today, credit cards do everything from extending manufacturers' warranties to providing purchase protection to insuring your rental car to covering your costs in the event you have to cancel a trip . Perhaps most obviously, however, credit cards these days actually pay you back for using them in the form of cash back or travel rewards based upon the purchases you make on the card.
Now that credit cards do offer rewards, the smart credit card user knows that seeking out ways to maximize those rewards can be a lucrative use of your time. Furthermore, having one go-to card in your wallet may not be the best path to getting the most out of a rewards program.
Before we go on, let’s be clear about one thing: Multiple credit cards is NOT a good strategy for everyone. If you’re someone who struggles to keep up with your due dates or who is tempted to spend beyond your means, no amount of rewards is ever going to offset your late payment charges or interest costs. If one card is enough for you, that’s great! Use that card responsibly and take advantage of every perk that goes along with having it and read about "double-dipping” on the rewards you have further down in the article.
If, on the other hand, you’re someone who would like to know the secret to getting the most out of your rewards as possible and wouldn’t mind some tips for making that happen, definitely keep reading.
Really get to know your issuer’s rewards program, not just the program for your specific card
Some major issuers, including Chase and American Express, for instance, offer consumers multiple credit cards that all run on the same rewards program though with different earning rates and sometimes even different terminology for those same rewards.
Chase is the king of pooling rewards thanks to its Ultimate Rewards® program. Multiple Chase cards, including the popular Chase Sapphire Preferred®, Chase Freedom®, Chase Freedom Unlimited® and even the Ink Business PreferredSM small business card, allow users to rack up Ultimate Rewards® points on their purchases. Furthermore, you can transfer all your points into a single pot and, if you have a particular card, actually redeem those points at a higher value.
The key is that each of those cards offers differing amounts of rewards for different types of purchases. Sapphire Preferred®, for instance, offers two points per $1 back when you pay at restaurants and on travel purchases and one point on everything else, while Chase Freedom Unlimited® offers 1.5 percent (1.5 points) on each $1 you spend on any purchase.
Compare Chase Sapphire Preferred® with other travel rewards credit cards here.
Add the Chase Freedom® card to the mix, with which you earn 5 percent back in quarterly rotating categories (let’s say the category is gas for this quarter), and you can really start to see the points add up.
If, and only if, you can see yourself managing more than one credit card well, here’s how putting to use a combination of a few Chase Ultimate Rewards® cards could benefit you:
Compare Chase Freedom® and Chase Freedom Unlimited® with other cash back rewards cards here.
The last piece of this puzzle is that Chase actually offers higher redemption rates for certain cardholders – in this scenario, that cardholder is the one with the Sapphire Preferred® card. Pool all your points under Sapphire Preferred® and they’re worth 25 percent more when you redeem them for travel. That means those 3,000 points mentioned in the graph above are as valuable as 3,750 points.
One other note for those of you considering a luxury credit card, the much-discussed Chase Sapphire ReserveSM card also runs on Ultimate Rewards® points (and a hefty $450 annual fee, for the record), but if you have that card in your wallet, all your points are worth 50 percent more when redeemed for travel.
Compare Chase Sapphire Reserve® with other travel rewards credit cards here.
Yes, it’s a lot to keep up with, which is why a strategy like this isn’t for everyone. That said, if you like the thrill of this kind of thing – strategizing to get to the most out of your credit cards (it almost feels like cheating, right?) – then you’d do yourself a favor to look into it.
No, we'e not talking about your friend who contaminates the table’s bowl of salsa every time you go out. In this case, we’re talking about both cashing in on rewards and earning rewards at the same time.
If you already have a frequent flyer or hotel loyalty account, you’re likely familiar with the fact that you don’t earn rewards on flights or hotel stays booked with redeemed rewards.
Certain credit card rewards programs, however, change that.
There are a number of travel rewards cards out there that allow you to redeem your rewards for statement credit to cover the cost of travel you booked on the card. Here’s how that could allow you to double dip:
Let’s say you have an American Airlines AAdvantage® frequent flyer account and a Discover it® Miles credit card. Head out to whatever website you like to use for booking flights – whether directly with the airline or through one of myriad travel deal sites – and use your Discover it® Miles card to pay for your flight. Very soon, you’ll see the cost of that flight show up on your credit card statement.
Go ahead and redeem your Discover it® Miles rewards for statement credit to cover that flight. Your miles are worth $.01 each, so you’ll need 50,000 miles to cover the full cost of a $500 round-trip ticket (though you can redeem miles to cover partial costs, too, which is a nice feature).
Here’s the double-dipping part: When you take your flight a few months later, you’ll see frequent flyer miles accumulate in your American Airlines AAdvantage® account. That’s because, as far as American Airlines can tell, you paid for your flight out-of-pocket and didn’t cash in frequent flyer miles for a reward flight, hence you’re able to both take a reward flight through your credit card rewards and earn frequent flyer miles through your airline loyalty program. And, yes, you also accumulate credit toward your airline’s “elite status” program this way.
When it comes to credit cards, there’s no “one size fits all.” You have to have a firm grasp of your own spending habits, your credit history and your level of responsibility in order to determine what card or cards could fit well into your lifestyle. Don’t let flashy rewards draw you into a situation you can’t afford or that you know you aren’t quite ready to handle.
But, if you’re ready to make your credit cards really work for you, exploring the ways your rewards can accumulate the most quickly and bring you the most value is a great way to start.