Have you ever dreamed about a luxury traveling without a huge investment? We all like to feel spoiled sometimes, right? You have probably heard success stories from people who have points and miles and have taken business class trips using those miles? All while Paying next to nothing. So you might think – “okay, but this is not realistic.” What if we prove it is? It’s All about Getting Started with the right credit cards.
What Do You Need to Know First?
Nowadays, there are many (and when we say “many”, we literally mean many) credit card options that are offering average, good, or crazy-excellent deals if you are using your credit card on a daily basis. Once you understand how the reward system works, there is so much value to be unlocked.
Do You Have Travel Goals?
So, first of all, in order to understand the whole process, you need to ask yourself “What are my travel goals?” Are you going to use your earned miles/points to book economy flights, or you would like to travel internationally on business class, or for instance you would like to experience first class suits? Answer this question and you will narrow down options for choosing the most suitable credit card to meet your needs.
Does Having Multiple Credit Cards Hurt My Credit Score?
Of course, you can open more credit cards at the same time if their offers seem useful to you. Opening multiple lines of credit does not hurt your credit score. However you should have a plan of spacing out the amount of credit cards you are trying to open. A good rule is to have a plan. A plan of what you are going for in terms of miles and points. Then go for 5 to 6 cards a year and space out that bundle of applications every two years. Opening lines of credit has its rules with the different card companies. For instance, a good idea for Chase would be to open a new card, only every 30 days.
Sure, you may see your credit dip slightly by a few points. However, it will always bounce back and more than likely go up. So long as you are paying everything off right away. Also, treating your credit cards as if you would a debit card.
For more information on how to maintain a High credit score, check out this blog post.
Use A Credit Card As It Was Your Debit Card
- Only Spend What You Can Afford.
- Do Not Keep a Balance. Pay Off In Full Every Month.
- Use Your Credit Card in Lieu of a Debit Card.
Just because your card limit allows you to make a huge purchase, doesn’t mean you can afford it. You wouldn’t want to overdraft your checking account and incur a fee, would you?
There is the exception on some “No-Annual Fee ” cards that offer ZERO percent interest in the first year. That would be a card, like the Chase Freedom card, or Citi Double Cash Back Card that you could use to make a big purchase. All while still earning points. But be cautious in doing that.
Using Normal Everyday Spending to Your Advantage
When it comes to using a credit card to earning points, your goal should be to earn more than 1 point per $1. You can do that with cards like the Chase Freedom Unlimited. This gets you 1.5% cash back on ALL purchases. It can be combined with a great starter card for travel like the Chase Sapphire Preferred. Which make the points worth 20% more when booking through Chase. Or the Citi Double Cash Card. Which earns you 2X the points on all purchases and can be converted to THANK YOU Rewards points. With that said, there are multiple categories of spending such as, “travel, gas, dining, etc” and cards that make those areas of spend worth A LOT more.
Transferable Vs. Non-Transferable Point Credit Cards.
Transferable Point Credit Cards
When it comes to all of the options of cards out there, the main cards you want in your possession are going to be transferable point credit cards. This is simply a card that earns points that are not only good for the program you earn them with, but that can also be transferred to airline or hotel partners that the program affiliates with. These are programs like Amex Membership Rewards (MR), Chase Ultimate Rewards (UR), Citi Thankyou Points(TYP), and Capital One Miles, just to name the big players in the game. The value you have with options of transferring points is the fact that you can utilize frequent flyer rewards programs to capitalize greatly on booking flights in premium upper class seats and you are not confined to one hotel group or to one airline.
Non-Transferable Point Credit Cards
With Non-transferable points cards, you ARE confined to one program. Just up until recently, Capital one was a Non-transferable card, they have since changed. Many banks have their own credit cards that earn cash back but only to redeem for something with THEIR bank. It’s like going to “Chuck E Cheese’s” and playing skeeball and earning tickets and you can only redeem those tickets there.
Co-Branded Credit Cards
There are also cards known as Co-Branded Credit Cards. They definitely have their place in this game so don’t write them off just yet. These are the cards that banks offer which you can earn sign-up bonuses with. Usually, they are airline rewards cards or hotel rewards cards.
Benefits of a Co-Branded Credit Card
When you see a Delta SkyMiles Card with Amex, an American Airlines AAdvantage Platinum Card with Citi, or a United Airlines Explorer Card with Chase, these are all cards that will have a sign up bonus of miles, but they can only be used to earn miles with that airline and they typically are not lucrative in their spend/return ratio.
They are however great for sometimes earning status with airlines or hotel chains, or more importantly, boosting your miles with that airline. But I just made co-branded Cards the bad guy you say? Sometimes your enemy is your friend folks. The point of gaining miles with a specific airline isn’t always to fly THAT airline but moreover use that airline’s “currency” to trade in for award flights with them or one of their amazing partner airlines in their alliance and there are three of them. SKY TEAM, ONE WORLD and STAR ALLIANCE.
Where Does This Leave Us?
I generally push people to start with Chase cards. Chase has great cards and the UR points you earn are very valuable. If you are traveling a lot or plan to start doing a lot of traveling, I would fully recommend The Chase Sapphire Reserve.
If you are looking to have a good beginner card and are maybe traveling once or twice a year, I would recommend the Chase Sapphire Preferred. Which has a 60k Point Sign Up Bonus. Not to mention it’s travel benefits. It earns 2x on all travel and dining purchases.
Chase has a 5/24 rule. This means simply that you cannot have more than 5 open lines of credit in a 24 month period for Chase to extend your credit. If you have opened more than 5 accounts in that 24 month period (business cards are not included in that as they are separate from your credit inquiries) then you will not be extended credit.
Bottom Line
The biggest thing for anyone starting out is to make sure you are responsible in paying your bills, not holding a balance as interest will negate the points you earn, and understanding how your card works in your favor to capitalize on earning a return on your spend as well as not forgetting to spend enough to hit the sign-up bonuses offered.
Use Transferable point Credit Cards while banking on sign-up bonuses and benefits of Co-branded Credit cards. Utilize the rewards on everyday spend cash back cards to combine with your travel cards. In no time you will have enough points to redeem for travel benefits.
Finance disclosure
Opinions expressed here are author’s alone, not those of any bank, credit card issuer, hotel, airline, or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post.
