Points 101

 

If you are new to the world of award travel, this is a great place to start. When I share my knowledge about free travel with a beginner, everything about it sounds great – first class flights and luxury hotel stays, all on points and miles. Their enthusiasm slowly fades as I explain about loyalty programs, credit card bonuses, minimum spends, category bonuses, online shopping portals, booking award travel, etc. The most common feedback I receive from beginners is that the idea of free travel sounds great but the information and work involved feel overwhelming. I hope to lay out an informative and concise beginner’s guide to help you get started.

 

Pick a travel goal
Make a travel bucket list and pick a destination or two. Maybe you want to revisit one of your favorite places or be able to see family and friends more often. Whatever your travel goal is, it can be helpful to work towards something. It may feel arbitrary accumulating points and miles in the beginning if you don’t have a trip to look forward to. I encourage everyone to save those points for award travel and not redeem them for gift cards, merchandise, or other similar offers. Points and miles will provide the highest value when redeemed for award travel. Once you take that first trip on points and miles, you’ll be glad you saved them up to make it happen.

 

Check your current balances
Now that you have a trip in mind, take a look at your current points balances with any airline frequent flyer or hotel rewards programs you may already have. Be sure to also check your points balance with credit card issuers, such as American Express, Barclays, Chase, Citibank, etc. If you aren’t a member of any airline frequent flyer or hotel rewards program, be sure to sign up for one before your next trip and credit your flight or hotel stay accordingly.

 

Develop points-earning strategy to meet travel goal
Taking into account your travel goal and current points balances, there will likely be one or two programs that will be most beneficial to achieving your goal. These programs are where you should be crediting and earning your points and miles. Some people may find they have a few thousand miles here and a few thousand points there, which are not enough for the type of award travel redemption they want. Accumulating your points and miles into fewer programs will increase your balances, allowing you to redeem for flights that cost 30K, 40K, 80K, or more miles.

 

Check your financial health
Without a doubt, the quickest and easiest way to earn lots of points and miles is through rewards credit cards. Before you decide to jump in, it is important that you take a look at your financial health. You can obtain a free annual credit report from each of the three major consumer credit reporting agencies – Equifax, Experian, and Trans Union. More information about free annual credit reports can be found here. A high FICO credit score is also helpful for credit card approvals. There is no magic number but something 700 and higher will likely yield an approval. Yes, applying for credit cards and opening multiple credit cards will initially lower your credit score due to the “hard” credit pulls by the bank. It is generally advised not to apply for new credit cards if you are planning to apply for a loan in the near future. Per the Terms & Conditions, I am not a financial planner and the information shared here is of general use. It is the sole responsibility of each individual to assess their personal financial situation and decide if applying for credit cards is appropriate for them. However, I do feel that I can share this piece of advice that can apply to everyone – do not take on more debt than you can handle. It is not advised to accumulate credit card debt for the sole purpose of earning points and miles. Rewards credit cards usually have a high interest rate on account balances that will negate any value earned from points and miles.

 

Apply for credit cards to meet travel goal
Once you have assessed your financial health and decided that you are ready to apply for new credit cards, the next step is to pick which cards to get. This is where having a travel goal and knowing your current account balances will be helpful. Most destinations can be reached by one or more airlines in the three major airline alliances – Oneworld, SkyTeam, and Star Alliance. Knowing your best option for getting there and your current account balances should narrow down your choice of credit cards. If you need advice about which credit cards to apply for, head over to the Credit Card Consultation.

 

Change spending pattern
Once you get your new rewards credit cards, you’ll likely have to meet a minimum spend requirement to receive the sign-on points and miles bonus. Most cards allow you to meet the minimum spend requirement in the first 3 months of card approval. The amounts can range from a few hundred dollars upwards to $10,000. Knowing your financial situation will help you decide if you can apply for certain credit cards and comfortably meet the minimum spend without accumulating debt. Although the minimum spend amounts may seem daunting, they can be met if you shift as much of your daily spending onto the rewards credit card as you can – restaurants, groceries, cell phone, cable, shopping, insurance, gas, etc. If you find yourself spending money on things you wouldn’t otherwise just to meet the minimum spend, reassess your situation and decide if this is right for you.

 

Redeem and travel
Now that you’ve earned enough points and miles, it’s time to redeem them for your travel goal. Points and miles are worth more today than they will be tomorrow, similar to monetary currency inflation. Airlines and other loyalty programs may devalue what their points and miles are worth due to award chart changes that require an increased number of points for the same award redemption. Most major US airlines and several hotel loyalty programs have made changes to their award programs in the last year that have increased the number of points and miles required for award travel. Don’t be afraid to use your points and miles for award travel because that’s what they’re for.

 

Last thought
Award travel for international first class and luxury hotel stays is great. I enjoy them as much as the next person. I love reading reviews about the latest first class products and fancy hotels. Award travel can also give you the ability to take meaningful trips, even if you’re not flying up front or staying at a five-star hotel – visit family across the country, attend my grandmother’s 99th birthday, take an annual anniversary trip. Think about what types of experiences award travel may open up for you, whether you’re sitting upright in coach or sleeping in first.

 

If you have any questions, go to the Contact page and send me a message.