Maximizing Credit Card Rewards and Points

In the last post, I touched upon the idea of credit card rewards and sign-up bonuses. Now I am going to expand it a bit and share my experience with you. For those who’re joining late, this is about travel hacking to get (almost) free airfare and hotel stays, multiple times a year. Let’s embark on the journey now.

I was near 100% credit card user for the last 10 years. I used to pay only mortgage and utility bills using my bank accounts. For everything else, I used credit cards. As a result, I earned a lot of credit card rewards and cash backs.

In our household, we have almost $50,000 spent, excluding the mortgage, in a year. Now, with even a very basic no-fee card I was earning 1% cash back or reward points. So that’s $500 per year for just spending money on things we needed.

But actually, I was earning much more, as some cards (cards with annual fee) offer more rewards for spending on particular categories. For example, my AMEX everyday card was earning 3% cash back on Walmart/target purchases and my AMEX Gold card was earning 3X (equivalent to 3%) on restaurant spends.

Enter the world of different tiers of credit card users.

Start with Tier 1 credit card user

I was a tier 1 (using a credit card just for ease of payment) credit card user until 2017. I used to get cash back in terms of a statement credit. Almost every quarter I was getting $150-$200 as a statement credit, which was reducing my monthly credit card bill.

I was happy with this arrangement until I came to know about the usage strategy. That is having multiple cards and using them at the right place at the right time.

I got Chase freedom, Bank of America rewards, Chase Disney and Citi thank you cards in 2017.

What follows is Tier 2

I became a tier 2 credit card user (Who use the right card at the right place to maximize returns). Chase freedom has rotating 5% reward categories. Every quarter they allocate 2-3 categories where you can earn a 5% bonus. In this quarter, they are giving 5% back on Groceries and home improvement stores (Home Depot/Lowes, etc.).

I present my Chase freedom card at Publix and Home Depot and use the bank of America rewards card for gas station purchases, where it earns 3% cash back. Similarly, I use Citi Costco card for our Costco shopping.

From last year I have Chase Sapphire Reserve card which I use for travel and restaurant purposes. For flights, hotel stays, parking and toll payments and at restaurants, I use only chase Sapphire card for its 3% rewards.

When you think this is too much to think and strategize, you may be right and entire travel hacking, which I am about to tell you, is not your cup of tea. But if you give it at least a try and see how you’re going along, you may be surprised how good you have become at it.

It’s like playing video games, you need to think and develop a plan, once that’s done, you only need to execute every day. And, when something becomes a habit, it becomes easier to follow.

To be honest this is just the tip of the iceberg. In order to score free travel, you need to pick your brain a lot more. This is hacking, after all!

Practice and knowledge make you Tier 3 credit card user, in literally no time. As long as you know the things.

When I became Tier 3 credit card user (unknowingly)

I was only earning points and rewards and redeeming them for pure $$. I had no cards that earned me miles. I had a very elementary concept of miles, which basically meant and reward miles you get after you complete a trip in an airplane. I had no miles earning card.

Even those miles that I acquired by flying to India every year were elapsed due to prolonged inactivity.

A reason I applied for a $450 annual fee Chase Sapphire credit card was a feature to use the Chase points for travel. (another one was to get PriorityPass lounge access, as we travel long-distance to fly to India).

Current status of my Chase ultimate reward account

Giving you a simple example to show how Chase Sapphire card is helpful for your travel needs.

If you dine and pay a bill of $100, you’ll earn 300 Chase Ultimate Reward points. If you take the cash back, those 300 points will result in $3 (1point = 1 cent). But if you book travel with your reward points, Chase will consider the point value as. 1 Point = 1.5 cents. So, when you book your flight or hotel, you can book for $4.5 worth of travel for the 300 points you earned at the restaurant.

That Chase Sapphire card came with 60,000 bonus ultimate reward points (UR – going forward). So, could have cashed it for $600 but I waited and cached it for $900 worth of cruise trip this year. My cruise vacation is coming up in July.

There are numerous cards and numerous point systems that can help you inch towards free travel, just for spending using credit cards.

See how $ value increased for the same points when I use for travel

Like Chase’s UR, American Express has Membership Reward (MR) loyalty program. Citibank has Thank you points (TYP).

So as a tier 3 credit card user, you’ll seldom cash in your reward points, and do more of travel redemptions, to maximize the value of your points.

This is not the end, if you noticed the sign-up bonus on Chase Sapphire I talked about, that’s the real thing behind travel hack!

The reality that you can cancel and re-apply for credit cards again and again to get the sign-up bonus, makes this game so interesting and so worthy of your time and energy. There are so many do’s and dont’s you’ll have to learn to play this game.

That’s the Tier 4 of credit card usage. But I’ll talk about it in the next post. Just to give you the glimpse, so far, I traveled free to India in Turkish airways economy, I am going to cruise free in NCL for 7 days and I stayed three free nights at Orlando. Just by hacking travel for less than 1 year.

Readers, Which tier are you in now?

I am putting referral links here, from the cards I own right now. If you click the link and apply for cards and get approved as well, I’ll receive some incentives in the form of reward points. So, feel free to use them

Chase Sapphire Reserve (The best card for frequent travelers) – they stopped the referral program.
Chase Freedom (Earn 5% cash back on popular categories) — Link
AMEX every day (more cash back for you for using this link, mutual benefit) – link We can both be rewarded if you’re approved!
Chase Disney Reward ($50 in Disney gift card for you) – Link
Chase Southwest Visa (win 60,000 rapid rewards points, up to three round trip domestic flights free) – Link
Barclay card Arival+ (get $700 in travel credit) – They do not have any referral link you can head over to https://cards.barclaycardus.com to signup for this card
Bank of America Cash reward (earn 3% cash back on a category of your choice, I have gas as that category, and $200 signup bonus) – No referral link for this one either as BofA doesn’t run refer a friend program at this time for this card.