For those who are new to the whole points and miles game, the different ways in which you can earn points and miles can be quite daunting and intimidating. It doesn’t help that those on frequent flyer boards constantly confuse newbies. They use crazy jargon and oddly specific tips that are so granular that, if taken out of context, make absolutely no sense. Even those who have been in the game for a while get confused! As a result, many people get caught up in random technicalities and lose sight of the bigger picture. Wouldn’t it be nice to automate a lot of this earning?
Part I: The Power of Automation (and how they help with Travel Reward Programs)
I first learned about the power of automation when reading Ramit Sethi’s book I Will Teach You to be Rich, a book about personal finance. If you haven’t read the book and would like some straightforward personal finance tips, I highly recommend it. Anyway, he emphasized setting up systems to automate savings, investments, and paying off debt. He also discussed this crucial concept called the 85% rule. It refers to making as many optimizations as possible without going overboard. He focuses on big wins to build wealth, such as investing part of your income, rather than minutiae such as cutting back on lattes. Now, let’s apply the 85% rule to earning travel rewards. Worry about setting up the correct travel reward system so that it will work for you, rather than internalizing every travel hack under the sun to the point where your marginal rate of return on the reward is not worth your time. In this guide, I’ll outline the steps from start to finish on setting up a rewards system that requires minimal effort on your part but can earn you plenty of points in free travel. Yes, you’ll have to put in some work at the beginning to set it up. Once the initial groundwork is done, however, you’ll rarely have to think about touching it again. This strategy works for people that are in any stage of the process, so feel free to skip around as applicable to you (remember: 85% Rule!).
Part II: Picking the Correct Travel Reward Programs
To earn the rewards, you have to set up the different travel reward programs so that you can start earning. First, let’s begin with airlines because these are the easiest.
- Go to Wikipedia, and search your local airport. Find out which airline(s) have a hub at your airport.
- Next, sign up for that airline’s travel reward program.
- Before you sign up, make sure to check in which alliance the airline is.
- Ignore low-cost carriers for now. We’ll get to them later.
- There are three main airline alliances: SkyTeam, Star Alliance, oneworld. You only need one program in each, as you can book flights on partner airlines within each alliance. If the airline is not a part of an alliance, check to see its partner airlines. Then, see which alliance(s) those airlines are a part of. You can categorize this program under the alliance that makes the most sense in that case.
- If your airport has hubs for two airlines in different alliances, go for those.
- For the third alliance, research which rewards program there has the best redemption strategy
- Finally, you’ll need a reward for a low-cost carrier airline as backup
- If your airport is a hub for a low-cost carrier, definitely choose that airline
- Otherwise, base it off of the first low-cost carrier flight that you take PROVIDED that you know that there is a possibility that you will fly them again
Pretty simple to start off with, right? I can show you an example of mine, so you have an idea of how it looks.
My Example – Chicago, IL, USA:
- My airports are ORD (Chicago O’Hare International Airport) and MDW (Chicago Midway International Airport).
- ORD is a hub for United (Star Alliance) and American Airlines (oneworld), and Midway is a hub for Southwest Airlines (low-cost carrier)
- Signed up for United MileagePlus (Star Alliance) and AAdvantage (Oneworld)
- For SkyTeam, I chose FlyingBlue from Air France and KLM. Delta would have made more sense, but their award redemption value is low.
- Chose Southwest Rapid Rewards for my low-cost carrier (Excellent award redemption value)
With regards to airlines, this is pretty straightforward. Now, when it comes to other travel reward programs, such as hotels and car rentals, it can get pretty complicated. For example, for hotels, you will only earn points with them if you book directly through the hotel’s website. If you book through a third party, you will not earn points. So what should you do in this case? With hotels, I would set up rewards programs as I go with the major brands (IHG, Hilton, Starwood Preferred Guest, etc.). Once I’ve gotten to three distinct programs, I would then focus my efforts on those three. With car rentals, I would keep it at one – most major car rental programs are available worldwide. Again, make it the first major one that you use.
Part III: Opening Travel Reward Credit Cards
Here is where it starts to get fun. However, before we proceed, there is one obligatory warning to make as a preface to this section. If you are in ANY credit card debt at the moment, please pay that off first. If you know that you have trouble keeping your spending in check, this section is not for you either. Unless you commit to paying off your balance more frequently than once per statement period, this will only exacerbate the problem. The reason I make this disclaimer is twofold. First, to get these credit cards, you usually need to have AT LEAST a good credit history. So if you have fair or below credit, and apply for one of these cards and get denied, that’ll hurt your score as well as diminish your chances of getting them shortly even if you do pay off your credit card debt. Second, these cards tend to have very high APRs. If you accumulate any interest on these balances, it will negate the value of any rewards that you might have earned. Now that we’ve gotten that part out of the way, let’s move onto the fun part. Many travel credit cards have lucrative sign-up bonuses that can translate into free trips (not including taxes and fees). Also, leveraging credit card rewards is not sketchy, illegal, or harmful to your credit score as many fear, as long as it’s done correctly. We’ll lay out some of the ground rules later in this section. First, let’s get to know the three types of travel credit cards that are out there: fixed value, general travel, and airline/hotel-specific.
Travel Reward Credit Card Type 1: Fixed Value Travel Reward Credit Card
If you’re looking for simplicity in travel redemption, a fixed value card is a way to go. If you have recovering credit, little-to-no credit history, or want a simple, enhanced cash redemption in the form of a statement credit, then these cards are what you want. The way these redemptions work is that you earn a certain number of points per dollar spent. You can then redeem these points as a standard statement credit or to cover a travel purchase, with the points holding more value in the latter option. With these cards, do not be deceived by the terms “points” or “miles” if the card issuer uses them. They bear no relationship to rewards programs for hotels and airlines. Also, please note that to cover a travel purchase, you need enough miles to cover the ENTIRE purchase. That being said, card companies categorize travel pretty loosely, so you’d be able to redeem the points for purchases such as Uber or Lyft rides or Airbnb stays. These cards usually have no annual fees and require at least fair to good credit. They also have primary travel benefits such as no foreign transaction fees. Examples of these cards are the CapitalOne Venture Card, Barclaycard Arrival Plus, and Discover it Miles Credit Card.
Travel Reward Credit Card Type 2: General Travel Reward Card
General travel credit cards are a step up from the fixed value cards regarding prestige, flexibility, and value. The points that you have on these cards can be converted into a cash value used to book travel. In addition, you can transfer them to airline and hotel partners at a specific ratio (usually 1:1, but there are exceptions). Among the different issuers, there are higher and lower tier cards. These cards usually do have annual fees, but some (usually the lower-tier cards) waive them the first year. The issuers have a travel portal where the points are worth a certain amount. They also allow you to utilize category spending more, where you can earn more points when you make a purchase that falls under a specific category. For example, you would earn 2x points when you make travel purchases. The higher tier cards tend to have higher earning rates. Finally, you get more benefits than a fixed value credit card, such as baggage protection and trip delay insurance. The higher tier cards have more of these benefits. Examples of general travel cards include the Chase Sapphire Family, The Platinum Card from American Express, and the Citi Prestige Card.
Travel Reward Credit Card Type 3: Airline/Hotel-Specific Credit Card
These cards are co-branded with an airline or a hotel and a bank. When you earn here, you get points or miles directly to that carrier. There’s not much flexibility here concerning what you can use the points for since they are airline miles or hotel points. When earning points, you usually get a higher earning rate for making any purchases with the hotel or airline, and usually one mile or point for all other purchases. The cool thing about these cards is that they’ll usually give you specific perks. For example, with airlines, you’ll sometimes get two lounge passes annually and almost always get two free checked bags. With hotels, if you meet the sign-up bonus, you’ll automatically get elite status. Examples of these cards include the United MileagePlus Explorer Card, Starwood Preferred Guest Credit Cards, and the AAdvantage Executive Card.
The fastest way to earn points through these cards is through the massive sign-up bonuses that they offer. Usually, you’ll need to meet a certain amount of spending in a certain amount of time (known as minimum spend) to get the bonus. An example of this offer would be “Earn 50,000 miles after spending $3,000 in 3 months”. Once you meet that spend, those points get deposited into the respective account. While it seems simple, there are a few things to keep in mind. First, make sure you can meet the minimum spend without stretching your budget too much! In other words, don’t overspend to get the bonus. If you feel that you can’t meet that minimum spend, find a related card with a lower minimum spend. Now, if you’ve already got the card and are close to reaching the minimum spend but need some extra help, here are some options:
- Ask friends or family if you can make purchases for them and have them pay you in cash.
- Buy prepaid gift cards. Be careful of this one, however, because companies are catching on this method (known as manufactured spend). Therefore, try to limit this to one or two, spaced out, as companies may close your account. Also, load the maximum amount on it so that it minimizes the effect of the card fee.
- Pay a friend or family member on venmo with the card, and have them pay you back by cash or transfer. For the subject line, you can say something like “rent,” so that it seems less suspicious.
Second, make sure you mark down when you got approved, so you know on which date you need to meet the minimum spend. It would be quite a disappointment if you had the opportunity for the bonus, and you ended up missing it because you didn’t take note of the dates. Third, during your sign up bonus, only use that particular card to make all of the purchases, so you don’t have to overspend. Also, make sure you don’t open any other cards during this period as you don’t want to try to meet more than one sign-up bonus at once. That being said, concerning how long you should wait between opening cards, between 3-6 months is a good rule of thumb, with a more extended period for those with lower scores. Finally, do not cancel your card immediately after you earn your bonus! This practice is called churning, and companies frown upon this behavior. It will affect your creditworthiness for future cards, and companies will be more likely to decline future applications. If you don’t want to pay the annual fee, you can wait until a few weeks before your annual fee period is up. Then, you can determine whether or not you want to keep the card.
Part IV: Leveraging Every Purchase
By now, you should have created your accounts and opened credit cards, if it applies to you. The final step to travel reward automation is to create a strategy to make sure you’re earning points on ALMOST every purchase. The reason why I say “almost” is because of the 85% rule. You don’t want to obsess over every little detail, as this is the most active part of the strategy. This process may not seem automatic at first. Once you get the hang of it, however, it becomes almost second nature. Here are the primary ways to leverage purchases for your travel reward programs.
Take a look at all of the cards that you have, and check which offer the most points in specific categories. Then, use them accordingly. For example, if you see one that offers 2x points on dining, use that for all food-related purchases. Then, if your other card offers 3x points on travel, use that for all travel purchases. And finally, if an airline/hotel specific card offers 2x points for bookings through that site, make sure to use that card.
Many airlines, hotels, and banks offer shopping portals where you can get extra points for making purchases through a specific merchant. If you are about to make a purchase and don’t have a category bonus associated with it, make sure to check the portals to see if you can still earn extra points. A great place to compare these portals is Cashback Monitor. For example, if you wanted to buy a TV, you could go to a shopping portal. You may see something in these shopping portals along the lines of 5x points when purchasing through Best Buy.
Many major airlines and hotel chains (especially in the United States) offer dining rewards programs. With these programs, you earn points for dining at certain restaurants. All you need to do is link your card once, and every time you dine at one of these restaurants, you’ll see rewards post about a week later. And the more you eat with the program, the more rewards you earn per dollar.
This is where things get fun. Dipping is a strategy where you earn rewards in multiple places for just one purchase. Depending on the number of areas in which you receive rewards, there’s a particular prefix before it. For example, if you earn rewards in two programs with one purchase, it’s known as double dipping. An example of double dipping is if you use a card with a dining bonus at a restaurant that participates in airline rewards. This is because with one purchase, you have earned rewards on both your credit card and frequent flyer program.
Part V: Final Notes
So, as we bring an end to this post, I know it was a lot to take in. However, a lot of it was describing specific terminology. If you go back through and follow the steps, you’ll see that it’s quite simple and easy to set up. It should only take a couple of hours of your time at a maximum. This process is doing 85% of the work to get to the points where you can start automating earnings. You’ll also start getting the hang of it so that each purchase requires less effort on your part. Next thing you know, you’ll check your accounts and see miles that you didn’t realize you’d collected! Now, it’s also important to monitor your account for annual fees and expiring points. Some tools do this for you automatically, such as AwardWallet. You don’t want to miss out on free travel because you forgot to use your points before they expired. Also, you don’t want to pay annual fees on credit cards that you don’t use that often or in which you don’t find much value. What you just read is a very high-level overview of earning points and miles, as prescribed by the 85% rule. There are a lot of granular details and ways of earning points that I haven’t covered here that can be helpful to your strategy. I will be posting about these on the blog, so make sure to subscribe to the newsletter to keep up to date on these!