Earlier this week I wrote about my overall impressions of actively pursuing travel reward miles and points. I also summarized which three credit cards I signed up for and why as I embarked into that world. Today, I want to offer some tips and advice for those of you just getting started. If you decide you want to travel more for less money, I hope these suggestions will aid you in that effort. If you have any questions, just leave them in the comments and I will do my best to answer.
I have read some great advice on managing the pursuit of points and miles on various blogs. I won't echo all of that - you can find good articles here, here and here - but I will emphasize a few points that I think are the most critical if you want to pursue these rewards without getting yourself into financial hot water:
- Know your spending patterns and don't deviate from them just to earn rewards. If you are going to take out numerous credit cards for rewards, it is critical you be able to avoid the temptation to spend more than you can afford. Even if you generally would not do this, the lure of charging things in order to get points can be a quick rationalization in your mind. Know your spending history and don't increase that just to seek points. Remember, those 300 points you may earn from buying that new gadget really are worth $3 to $5. It is ok - and advisable! - to move all your spending to your rewards-paying cards from other methods like cash and debit cards but that should be the limit of your changes with the goal to earn points.
- Don't carry balances on rewards cards. While carrying a balance on a credit card is often a poor financial decision - Dave Ramsey did not pay me to say that! - sometimes it happens. Generally, the interest rates on rewards cards are in the mid-teens or higher. If you are going to spend money on your card, pay that bill in full each month! Yes, some rewards cards do offer balance transfer offers, so, if you are going to carry a balance, these are generally the only type you should carry on those cards. But balances from regular purchases...do all you can to avoid those. One thing to keep in mind about carrying even low-rate balance transfers on your reward cards. If you take out multiple cards with one bank and you later need to close some of those or reduce your credit limit in order to take advantage of that bank's latest offer, having a balance that you can't pay off immediately will reduce your flexibility in adjusting your total credit line from that credit card company.
- Use personal finance software or a spreadsheet to keep yourself organized. I have diligently used this type of software for well over a decade. Starting with the now-defunct Microsoft Money, then moving to Quicken and most recently iBank for Mac, recording financial transactions is second nature to me. If you have tracked your financial life with such a tool, you will already have the data you need to analyze your spend history. Going forward, as you add more credit cards and their associated payments to your bill-paying chores, these software options can be great assets in keeping you organized and helping you avoid missed payments. If you don't want to take on this level of detailed management, keep track of your card payment dates and amounts as well as annual fee dates in a spreadsheet or reminder tool. Though I diligently use iBank, I keep a separate spreadsheet where I track certain details of my rewards cards like spend requirement for bonus points, deadline for that spend, renewal date and any associated annual fee, spending category bonuses etc. If you are going to take out these cards, the whole point is getting those miles so don't fail to satisfy the requirements to earn them by being disorganized!
Another big thing to keep in mind is to have a plan. I have a "dream vacation" that I have been mentally planning for years. Though it will probably be a year, if not two, until I embark on such a journey, I am already planning the rough outline of that trip. I know which cities I want to visit, which airline experiences I want to have and which hotels I want to stay in. I am translating that into identifying what points and miles I will need, as well as how far in advance I will need to book reservations. That, ultimately, gives me the information I need to lay out a credit card strategy to earn the necessary miles and points in the necessary programs. A common theme on the points and miles blogs is that, if you don't have a plan, you could wind up with a lot of points spread out over many programs that can't be combined to achieve your travel goals.
Earning points and miles is really about attention to detail, education on opportunities and common sense to avoid trouble. If you follow this basic framework, you too can take that dream trip for little money!