A BEGINNER’S GUIDE TO TRAVELLING ON CREDIT CARD POINTS
photo credit | robin nougier on unsplash
There are a lot of strategies for collecting and redeeming credit card points (or miles) for travel. This blog is for people who are just getting started and who want to earn points without changing their spending habits. And it’s for people who want to collect points from everyday purchases like food, entertainment, and transportation.
Download a free printable copy of the workbook for this blog and use it to organize your notes and stay on track. A Beginner’s Guide To Travelling On Credit Card Points ~ The Workbook can also be found on my guides page with my other free downloads.
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A BEGINNER’S GUIDE TO TRAVELLING ON CREDIT CARD POINTS
- Analyse your spending habits.
- Plan your next trip.
- Find your preferred airline and hotel loyalty programs.
- Learn how credit card points can be redeemed.
- Choose the right credit card for your needs.
- Maximise your potential to earn points.
- Set your points goal for your next trip.
Step 1: Analyse Your Spending Habits
The first thing you need to do is figure out the top 2 or 3 expenses in your household. Is it food, entertainment, transportation? The quickest way to do that is to download a copy of all your credit card statements for the past two months and go through them line by line.
I know! I know…
It sounds tedious, but some credit cards offer extra points for certain types of purchases, and this exercise will help you choose the best credit card so that you can collect points faster and travel sooner, without changing your spending habits.
If you’re an Excel person and you like playing with spreadsheets, check out How To Automatically Categorize Credit Card Expenses In Excel by Pete-HowtoAnalyst (on Youtube).
Step 2: Plan Your Next Trip
Phew – okay, that was a rough way to start.
Let’s move along to something way more fun: planning your next trip. Aim for high-level details that you would spend a lot of money on, like flights, hotels, fancy meals, ground transportation and activities. Read reviews, choose your top 2, and write them down. Now, do a Google search to find out what loyalty programs they honour.
The goal here is to start thinking about which loyalty programs may be available at new-to-you destinations, and how you’ll manage your credit card points to pay for big-ticket travel expenses.
Tuck this information aside for now, but keep your overall trip in mind as you do the next few steps. We’ll circle back on your trip plans in Step 7.
Step 3: Find Your Preferred Airline and Hotel Loyalty Programs
Most credit cards offer a points transfer to airline or hotel loyalty programs (or both). In order to maximise your benefit from those transfers you’ll want to find out which loyalty programs you’re most likely to use.
Create a list for each of the bullet points below. Next, do a Google search to find out what kind of points (or miles) can be redeemed for every item on each list. If you’re having trouble finding information for a smaller airline or lesser-known hotel chain, don’t give up! That’s valuable information, especially if you spend a lot of time at out-of-the-way destinations. Try looking up their parent company – a lot of smaller companies are owned by larger corporations.
You’ll probably end up with a mix of different types of loyalty programs, and that’s OK. As long as one or two stand out, you’re in good shape.
- airlines I’ve flown in the past.
- hotel / motel chains I’ve stayed at.
- car rental companies / Uber I’ve hired.
- activities / tours / cruises I’ve enjoyed.
A fun thing to do now would be to write nice reviews for the services and experiences you enjoyed in the past. It’ll help boost your excitement level for your trip, and it may come back as good karma.
Protect Your Loyalty Program Points
Password protect your loyalty programs the same way you do banking information, and consider using MFA wherever available. Loyalty account fraud is a real thing, and it’s on the rise. Read What Is Loyalty Account Fraud And How Can You Protect Yourself by Experian.com.
Step 4: Learn How Points Can Be Redeemed For Travel
It’s time to look at how points can be redeemed to make your trip come true. Most credit cards offer 3 methods of redemption:
Travel Portal – Many credit card companies have an online portal where you can shop and pay for travel using points (flights, hotels, activities, dining, etc.). Consult your lists from Step 3 and your travel plans for your next trip to make sure the right airlines, hotel brands, etc. are offered for the credit card(s) you’re considering.
Transfer to Partner Loyalty Program – Many credit card companies have partnerships with hotel and airline loyalty programs. Choose a credit card that partners with a loyalty program you’re likely to use (for example, Air Miles) and find out what the transfer rate is (it’s not always 1:1).
Statement Credit – Use your points to pay down the balance on your credit card. A creative way to use this is to spend dollars on your credit card for travel expenses that can’t be paid for with points.
As you work through the process of choosing the best credit card for your needs you’ll want to consider the points value for each of the redemption methods above. Then, when it’s time to set your points goals for travel expenses you’ll want to calculate all three redemption options and choose the one that offers the best value.
Step 5: Choose The Right Credit Card For Your Needs
Alrighty. Now it’s time to implement all your hard work.
Start by doing a Google search for the best travel rewards credit cards. Narrow down your search by adding the current month and year and your country name. For example, mine would be: “Best travel rewards credit cards for July 2024 in Canada.” I recommend taking the time to compare at least 5 different credit cards before applying for any one of them.
There are a lot of things to consider when choosing a credit card (specifically for travel rewards) so I’ve narrowed this beginner’s blog down to my top considerations.
Earnings Rates
The earnings rate tells you how many points you get for each dollar spent. Some credit cards offer better earning rates for certain types of purchases. Look at your household spending from Step 1 and choose the credit card that offers the best earning rate for your 2 or 3 highest monthly purchases.
Transfer Rates
Find out the transfer rate to hotel or airline loyalty programs (it’s not always 1:1). This is really important if you have the potential to collect a lot of the same loyalty points through a retailer in addition to the points you could transfer from the same purchase made on your credit card.
Welcome Bonus + Minimum Spending Requirement
A welcome bonus is a lump sum of travel points that becomes available after the minimum spend requirement has been met. The minimum spend requirement is the dollar amount that must be spent on the new credit card within a set amount of time.
For example: 50,000 points unlocked when $1,000 spent within 30 days of approval.
There are almost always conditions on the minimum spend requirement: annual fees, balance transfers, cash advances, and some gift cards are examples of charges that don’t apply. Check out these creative tips on How To Meet Minimum Spending Requirements by The Prince Of Travel.
Annual Fee
The annual fee is a user fee that you pay once a year that’s normally charged to your credit card as soon as it’s approved, and then every year on the anniversary of when it was approved.
Credit cards with higher annual fees tend to offer big welcome bonuses and higher earnings rates, while credit cards with low (or zero) annual fees offer smaller welcome bonuses and lower earnings rates.
That’s an awful lot to consider.
So! Let me give you the order of operations I’d follow if I was just starting out.
- Figure out my top 3 types of expenses based on the last two month’s credit card statements.
- Choose one credit card for each type of expense based on a quick look at:
- Annual fee
- Welcome bonus
- Earnings rates
- Find two more credit cards based solely on how attractive their welcome bonus is, or the low cost of their annual fees, or both.
- Calculate what the welcome bonus is worth in dollars for each of the 5 credit cards I’m reviewing (to find out if paying the annual fee for the welcome bonus is worth it)
- Calculate what the annual fee would be worth in points for each credit card (to find out if the welcome bonus is worth the annual fee)
- Look at the past two month’s expenses and see which minimum spend requirements I would have met (and the remaining difference on the ones I didn’t meet)
- Calculate how many points I would have earned for each credit card based on my last two months worth of expenses. Then multiply that amount by 6 to get an estimate of points I could earn with that card every year.
- Add up the points earned for the year plus the welcome bonus, and then subtract the points value of the annual fee. Do this for every credit card.
The grand total for points on each of the credit cards analysed would give me a pretty good idea of which credit card stands out as the best option for my needs.
Intermediate Tip: As you become comfortable comparing credit cards, you’ll start to understand which factors are most important to you. Make notes as you learn so that you can refer back to them next year when it’s time to review your credit cards. I recommend reviewing your credit cards every year and compare them to new offerings to make sure you’re getting the best earnings rates.
Step 6: Maximise Your Potential to Earn Points
Remember the trip you planned in Step 2? Now it’s time to get strategic about earning points in order to meet those travel goals.
Below are a few strategies that you can implement at different stages of your points collecting journey. Turn these strategies into habits to earn points faster!
Choosing Your Credit Card
Earnings Rates – Apply for the credit card(s) that offers the best earnings rates on your top expense each month. If you have a big expense coming up, like a wedding or a renovation, use your budget for that event to determine whether it would be wise to get a separate credit card for that type of expense, so that you can earn the points from the earnings rate and achieve the welcome bonus by spending a lot of money in a short amount of time.
Welcome Bonus – Apply for new credit cards every year so that you can maximise your points earned from welcome bonuses. Remember to cancel old cards, and make sure you manage your cards wisely to grow your credit rating.
Annual Fee – Instead of getting one credit card that has a big welcome bonus and a big annual fee, consider getting multiple zero-fee credit cards for different earnings rates that have modest welcome bonuses. Smaller welcome bonuses and tight strategic spending for specific earnings rates can add up over time.
Using Your Credit Card
Where you spend your money – Sign up for loyalty programs where you shop most often (like at the grocery store) and find out if you can transfer those points to your desired airline and hotel loyalty programs. If not, spend those points and discounts to get items for your trip.
When you spend your money – Take advantage of seasonal and one-off loyalty points bonuses by knowing when they happen. Sign up for your credit card, retailer, and loyalty program newsletters.
Manage Your Credit – Pay your credit card in full on the day it’s due every month to help build your credit and become eligible for credit cards with bigger welcome bonuses and higher earnings rates in the future. Read this article by CNBC about when is the best time to pay your credit card bill each month.
Step 7: Set Your Points Goals For Your Next Trip
The last (and most rewarding!) step is to set your points goals for your trip and start to work toward them. Figure out how many points you’ll need for each travel expense from Step 2, make a list and put it someplace you’ll see it every time you make a credit card payment. Every few payments you’ll be rewarded with reaching a points goal, and you can celebrate by buying something for your trip.
Happy Collecting!
A couple of things to remember
Collecting enough points to travel is a marathon, not a sprint. Take your time to do proper research and find the best credit card for your needs.
And, be gentle with yourself while you ease into your new hobby. You may not ace this on your first attempt – but with a little dedication, you’ll soon be travelling on points like a pro.
Go get it!
Renee | July 2024
PS: Never turn down the opportunity to join a loyalty program. If the cottage you stay at only once a year offers a “tenth stay is on us!” promotion, you might find yourself sipping hot chocolate at the edge of a frozen lake under the aurora for free on the tenth anniversary of finding that gem.