Flying around the world for free? Sounds like a pipe dream, but for some budget-minded travelers out there, it is possible. Three experts weigh in on how to make the most of credit card reward programs.
“When you are earning flights or miles, the first thing you should do is have a specific travel goal in mind,” explains Brian Karimzad, Director of Milecards.com.
For the uninitiated, this means strategizing about where you want to go, what airlines you will most likely fly and how frequently you will travel.
If most of your trips are domestic and infrequent, Karimzad recommends looking for a 2% cash back card. “You don’t have to worry about airline flights or rules. It is hard to get more value out of it than that.”
Interested in international jet-setting? Then it might be time to play the credit card field.
“There are three different ways a credit card can provide value and it is worth separating them out. First is the signing bonus,” explains Gary Leff, frequent flyer and founder behind website Milepoint.com.
A signing bonus is the amount of points that you receive when you get a new credit card. Signing bonuses change all the time, but a decent amount of points would be around 50,000. Some cards require you to spend a certain amount of money in the first few months in order to redeem your bonus. Others will just give you the points, even if you don’t rack up thousands of dollars on the card.
“After the signing bonus, there are some cards that offer you a lot of value for your ongoing spending,” says Leff. For ongoing spending, look for a card that offers you double points for spending money certain ways. Investigate your card options and see which ones might give you the best dollar to point deals.
“Finally, there is a whole set of cards that offer value for having the card,” says Leff. These tend to be airline credit cards like United or American that will give you access to lounges, priority boarding or free baggage when flying that specific airline.
“Alaska Airlines has a card that comes with an annual companion ticket, where the second person pays $99 plus tax no matter where you fly,” says Leff. “Having a card with one of those types of benefits doesn’t actually mean you need to spend money on it. Use the benefit and stick the card in the drawer.”
Don’t have enough credit to qualify for a premier program? Try qualifying for a smaller program in the meantime so that you can roll your points over when you get the premier account.
What about big annual fees? For some, that can be a deterrent from singing up for a rewards program.
“If you want free travel, you should be prepared to pay an annual fee,” says Karimzad. “Most of these cards have a sign-up bonus that is worth around $400 or $500 and an annual fee that is a little bit less than a hundred dollars.”
Other travel bloggers disagree and believe you can find a good rewards card with a low or no annual fee. The most important thing is to evaluate what the bonuses are and how much they are worth to you personally. Don’t be swayed by fancy deals that, in reality, you might not take advantage of over the course of a year.
In general, experts recommend looking for reward programs that let you transfer your points into multiple miles programs, that way you can fly on many different airlines. This is especially true if you travel to different regions of the world, as certain airlines service some areas better.
Sound like it is too good to be true? Could be. In general, these rewards programs come with high interest rates, so it is important to pay off your bill every month.
“Only put on these card every month what you can safely afford to pay off in full,” cautions Nick Clements, Co-Founder of MagnifyMoney.com. “The interest you would end up paying to a bank for your debt would completely wipe out any type of travel benefit you would receive over time.”
Matt Kepnes, travel blogger behind hit site Nomadic Matt, cautions against signing up for a card that will require you to spend extra money, explaining that, “You don’t want to go into debt for a free flight.”
As with all financial decisions, be sure to read the fine print and stay organized. Some of these rewards credit cards offer great deals for the first year and then you will be hit with high annual charges.
“I’ve traveled just about everywhere on miles. This year alone I’ve gone to the Maldives in Asia, Vietnam and Cambodia and then Macau for Chinese New Years,” says Leff. “Later in the year I’ll be in Australia and Thailand and Singapore on miles. And that is just this year.”
While that level of free travel might be extreme for the average Joe, it is worth exploring the world of credit card travel rewards. Who knows, you could get a free ticket to Cancun just for buying your groceries.