Using Credit Card for Travel Rewards

kmitch0303 · September 2014

Hello! It's been forever since I've been on these boards. I have been thinking about getting a southwest credit card for travel points. We are planning a trip to Disney next year and I would love to be able to fly so I was thinking getting free flights with reward points could help out with the cost. My DH is not really thrilled with this idea, as he hates credit cards and is afraid we might be tempted to charge more than we would normally spend in an effort to get points. I don't want this to happen either and would want to manage it really well. I was thinking of starting out using it for gas, work travel that I would get reimbursed for, maybe monthly bills that I can use it for. My questions for those of you that use them purely for points: How much stuff do you put on your card, just gas?, everything, etc? How fast do you accumulate points? Is it reasonable to think I could get enough for a flight in 6 months or so? Can I put my mortgage on it or are there certain bills that I am not able to? How much of a lag time is there between when they are earned and when they can actually be used? I am thinking the sign on bonus would be enough for one and then if I could at least get enough for another free one, it would be worth it. Do you have a system for managing it? Do you go in and pay the card off each time a bill clears? I am thinking that might be the best way to keep up with it budget-wise, but would love to hear about any other systems that work for you.

maple2 · September 2014

We don't have a travel rewards card, but we put absolutely everything we can on our rewards cards because it is convenient and we earn points. I'm sure we would have a different approach if either of us was more likely to overspend while using credit cards, but luckily that isn't a challenge for us. We have been able to put some recurring monthly bills in our credit card, but there are others that we do not. The credit card would be happy to have all of our bills charged to it, but some vendors won't accept credit card payments. For us that includes our mortgage, insurance, daycare, and propane.

The way our card is set up, we accumulate the points at the end of every billing cycle based on how much we spent at various types of places. We get different numbers of points for spending at different types of places. We don't actively try to maximize the number of points we get, we just spend what we would normally and are happy for any points that provides. In your situation, I can see how there might be more temptation to "spend enough to get points" since you have a specific event you are hoping to use points for.

We pay our credit card bill in full on the monthly due date. I know some people pay every bill as it appears, so it's really a question of what would be most useful to you based on how you managed your budget.

I am not familiar with the southwest rewards program, so I don't know how quickly you'd be able to earn enough points for a free ticket. That would depend on how much you spend and how many points are required to redeem a ticket. We are able to redeem our points on Amazon, so we basically use our points for random household items and gifts. We earn enough points (2000-4000/month usually) that I haven't had to pay money for Amazon products in a couple of years.

hoffse · September 2014

I work probably 10 credit cards for points, but none of them are travel cards. I do not travel enough to make them a great deal for me. H and I each get on an airplane maybe two or three times a year, and when I've calculated it it just doesn't add up for us. It would take us 5+ years to earn enough miles to really bank a legit flight (transatlantic for us)... and I am not willing to wait that long to cash out on rewards. The best airline rewards usually come when you are flying business class, and H and I are too junior at our jobs to be flying business class on a regular basis. If one of us was flying a few times a month then we would have an airline card.

My best "everyday" card is my Fidelity card. It gives me 2% back on everything - no categories, no limits. Cash is automatically deposited once a month, every time you have earned another $50 or more in points. H and I have the rewards deposited into an account at Fidelity, and since it's cash it can be used for literally anything.

2% back on everything is a much higher return than most airline credit cards unless you are purchasing eligible flights with your credit card.

So far this year, H and I have earned about $480 on our Fidelity card.

Our other cards tend to be tied to stores where we shop often that give a higher percentage back than the Fidelity card (at that specific store): Costco gas card (3%), Amazon (3%), Target (5%), Pottery Barn (10%), Kohls (30% off 4 times per year), etc.

We put everything we can on a credit card. We do not carry cash, and we rarely carry a debit card. Almost everything in our life is charged for points.

Keep in mind you can almost never pay your mortgage with a credit card because that's technically repaying a loan (your mortgage) with another form of loan (revolving credit) - and there will probably be restrictions on doing that in your mortgage agreement. It gets too dicey if the borrower goes bankrupt and has been "paying off" loans with a credit card. So lenders hardly ever let you do it.

Utility companies are hit or miss. I am able to pay my water and gas bills with a credit card but not my power bill.

April is correct that most rewards cards have sign-up bonuses, but they often require you to spend X dollars to earn them. I chase sign-up bonuses once in awhile, but it's usually for very specific things. The last sign-up bonus we chased was for the hotel for our wedding night. H signed up for a rewards card affiliated with that hotel chain and earned 3 nights free at this particular hotel we had chosen. It was perfect for us because it covered the entire wedding weekend, and that saved us a lot of money at a time when we were strapped for cash. But I mean, that was a time and a place.

If your H is worried about being irresponsible with a credit card, then I wouldn't do it. These rewards are only a good deal if you are able to pay your cards off in full each month. Otherwise you're earning 1-2% in points but paying 20% in interest. That's a terrible deal. We earn lots of money with credit cards because we treat them like debit cards/cash. We only buy stuff when we have money in our bank account to cover those items. I track our cards every day and add purchases to our budget as they occur so we know exactly where we are in terms of our monthly spending.

RosieC18 · September 2014

We're really happy with Chase Sapphire Preferred, which is general points but can be used pretty efficiently for travel, and then you're not limited to one airline. We put everything we can onto the card that doesn't have a fee for being charged, including most of our wedding. We get double points at restaurants, which is they called our catering bill - that was a flight right there.

Our card does have a yearly fee (I think $100?) but H's work pays for it because he has to have a high-limit card to book reimbursible travel on.

There are some good card comparison sites online if you Google - they can help you figure out what fits your needs and maximize the rewards you want.

formerlyGDaisy09 · September 2014

We also work credit cards for points, none are travel cards.

our LLBean card is our card with the highest limit, so many of our monthly bills get charged here, and I charge any works expenses to that card. We probably earn $250 in rewards every year, we use it to buy things like winter boots, ski coats, and last year a dog bed.

We also have a kohl's card, I only shop when I get a 30% coupon and they're offering Kohl's Cash, i usually use those times to stock-up on some work-clothes, perhaps a dress for a wedding, the same for H, and home goods...we rarely need to go out shopping for specific events as they come-up because we've stocked our closet with work-able pieces for a steep discount.

We shop with an Amazon Card, the cash shows up right in our amazon account so when we're buying things there we can use it right then.

our shopping options in our area are pretty much limited to Kohl's and TJMaxx, so I also have a TJMaxx card to earn rewards whenever I shop there, I think I earn about $50 a year.

I've also been shopping with a banana republic card (as much as I love Kohl's, I need a 2-long in for pants, so i simply can't buy them in many stores). in the last 6 months I've earned $80 in rewards.

so if you work the cards right, on things you would buy anyways with cash, you can earn quite a bit...I think total we earn $400-500/year in rewards, not counting whatever additional savings we get with card-member discounts.

hoffse · September 2014

Oh one thing I didn't mention: I would be really surprised if you could get enough points for multiple flights in 6 months. One of the problems with airline cards is that you earn points based on your spending, and then you spend your points based on some entirely arbitrary calculation the airlines come up with. The value of a "point" varies from card to card and airline cards virtually never give you a flat rate of return. That makes it hard to compare them to other cards. You have to calculate it using dummy bookings.

I'm looking at this particular card right now. It looks pretty good, but only if you plan to use it to fly often.

But there are a few red flags. First, there's a $99 annual fee. I avoid cards with annual fees unless I have a very good reason to have one. Our gas card has an annual fee - but it's our Costco membership. We would be Costco members whether we had that gas card or not. RosieC's example is also good - her Chase card's fee is reimbursed.

Another red flag is Southwest charges each direction. Set up a dummy booking and see how many points it takes to fly from where you live to Orlando. I set up a dummy booking to Denver, and it "cost" 17,000 points one-way. That's a lot of points.

When you calculate it out - and I did - the Southwest card is about a 1.34% return, assuming you spend exactly $25,000 per year on 1-point categories and continue paying the $99 annual fee. That's not a great return.

And I mean... spending enough to earn enough money to cover multiple flights in 6 months on ANY card means you are spending a ton. Buying gas and basic household purchases won't come close to getting you there.

strickland8052 · September 2014

I love my Chase Freedom card for working points. It offers 1% cash back on everything and 5% cash back on special category items. The special category items change every quarter. For example, one quarter it might be 5% cash back on gas, and the next might be 5% cash back on restaurants. They also have an ultimate rewards points mall, where you can shop at common online retailers like Amazon or Hotels.com to get special deals and even more cash back. Sometimes the offers are like 15%, so I always go through the rewards points mall if I need to make a major purchase online.

The Freedom card also has specials where they give you $200 or so for opening a card and $50 for referring a friend. I recently talked H into finally getting a card (mine is in my name only), so we banked $250 for him doing so by my referral. I also talked my parents into getting the card.

I use my card for absolutely everything possible, and I typically make between $12 to $25 a month. The card is more so designed for actual cash back, but you can cash in your points for travel deals or gadgets or what not also. I usually let my cash back money build up until I reach a bad month with an unexpected expense. Its nice to have an extra $70 or so lying around to use in an emergency. Although I let mine build up, you can get your cash back as soon as your billing statement for the month ends.

As far as H being scared, is he more worried about himself or you abusing the card? Maybe just one of you could use the card for a certain amount of time to see how it works. I also like the idea of using the card for a specified expense like gas, which you would have to purchase anyway.

Xstatic3333 · September 2014

We use ours for most everything except gas, which we get a better deal with by using our local chain's debit service for 10 cents a gallon off. We can't use it for utilities or mortgage.

We use the Capital One Venture Rewards card, which gives 1.25 points for every dollar spent. I pay off each purchase right away, usually the same night, except for my monthly work reimbursables. It's not the most efficient rewards card out there, but we find the travel points fun and motivating. Our card has no annual fee, but there's another version with a fee that gives 2 points per dollar. Each travel purchase you make can be reimbursed if you have enough points to cover all of it. For example, a $200 plane ticket costs 20,000 points. However, you can pick any airline and also use points towards hotel or other travel expenses.

KatieCutie05 · September 2014

I would have to agree with your DH on this one... and if it makes him uncomfortable then i wouldn't do it. Credit cards just mean stress and hassle and if your husband hates credit cards and is uncomfortable with the idea then i wouldn't do it. I think you should both be on board because it takes a lot of responsibility and management skills to handle a credit card.

You really have to be a big saver, have a working budget so you know exactly how much you can spend in each category before hand, and be extremely disciplined with paying bills early, knowing that every single dime put on that card WILL be paid off imediately. If you see yourself saying "well no i can't afford this now but if i put it on the card then i can just pay for it next month" then thats a good sign you shouldn't have a credit card. Spenders, people who don't have a budget they stick to already shouldnt have credit cards, and those people like myself who have been known to miss a due date shouldn't have credit cards. I paid one too many late fees and interest because of a 1 day late bill in my lifetime - as did my husband. Know which type of person you are and be realistic if its really something you can handle.

My advice is to do the math on how much you will realistically earn and figure out if you already travel every year - so your going to actually use the points you earn consistently. Then talk to your husband and decide together if its worth it. Travel cards usually have the worst points ever and something like 90% of the airline miles are never redeemed. Remember the credit card companies to extreme studies and the people who never pay any fees, don't overspend, and always pay their bill in full and on time every month are extremely rare. The millions that don't more then make up for the 1 or 2 that do and they still make millions. The credit card company won't lose at their own game.

If you and your husband really want to get those extra points that bad and you've studied exactly which card will do that best and you know you can handle it responsibly then a cashback card that you just redeem and use the cash to buy the airline ticket would probably be a much better idea then a travel card.

brij2006 · September 2014

kmitch0303 said:

Hello! It's been forever since I've been on these boards. I have been thinking about getting a southwest credit card for travel points. We are planning a trip to Disney next year and I would love to be able to fly so I was thinking getting free flights with reward points could help out with the cost. My DH is not really thrilled with this idea, as he hates credit cards and is afraid we might be tempted to charge more than we would normally spend in an effort to get points. I don't want this to happen either and would want to manage it really well. I was thinking of starting out using it for gas, work travel that I would get reimbursed for, maybe monthly bills that I can use it for. My questions for those of you that use them purely for points: How much stuff do you put on your card, just gas?, everything, etc? How fast do you accumulate points? Is it reasonable to think I could get enough for a flight in 6 months or so? Can I put my mortgage on it or are there certain bills that I am not able to? How much of a lag time is there between when they are earned and when they can actually be used? I am thinking the sign on bonus would be enough for one and then if I could at least get enough for another free one, it would be worth it. Do you have a system for managing it? Do you go in and pay the card off each time a bill clears? I am thinking that might be the best way to keep up with it budget-wise, but would love to hear about any other systems that work for you.

If he has a fear of this, then listen to that and do not get a credit card. My H had this fear before we were married, and I talked up my rewards card to him as though it was the most amazing thing in the world. Heck, I would have enough points to go see my BFF from IL to CA every year, plus spending money. However, we were using them and making purchases to get points. He would get excited about a $2,000 purchase that he could use his card for and get points. Even though if we would have been paying cash for that purchase, we likely would not have made that purchase so lightly and shopped around for a better deal.

Credit cards are 100% behavior. If he's afraid that more money will be spent because you're trying to get points, then he has a legitimate fear.

Honestly, once we stopped using credit cards altogether (we never carried a balance and only used them for every day purchases), we were spending much less because it was coming straight out of our checking and stung a little. We would think twice about larger purchases and would think it through when buying something we may not have needed.

Credit card companies are in it to make money. The more you charge to their card, the more they get in processing fee's and the higher the chance they have of you not paying the bill. You're better off saving up the money and paying for flights yourself instead of risking the chance of spending too much on a credit card.

LS45 · September 2014

I have the Barclaycard Arrival Plus World MasterCard Elite. I love it. The sign-on bonus right now would get you 40,000 or about $400 in free travel if you spend $3,000 in the first three months of getting approved for the card, so that might be the fastest way for you to meet your rewards goal on a six-month timeframe. I charge every thing that I possibly can to it, and I pay off the balance in full each month. The fee is waived the first year, but is $89 a year after that, so you'd need to analyze what your spending is to see if it's worth it.

Since getting mine, I would say that it does make me *slightly* more likely to spend than if I were not getting the 2x points on every purchase. However, I still stick pretty closely to my regular monthly budget. You should talk to your husband about his (legitimate) concerns prior to applying for anything. If you have certain set monthly expenses (like your rent/mortgage, gas, car insurance, phone bill) and agree to only pay those with the card, then that may be a good compromise.

als1982 · September 2014

We leverage credit cards for travel, putting absolutely all our purchases on credit cards as well as utilizing other mechanisms of mile/point acquisition outside of actual travel. And to echo everyone else, if you overspend your budget and carry a balance at the end of the month, then there's nothing free about it. Only do it if you can pay it off at the end of every month and aren't tempted to spend more than you regularly would.

kmitch0303 · September 2014

Thanks for all of the great feedback! I appreciate it. We do stick to a monthly budget and are currently working on a debt snowball. I haven't talked to him in depth about it, just mentioned that it might be a good idea to help out on the flights and his initial reaction was no. We definitely won't do anything we aren't in agreement on. I just wanted to get some insight from people that have used them before we really discussed it. It sounds like a Southwest card is probably not the way to go for us.

hoffse · September 2014

als brings up a good point about point and cash portals. Many credit cards have point portals that give you an extra x points per dollar at various online stores. The amount at each store varies.

Other sites like ebates, fatwallet, and befrugal give you cash back as well - and these do not require a credit card. The amounts also vary.

Befrugal actually "matches" if you find a better offer at another portal within a particular time frame. I find theirs to usually be the highest - and sometimes even double - what other portals offer.

Anyway I check the portals for my credit cards, ebates, fatwallet, and befrugal before making online purchases. Then I go with whichever portal is offering the highest % cash/points back. If they are the same, I go with whichever one is closest to cashing out. Ebates cashes out ever $5, befrugal cashes out every $25, etc.

When you spread your points/cash back around multiple sites it can take some patience before you are able to redeem or cash out - but over time you earn more that way. That said, I don't like to sit on points/cash back for more than a year before redeeming. You never know when the T&Cs might change.

SlurpeeLove · September 2014

I have an Amazon Rewards card. We order a lot from Amazon and so the card just made sense for us. We use it on regular purchases and especially large purchases and bring in the rewards. I bought my dog's food recently for a huge discount using my rewards points for Amazon and my husband has his Discover card and we used his rewards to get a grocery list for the refrigerator completely for free using his reward points!

I would say that if you are disciplined enough to pay it off each month or each time you use it, it's definitely worth it. It's not worth it to be in debt...take it from me.

JoanE2012 · September 2014

We have the United Mastercard (we live near a United hub). We put everything we can on that credit card. Furniture, trips, down payments for cars, etc. We recently charged our new central AC (10k!)

We are flying for free to Hawaii next month thanks to the miles from the credit card. We've also flown to the caribbean, central America and Europe for free over the past few years. We still have enough points to take another trip to Hawaii AND a trip to Europe.

We travel ALOT, so we still pay for most of our airfares (it's not always easy to find the flights you want available to redeem miles), but it's nice to get a free flight every now and then.

Using Credit Card for Travel Rewards

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