Why You Should Care About Credit Card Points (Hint: Free Travel)

There is no free lunch in this world, but I’m pretty sure the credit card game is the closest thing possible. If you responsibly leverage credit cards for travel, you can easily get thousands of dollars worth of value. This is especially valuable for people who want to travel more, and I’d argue that’s probably one of the most fun and rewarding ways to spend money. Your new Gucci bag will not make you happier in a week, but thinking about the (almost) free trip you took to the Swiss Alps will yield happy memories for the rest of your life.

Here’s a guide on why you should care about credit card points and how to start.

The crazy thing about the credit card game is everyone is enrolled by default. In other words, people will, ask: What’s the catch? Who’s actually paying for this?

The answer: everyone who doesn’t use a rewards credit card (it’s not the banks or card companies, at least in aggregate).

This is because, at least in the US, prices for goods are the same regardless of payment method. If you buy a $100 meal with a credit card, it will cost you $100. If you buy a $100 meal with cash, it will cost $100. So net net, the non-card user functionally is subsidizing the card user’s rewards (travel) because merchants will generally charge the same price for the same good, regardless of payment method. Meanwhile, the banks love their credit cards because they make tons of money off of (1) interchange fees (i.e, a cut of every single swipe) and (2) interest (your APR %) on any balances you carry on your cards (DO NOT DO THIS).

So basically, everyone is forced to play this game. And if you don’t, you’re paying for (my) free plane ticket to Croatia next month. While ethics can be debated here, the immediate action is to start playing the game.

Take two people. Let’s call them Oldie and Newbie. Oldie pays for all her living expenses with her debit card or cash. She grew up instilled with the value of the dollar, and scoffs at the mention of borrowing money via a credit card.

Meanwhile, Newbie pays for all her living expenses with her credit card. She spends the same exact amount of money as Oldie, has the same income, and pays off her credit card bill in full every month. Let’s use this 2022 Forbes estimate that the average single person spends $44k per year. Inflation has been significant the past two years, so let’s say both spent $50k each.

The only difference between the two is after 1 year, Oldie has nothing, and Newbie has racked up 100k+ in credit card points. Newbie can then spend that 100k+ in credit card points on:

a) 2 x roundtrip saver fares to Europe so she and her boyfriend can go to Europe for free

b) 5x nights at a nice Hyatt in South/Central America, Asia, or parts of Europe & North America

c) 5+ one way domestic economy fares for free to visit friends & family throughout the year (not all redemptions need to be aspirational – practical redemptions work too!)

Okay, so you’re sold. So how do I get started?

First, a few checks:

1. You need to have a good credit score (>700)

If you don’t, stop reading. Unfortunately, you won’t be able leverage the system in your favor.

2. Do not change your spending habits after getting a card / trying to chase a sign-on bonus

This is an extremely common but overlooked mistake. Say you normally spend $2000 in 3 months. You get a new card that requires you spend $4,000 in 3 months to achieve the sign-on bonus, so you spend more than usual just to hit it. Congrats! You effectively lost money. You may get close to breakeven / smaller loss factoring in the value of the bonus, but this more or less defeats the purpose of playing the game in a responsible way.

3. Never, ever, ever, carry a balance

Pay your statement balance in full every month, period. If you plan to or think you’ll be unable to, stop reading.

4. Assess your priorities for the card rewards

Generally, I think this can fall into one of three buckets:

a. You don’t travel (in that case, aim for cash back)

b. You travel, but don’t want to make it complicated. You just want to make your routine travel cheaper and more comfortable.

c. You travel and want to maximize value for luxury experiences you would not have paid for in cash. You don’t mind getting your hands dirty when looking in the weeds for aspirational award redemptions (i.e, a $5k business class fare you can book for 50k points and $100 in fees). Bonus points if you find this enjoyable / love the chase. Fair warning: this is a rabbit hole and can be addictive.

If you’re all set on the above, then it’s time to start applying to some cards.

See my recommendations in upcoming posts.