So, What’s the Catch?

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Part 2 Featured Disbelief

“Whoa, whoa, whoa!” you’re probably thinking. “It can’t be this easy, right? There’s gotta be a catch.”

Well, you’re right…there always is.

First, most of the best cards to use come with an annual fee, which could be anywhere from $85-$495 per year. “Wow!” you might think, “that’s outrageous!” But the value of the card is what you really need to consider, not just the cost.

In most cases, the benefits offered by these cards often pay for the annual fee itself (and a lot more!).

For example, you may get benefits such as 1 free hotel night per year (easily worth $100-$300) on a card costing only $85 per year. Or you could get $200 in flight fees plus priority access, free bags, hotel upgrades, and more on a card that costs $450 per year.

Other cards offer free WiFi, access to shopping portals (which can really boost your points earning potential), and a bunch of other random benefits to keep you satisfied.

Bottom Line: The value of a new card is the most important thing to consider, not just the cost.

On to the Real Strategy, Then

For points earners, the real strategy is in the following:

  • Understanding credit card benefits (and which cards are best for you!)
  • Investing time to research the benefits and variety of cards
  • Organizing your cards and overall strategy to maximize your benefits

That’s why we’re here: to help you figure all this out so you can enjoy the benefits of travel with the least amount of hassle.

Organization itself can seem overwhelming, but our guide will help you get it together. Soon, you’ll find it easy to see all your awards balances in one place and identify the best card to use in any situation.

Part 2 Overwhelming Organization

On Using Points: Caveats to the Method

It’s worth noting that using points isn’t always as straightforward as just exchanging them for something free.

Certain redemptions come with taxes and fees you must pay in order to redeem. Usually, these are small enough that they don’t offset the award. But not all the time!

British Airways, for instance, is notorious for this. A redemption for international travel with them may cost anywhere from $650-$1,250 in taxes and fees. You can practically buy a whole economy class ticket for that!

Luckily, most other airlines have much smaller fees, and some don’t charge fees on reward seats at all. Hotels generally don’t have any additional fees for redemptions.

There may be fees for alternative redemptions like merchandise, but we focus on travel here so we won’t detail all of those.

The good thing is that the value of these awards redemptions can be worth far more than you think!

Some awards can be worth $1,200 to almost $10,000! If you really understand the system and can find ways to maximize your redemptions, you’ll be traveling like royalty without having to spend like it.

Bottom Line: Redeeming points may cost taxes and fees in some instances, but these usually don’t offset the value of the reward.

The Value Can Change Any Time, but Don’t Let That Deter You

Next, it’s important to note that while we give examples of how far points can take you, the value of those points can change at any time.

Credit card companies and carriers hold all the power here, and there have been instances of points devaluations that have hurt many people’s strategies. Sometimes, though, changes can go the opposite direction and make your points more valuable!

The trick is balancing out your earning and redemption strategies so that you’re constantly getting the best value. Sometimes, you may have to change your strategy completely – that’s just part of the fun.

The good thing is that these changes in valuation don’t happen too often.

When they do, we just find a better redemption option still available. There are so many ways to redeem, transfer points, and find deals that you will never experience your points completely losing their value.

Bottom Line: Even though your points’ value can change at any time, there will always be a way to find a valuable reward.

The Strategy Killer: Interest

Perhaps it’s obvious, but for these strategies to be worth anything at all, you must be paying your credit cards off each month and avoiding interest charges.

While you may be collecting between 1%-5% of your spending in points, interest rates are often 13%-30%! You’ll quickly lose the game if you’re paying interest just to play.

Some cards offer a 0% introductory APR to help you avoid interest. If you’re worried about interest, then you can always go for a card that has no annual fee and only spend on it what you can afford.

Improving your budget and finances are an important part of the overall strategy, which is not only good for travel but your life and future in general. Think of the points world as a reward to yourself for ensuring your future financial success!

Rewards build good habits.

Bottom Line: Don’t put more than you can pay off on your cards, or the interest you pay will negate the value of the points you earn.

Why You Shouldn’t Worry About Your Credit Score

If you’re worried about your credit score, the good news is that it’s not nearly as scary as you might think. You can (and very likely will) improve your credit score if you use the strategies we suggest.

While the exact credit score algorithm is a secret, the factors that go into it have been disclosed, and you can use these to understand what works in your favor.

Note that you’ll need good to great credit to get started on these strategies, so if you don’t have good credit now you’ll have to build some before beginning.

The process of building credit is the same no matter what your strategy is, although you’ll have less access to rewards cards and may have to pay some fees to build it back up.

Bottom Line: You can improve your credit score, and pretty easily too!

You Can’t Have Everything, but You’ll Always Get Something

The last thing to note is that while redemptions are pretty flexible, the Rolling Stones had it right: you can’t always get what you want.

Some routes have blackouts for award travel, and awards can be more difficult to find to certain destinations. Usually, these are more highly traveled routes on flights that include more elite status members than other places.

Large events can also make it difficult to get a regular flight or hotel, let alone an award redemption (e.g. don’t try to visit Austin, TX during SXSW!).

Part 2 SXSW Crowd

If you stick with it, though, you’ll have no problem finding value somewhere. It helps to go into the points world with this flexible mindset so you aren’t disappointed that the one reward you want wasn’t available.

Being flexible helps you work around these complete blackouts and upsets. So if you’re a person who really likes to have tight control over their life, we simply recommend planning your travel further in advance.

There’s no question that the more you plan ahead, the more likely you’ll be able to find redemptions you want!

However, if you’re spontaneous and just want to find last minute deals, you can often find a much higher value as opposed to planning ahead. Just know what type of traveler you are and strategize from there!

The good thing is that for the most part, your points and miles will not expire unless you close accounts or become inactive for many months on your cards. Each card will have fine print that explains this.

Bottom Line: While you may not always find exactly what you want, there is something of value for everyone out there.

That About Wraps It Up

Now that you’ve seen the pros and cons of the credit card points world, we hope you’re ready to dive in a little further!

If you need some more convincing on the credit score portion, go ahead and move on to the next section.

Even if you don’t need more convincing, it’s still important to understand, so maybe just check it out. If you’re confident in your score, you can head on further down the guide!

Part 3: Credit Cards & Credit Scores Explained >>

Photo Credits/Credit/Copyright Attribution:
Skeptical Kid Featured Image: PathDoc/Shutterstock
Overwhelmed Woman: Photographee.eu/Shutterstock
SXSW Street Crowd: GSPhotography / Shutterstock.com
Chase Sapphire Preferred® Card
  • Earn 50,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $625 toward travel when you redeem through Chase Ultimate Rewards®
  • Named Best Credit Card for Flexible Travel Redemption - Kiplinger's Personal Finance, July 2016
  • 2X points on travel and dining at restaurants worldwide & 1 point per dollar spent on all other purchases.
  • Earn 5,000 bonus points after you add the first authorized user and make a purchase in the first 3 months from account opening
  • No foreign transaction fees
  • 1:1 point transfer to leading airline and hotel loyalty programs
  • Get 25% more value when you redeem for airfare, hotels, car rentals and cruises through Chase Ultimate Rewards. For example, 50,000 points are worth $625 toward travel
  • No blackout dates or travel restrictions - as long as there's a seat on the flight, you can book it through Chase Ultimate Rewards
Apply Now Full review

Frequently Asked Questions

What are credit card benefits?
Credit card benefits are the "extras" that you get for owning a card. The obvious benefits are collecting points.

Other benefits include a variety of insurances (purchase, return, travel, etc.), free WiFi, discounts at certain companies, elite status, and much more.

Which credit card has best benefits?
You can compare credit card benefits by researching the different card reviews. Each card's benefits differ, so there is no "best."

In fact, combining benefits from multiple cards is often a good bet, because you can tailor what you really like from each and create a "collection" of benefits, if you will.

What's the best credit card for me?
Similarly, the best credit card for you is one that works for your personal situation, spending habits, travel preferences, and so on.

This may be a single card that earns well across the board, or a combination of cards that earn in certain categories and have a variety of benefits.

Try using the Card Match Tool to find cards that are available to you, which may help you narrow your choices down.

Are credit card points worth collecting if I'm paying interest?
In short, not really. The earnings rate on a card comes out to 1%-5% for points, and interest is usually 12%-30% or more. At 1 point per $0.01, you won't make your money up if you're paying any interest at all.

For instance, at $100, you'll earn $1 in points at a 1% rate. If you can't pay off that $100, you may pay $1 in interest per month at a 12% APR. At a higher interest rate, you're losing money.

When and where does your credit score start?
Your credit score begins being calculated once you have something to calculate it from. This includes having a credit card, having any types of bills in your name (utilities, internet, etc.), or having any type of loan.

Are credit card rewards taxable income?
In most cases, they are not considered taxable. However, if you redeem the points for cash, which can be done on a few cards, then this can be construed as income.

Redeeming for cash is NOT the same as redeeming for statement credit, however, so in most cases you will not have to worry about it.