Free Money! How we use credit card points

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We don’t consider ourselves expert points hackers. Maybe we just don’t like labels. In any event, we use a carefully curated credit card collection to help squeeze a little bit more out of our travel budget. We carry a couple of cash back cards, too. We consider our credit card strategy to be intermediate level. After some initial research and investigation, we choose solid cards and then stick with them. We open a new card for the purpose of sign up bonus harvesting maybe once per year or less. As working professionals, we just want a little kickback based on what we already spend. We typically won’t take advantage of a sign up bonus if we expect to close the card within the year. 

First, a cautionary tale. If credit cards will hinder your ability to responsibly handle your finances, do not use them. I got into some credit card debt while in college. In hindsight, it was very minor. But the amount of debt relative to my income at the time was enough to teach me a lesson about responsible credit usage. Credit cards made it easier to disconnect the income and expense columns on a balance sheet. If credit cards cause you to spend more money than you make, or even to spend more than you want to, no amount of points or rewards will make it worth it. Use a cash-based or other type of budget system instead.

After a period of cutting up the credit cards and gaining more self-discipline, here’s what we do today. Our biggest expenses like the mortgage and car payment are not readily available to pay by credit card. We haven’t investigated whether we could make these payments with plastic. But these types of charges would typically fall into the “other” category for our cards, which return the lowest points values (for our cards, that’s 1.5%). Considering the hassle (and likely extra fees) involved, we continue to pay these types of expenses through our bank. The same goes for any other type of expense that charges a fee to use a credit card, like taxes for example. Our next biggest spending categories are travel, dining out and groceries.

What’s in our wallet evolves over time. More of those cards than ever have annual fees. The idea of paying an annual fee for a card was so foreign to us just a few years ago. 

In April 2018, when we launched this blog we used the American Express Blue Cash Preferred for groceries and gasoline. The 6% cash back on groceries is great. We are fortunate that our main grocery store is one of the supermarkets within the 6% category. But AmEx makes it pretty difficult to figure out exactly which stores are included and which are not. We ultimately downgraded this card to the no annual fee version, which offers just 3% back for groceries as our food spending declined and shifted to other sources (like buying direct from farms, which I wrote about here, here , here, and here).

Right now we use the Chase Sapphire Reserve card for most travel. The 3x rewards points in a big spending category, plus some of the other perks associated with the card, make it worthwhile to pay the jaw dropping annual fee. We also signed up back when Chase offered 100,000 rewards points bonus. We used that sign up bonus to cover a great hotel in Tokyo. We’ve used some of our more recently earned points through the Chase Travel site, which offers a 50% bonus on redemption with this card. Now that the annual fee has been further raised as of April 2020, without perks that are equally beneficial for us, we are re-evaluating whether this card still makes sense going forward. Regular reconsideration of credit cards, especially those with an annual fee, is always a good idea. 

Today, for dining out and groceries we use the American Express Gold card. The 4x rewards points in our relatively large food spending category is a great way to earn travel points. We also take advantage of the perks this card offers, like a dining credit for GrubHub and an airline fee credit. 

We are Amazon prime members and the Visa offered through Chase is an incredible offer. It pays 5% back which immediately applies to other Amazon purchases. We buy pet food and supplies from Amazon, along with many other household items. Having this card certainly encourages us to move purchases to Amazon whenever it makes good sense to do so.

For almost everything else, we use the Chase Freedom Unlimited. For anyone who also has the Chase Sapphire Reserve or Preferred, a Freedom card (or the Unlimited version) is a smart addition. The Sapphire cards provide a bonus redemption rate for points spent through Chase’s travel website. You can transfer points from the Freedom cards to the Sapphire card, and therefore earn and redeem at higher rates than you would be able to otherwise. We chose the Freedom Unlimited, which offers 1.5% on all categories, while the Freedom offers 1% with bonus categories that change on a quarterly basis. Because we try to keep things simple, we opted for the higher flat rate so we don’t have to think about which card to use in a particular quarter.

The shop through Chase or American Express offers can be a solid way to earn a lot of points. We’ve cut back spending on online shopping significantly, but nonetheless we do buy things. Some of my favorite stores offer 5-10% extra reward points! If you have multiple cards, be sure to check each card and each brand because offers can vary considerably. 

For the most part, we still take the same number of trips with the same class of travel (both hotel and air) that we would with cash. We never considered ourselves extraordinary travelers until our financial planner told us we were. Sometimes we will choose a destination that’s a good deal with points, just like we would with cash. Generally our strategy is to offset the cash outlay against points we earned by doing what we would have otherwise. 

Another way our points strategy has changed is that we used to earn and burn our travel points as a way to save money in the short term. Now, we consider our points part of our early retirement asset portfolio. There are still occasions where we redeem a big chunk of points (as we did for our Costa Rica vacation). But we believe our greater flexibility to travel during retirement will yield higher returns for those points. We’re also considering some big aspiration trips that we would never pay cash for. This plan changed once and could change again.

Do you have a credit card strategy? How do you feel about using credit cards to earn points? Are points a major part of your personal finance plan? What’s your best points redemption or hack? Has your credit card strategy evolved over time? 

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