Earning credit card points and maximizing credit card sign up balances for award travel is a fun hobby and can be very lucrative. It allows you the freedom to travel more and to take trips you either can’t afford or wouldn’t want to pay full price for. Many travel credit cards also offer great perks like lounge access which makes the hobby even more fun and makes travel more luxurious and relaxing. You don’t need to make or spend a lot of money to get into the hobby and to earn plenty of points and miles for free travel. But you do need to do it responsibly, so it is crucial to follow these do’s and don’ts. Understanding the basics of the hobby is important so you don’t make bad decisions in the beginning of your journey that you may regret for many years to come.
As long as you have a minimum 700 – 720 credit score you should be able to get approved for most travel credit cards. If your score is lower than this you should start with either the Chase Freedom Flex or Freedom Unlimited or with a Discover Credit Card. If you are rebuilding your credit or have no credit then you might need to start with a secured credit card for a few years before you get a travel credit card. You can also have a relative or a friend add you as an authorized user to one of their credit cards to increase your credit score and credit history. You can find more information about secured credit cards and authorized users with a simple google search.
If you are in the process of buying a home, don’t get any more than one new card in the 6 months before you start applying for mortgages. It’s best not to apply for any in that 6 months, but one most likely won’t be a big deal.
3 DO’S
1. Always pay your balance in full by your due date so you won’t accrue any interest. Credit Card rewards are never going to be profitable for you if you are paying interest. As soon as you get your new card you should log into your credit card account and set your payments up on autopay. This will ensure that you never miss a payment. If you have credit card debt then get that paid off first or at least get it transferred to a 0% interest credit card. Even some travel cards with good sign up bonuses offer 0% interest for a year. 0% offers frequently change so email me if you need help finding a card offering this. Not carrying a balance over 10% of your credit limit and making payments on time are two of the most important factors in your credit score. A higher credit score gives you more options in your financial life.
2. Always know why you are getting a certain credit card. Are you getting it strictly for the sign up bonus or because you have a flight or hotel redemption in mind? Are you getting it because it earns 4x on grocery and dining and those are categories you spend a lot on?
It’s important to know your Chase 5/24 status in this hobby. Chase 5/24 is an unwritten rule by Chase Bank. Chase won’t approve you for a new credit card if you have gotten 5 or more new personal credit cards in the last 24 months. Most business credit cards do not count towards your 5/24 status since most do not show up on your personal credit (exceptions to this are Discover, TD and some Capital One business cards). Keep in mind that store credit cards from retail stores do count towards your 5/24. Chase has some of the best credit cards in the points and miles hobby, so not paying attention to this rule in the beginning can be a big rookie mistake. With possibly a few exceptions, it’s best to start with Chase cards. Once you have all the Chase cards you want then you can move onto other banks. Trust me, I made this mistake and the 2 year wait to get some cards you really want is no fun!
3. Make sure you can meet the minimum spend requirement before you get a credit card. You would be surprised how many people get credit cards and have no idea how much money they need to spend to get the sign up bonus, or even what the sign up bonus is. The sign up bonus is the best and most exciting part of getting a credit card. Unless you are a big spender, it could take you years to earn the number of points you would earn from the sign up bonus.
3 DON’TS
1. Never spend more than you would normally spend if you were paying with cash or with a debit card. Get into the habit of looking at your credit card charges daily or every other day just like you would with your bank account.
2. Don’t fall for shiny card syndrome and apply for a card just because it’s all over social media. It’s tempting, I know! Once you get into the hobby you will want every credit card. And after many years in the hobby you might eventually have almost every credit card. Trust me, stick with Chase cards in the beginning. The only exceptions to this are if you travel a lot and stay at the same hotel chain or there is an incredible sign up bonus that is worth adding to your 5/24. Chase 5/24 isn’t as important if you don’t plan on becoming a full fledged points and miles junkie like most of us in the hobby since you won’t be getting that many cards. However, a word of caution, many people think they won’t get deep into the hobby, but do and then regret not paying attention to the 5/24 rule.
Be selective about how often you apply for a credit card or any credit for that matter. Every time you apply you get what is called a hard pull on your credit. Every hard pull lowers your credit score anywhere from 2-15 points. This is only temporary and your score will recover within a few months. Once you show that you are responsible with credit card use and have a longer credit history, credit cards will actually help increase your credit score since you are showing that you are responsible with credit.
3. Don’t fall short of meeting the minimum spend requirement. Every sign up bonus has a dollar amount you need to spend and a time frame you need to spend it in. If you don’t meet those requirements, you won’t get the bonus. All of these details are clearly explained when you are applying for the card, so make note of them. If you forget, you can get in touch with the bank and ask them the details. You usually have 3 or 4 months to do the spending. Sometimes you might have 6 months. Make a note in your calendar about 3 weeks before the deadline so you can make sure your’e on track. You will be able to see all of your charges in your account. Get out a calculator and add them up by hand if you need to. Just don’t miss your sign up bonus! I’m almost crying just thinking about it. lol.
Also be aware that returns and the annual fee you paid (if your card has an annual fee) do not count towards that minimum spend requirement. Look through your statements and add up any returns. Any amount of money credited back to your account from returns needs to be spent again during that sign up bonus period or you may not get the bonus. If you have already received the bonus and then make a return, the bank has the right to clawback your bonus. For this reason, I recommend that you spend 10% more than the minimum spend requirement. .
I hope this has been helpful for newbies to the points and miles hobby. Comment below or shoot me a message at @mostlyfreetravel on instagram and Facebook.
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