You know how all of those articles about saving money and financial freedom always say to build up your emergency reserves? Points and miles are the same way. The best way you're going to rack up points is through a credit card signup bonus.
Now, before we get too far, let me dispel the bullshit myth that credit cards are evil. They're not. There is only one evil group made up of plastics.
Look, obviously you can get into trouble because credit cards aren't finite like cash is. But if you're a person that is going to get into debt, don't blame it on the cards. Control yourself. You're an adult, act like it.
As much of a fan of credit cards as I am, I NEVER advise anyone to get a credit card that doesn't feel comfortable paying it off every month. Remember, if you don't pay off your card monthly you won't get the rewards, and if you're not going to get the rewards, what the hell are we even doing here????
Now that we've got the gloom and doom out of the way, let's get to building a strategy.
I will walk you through the different game plans and tell you the card I think is right for you.
Feel free to email/tweet me questions if you want a more customized plan, as I will be fairly general here.
As a disclaimer, this is assuming your credit is in good standing and you have a steady income. If you're worried about your credit, you'll have to start much smaller. You can email/tweet me questions about that as well and I'll help you through that.
We will first talk through the differences in co-branded cards and transferrable cards and then decide from there. This is going to get super exciting once you realize how easy it is.
Co-Branded CCs are marketed by actual airline or hotel loyalty programs and you earn that reward currency. An example of this is the American Airlines Platinum Select Mastercard. You earn AAdvantage Miles, which you generally will only use towards flights that you book through American Airlines.
Pros: Simplicity. With C/B cards you mostly won't have to deal with transferring points and every month when you pay off your bill your points go right into your loyalty account. This is nice for if you just want to grab the signup bonus and close the card, because you don't lose the points. Some C/B cards also come with automatic status which is a nice feature.
Cons: Bad return on bonus category spend. Generally C/B cards will only reward you with one point on travel or dining purchases unless it's spent on their flight/hotel stay. Using the AA Mastercard as an example, you earn 2 miles per dollar on flights booked on AA, but only 1 point for everything else. So if you want to book a flight on Southwest, you only earn 1 point. That's giving up a lot of value.
Transferable Point Cards
Transferable Point CCs are marketed by a bank and don't generally have any face value alliance with a carrier or hotel chain. They award you points that you generally have to transfer to other programs to redeem. However, you generally earn better rates
Pros: Higher earning rate. Most of the higher rated TPCs earn 2-3 points per dollar on travel and dining. This is a massive difference when you think about it over the course of a year. These cards are also a hedge against "point inflation" if a loyalty program decides to devalue their points like AA did this year. That way, you can simply transfer your points to another program. By the way, programs are doing this more and more frequently. It's basically their way of taking your points.
Cons: Work. It definitely requires a little more thought and effort to extract the maximum value out of transferable points. You must know which programs your points will transfer to, at which rate they will transfer to, etc...
Got it? Good. Now we have to figure out where you spend the most money. You don't want to use a card that doesn't reward where the majority of your money will be going.
The main categories are travel (flights/hotel), dining, gas and groceries.
If you cook all the time, you want to make sure you get a card that gives you a bonus for those dollars, same with if you frequent restaurants and bars, you want a bonus for dining spend.
Cards that reward TRAVEL
Chase Sapphire Reserve - 100,000 Ultimate Rewards Points after spending $4,000 in 3 months, $450 annual fee (not waived)
-Chase's newest offering is arguably the greatest travel credit card ever created. As if the 100,000 UR Points weren't enough, it comes with the most lucrative bonus spend ever with 3 points per dollar on travel AND dining. It also comes with a $300 travel credit each calendar year which means if you book a $300 plane ticket or hotel stay, you get a statement credit automatically for $300. SERIOUSLY.
Nicki Minaj thinks that travel credit is crazy too
Citi Prestige - 40,000 ThankYou Points after spending $4,000 in 3 months, $450 annual fee (not waived)
-What quickly became the hottest travel card over the last year saw some unfortunate downgrades as applicants beginning September 1 will no longer receive Admirals Club access when flying AA. You still get 3 points per dollar on travel and 2 points on dining and entertainment which is great. Additionally, you get a $250 travel credit just like the Reserve that is a straight airfare/hotel spend travel credit. Also when you book a 4+ night stay through their concierge they will give you a credit for the average nightly rate. Still plenty of value to extract from this card!
Chase Sapphire Preferred - 50,000 UR Points after spending $4,000 after 3 months, $95 AF (waived first year)
-Consistently rated the top travel card by industry experts, the Preferred generates solid bonus earnings with 2 points per dollar on both travel and dining. Chase's Ultimate Rewards program has some of the strongest transfer partners in the business, including Southwest. The waived annual fee the first year is a nice way to dip your toe into the points pool. Also, Chase has a rule that they will reject any applicants that have opened 5 or more credit cards in the last 24 months, so you'll want to get your Chase cards in early!
American Express Premier Rewards Gold Card - 25,000 Membership Rewards points after spending $2,000 in 3 months, $195 AF (waived first year)
-For some reason the Gold card doesn't get enough love, but I'm a huge fan. 3 points per dollar on airfare booked directly with the airline, 2 points per dollar on hotel stays booked through the AMEX Hotel Collection portal is great bonus spend along with 2 points per dollar on groceries. Gold Card members also get access to AMEX's Hotel Collection, which gives you a free room upgrade, resort credit and late check-out. It also comes with a $100 airline fee credit that can be used to purchase gift cards.
Citi Premier Card - No signup bonus, $95 annual fee (waived first year)
-I do not advise getting a credit card that has no signup bonus as this one currently does, but it's worth keeping in mind as it has the same earnings structure as the Prestige, and with the Prestige losing a lot of its value, it's not a bad idea to think about the Premier for your bonus spend.
Cards that Reward Everyday Spend
American Express Everyday Preferred Card - 15,000 Membership Reward Points after spending $1,000 in 3 months, $95 AF
-For all you grocery shoppers! This card earns an amazing 3 points per dollar on spend at grocery stores, 2 points per dollar at gas stations and 1 point everywhere else. The kicker is that if you swipe 30 times in your billing cycle, you get a 50% point bonus. That brings you to 4.5 points per dollar at grocery stores, 3 points on gas and 1.5 points on non-bonused spend. That's the best in the biz. If you eat at Whole Foods or Central Market a lot, this is your way to max out dining spend! 4.5 points??? You'll be flush with MR Points in no time.
R Kelly loves 4.5 points on groceries
Starwood Preferred Guest AMEX - 25,000 Starpoints after $3,000 in 3 months, $95 AF (waived first year)
-You may find it odd that I put a card on here that only earns 2 point per dollar on Starwood stays and 1 point on everything else, but because you get a 5,000 point bonus when you transfer Starpoints in increments of 20,000, your effective return is 1.25 points per dollar, better than just about everything but the Amex Preferred. Plus, as I've mentioned previously, Starpoints rule.
Ok, so obviously you may notice that I don't have any Co-Branded cards on here. That's because they're kind of a given. If you want to go with American Airlines, get an AA card. Southwest, get the SW Premier card, Delta, get a Delta card, and so on. I'll do a breakdown soon of whether or not to get the premium co-branded option for the airlines.
So, here's what I would recommend:
Heavy Travelers - Chase Sapphire Preferred
Heavy Diners - Chase Sapphire Preferred/Amex Gold
Heavy Grocery Shoppers - Amex Everyday Preferred/Gold Card
I fully recommend getting a card that will bring home the big points on travel and dining like the Sapphire Preferred or the AMEX Gold and then also either the Amex Everyday Preferred or the SPG Amex for grocery/non-bonus spend.
So now you have a plan going forward. Always keep in mind what your timeline is. If you want a flight fast, grab a co-branded airline card as one of your first two.
Again, feel free to tweet me @MileageMayhem or email me at firstname.lastname@example.org for a more personalized process.