Grabbing a rewards credit card is the single fastest way to turn an ordinary traveler into an extraordinary jet setter. Earning travel rewards points for every single purchase from latte to Lamborghini (yea, people really do that) opens up the possibility of upgrades, free first class flights and five star hotels, without a penny paid! Naturally, as with the case with most lucrative opportunities in life – rewards cards are extremely confusing. Here’s everything you need to know to dive in deeper, or get started…
Very short term answer: perhaps minimally, yes. Long term answer: definitely no. It’s all about how you use them, and using rewards cards responsibly. Opening new lines of credit can dip your score between 5-10 points in a very short term, but if you keep utilization (credit you use versus available credit) below 30%, you should actually see your score improve rapidly.
More available credit with low utilization shows you are a good borrower, which makes lenders more likely to approve. The big factor: don’t get too many cards before trying to get a mortgage.
Easiest advice? Don’t cancel your credit card until you’ve moved or used your points. For airline credit cards like British Airways, Delta, American, etc (Learn More) those points can’t be taken from you, once earned. You can lose any vouchers, but not the points- even if you cancel.
For cards that earn Amex, Citi or Chase Points, like Membership Rewards, Ultimate Rewards, etc (Learn More) you need to transfer your points or use them before cancelling. Since these points are bank points, if you cancel your card you’ll lose out. These points can be transferred to a variety of airline and hotel programs, so once they’re out of the bank program – you’re safe to cancel. Earn and burn.
One simple equation answers this: are the benefits I will receive greater than the fee of the card. Like… if I pay a $95 annual fee, and get free checked bags for everyone on my reservation, how many checked bags will I need to beat the annual fee. It’s that simple. Even a $450 a year credit card can save thousands, making it a no brainer.
The more you travel, the more you consume the benefits the easier it is to justify any annual fee. You should get a card with an annual fee if it’s going to save you money over the course of the year.
Short answer: it depends. Most banks have policies which prohibit you from getting a bonus for the same card for at least two years. Others – more lax, and others never ever again! Since most bonuses are defined by “product”, you can often get a similar card or a different version – like Gold versus Platinum and still get the bonus, since they are different products. You’ll need to look a bit further for a definitive answer, but with almost every bank you can get the bonus again, it just may take two years.
Despite what any blog says – this is entirely personal. Yes, there are cards that theoretically offer the best earning per buck, but if you can’t use the earnings- they’re useless. For example, tons of Marriott points and Marriott status does nothing for you if you stay at Hiltons.
Airline miles do nothing for you if you don’t travel. If you only fly with one airline, their credit card may be a great option – though our best advice is to choose cards with flexible points. This means cards from Amex, Chase or Citi (Learn More), where points can be transferred to a variety of airlines or hotels. They can also be used as cash when making a booking through the bank. This protects you from an airline or hotel devaluing their points currency, allowing you to “bank” the points until you see fit.
The best thing to do is to create a spreadsheet of your cards and balances, and then Calendar notifications.If you spend heavy and want to keep your utilization low, you can always pay off a portion of your balance before the statement hits. Find out your statement closing date, make a calendar alert notification for the couple days before and assess from there.
Of course, almost every bank offers automatic bill pay- but these will pay after the statement hits, so you run the risk of high utilization, if you spent a lot and your credit limits aren’t extremely high.
The biggest misconception with credit cards is that you’re automatically paying interest. That’s false- you only pay interest on a balance left from the month before. Other than your annual fee (which you can actually save money off of), you do not need to pay a dime to earn tons of rewards.
Pay in full every month, or leave an an amount so small- that the interest doesn’t add up to much of anything. Leaving something can be a sign of usage, which is attractive to other banks for future approvals. But in general – it’s simple, pay your card off every month, don’t buy things you wouldn’t buy with cash.