Credit card rewards have taken me around the world for cents on the dollar compared to list prices. I’ve been to Tel Aviv for $72.50 one way, Spain for a few hundred bucks, and flew my family across the country for $22.20 round trip. All of this thanks to travel hacking.
But with great rewards cards comes great responsibility. Poor credit card management can lead to expensive interest, fees, and a lower credit score.
If you can make on-time payments and avoid the temptation to overspend, rewards cards are a great way to travel and get cash back from spending you already do.
Pick the best credit card rewards for your goals
Some people love to jet-set around the world and look for reward credit cards specific for traveling. Others may prefer cash back or gift cards to save up for fun electronics, dinners out, or other accessories.
There are no right or wrong favorite credit card rewards. Just make sure you are getting the best return for each dollar you spend.
Typically, travel rewards have the best value. You can get 2¢ or more per dollar spent in some cases, whereas most cash back and gift cards only give up 1¢.
Use the right card for the right transaction
I usually have three to five credit cards in my wallet at any given time. While that may seem excessive to some people, I have a strategy and set of priorities for using each card.
Credit card rewards often give different bonuses for each dollar spent, so pick your cards for each transaction carefully.
Here are a few examples of credit card rewards programs:
- Chase Sapphire Preferred gives you two points per dollar at restaurants and bars
- Chase Freedom offers five points per dollar on categories that rotate quarterly
- Barclay Arrival Plus offers two points for every dollar spent
- American Express Everyday Preferred offers 3x points at grocery stores and 2x at gas stations, but also a 50% bonus on all rewards when you use it for 30 transactions or more in a calendar month.
This is why I carry multiple cards. I use the Chase Sapphire Preferred at restaurants, Chase Freedom where I can get a 5x bonus, and American Express Everyday Preferred for most other transactions. I get the best credit card rewards possible for every dollar I spend.
Pay your reward credit cards in full each month
Now that we’ve looked at spending, let’s look at paying those reward credit cards off.
There is one big rule that you should always follow no matter what. This big, bold rule is always pay off your entire credit card balance in full each month.
If you use your cards for purchases and don’t pay them off each month, you end up paying big interest to the bank. Paying substantial interest can quickly offset any bonuses and rewards you get.
A free flight to Europe is awesome. But if you pay $2,000 in interest on the purchases you used to get that flight, you would have been better off skipping the credit cards and just buying the plane ticket.
Make a payment schedule that works for you
You get a bill every month, and that is when most people make their credit card payment. Did you know you can pay your credit card at an earlier date, even multiple times per month?
When I had a regular paycheck schedule at my day job, I paid my cards off in full every payday. That allowed me to match my income to my expenses and avoid a giant bill at the end of the month.
Bonus tip: you can do this with you student loans too!
Use the 24-hour rule for big purchases
If you ever get tempted to make a big purchase that could be a budget buster, use the 24-hour rule to avoid overspending. The rule works just like the name implies. If you want to make a big purchase, wait at least 24 hours to see if you still want it to avoid buyer’s remorse.
I use this rule for any online purchase that isn’t for a household need (like groceries or diapers) and any fun purchase over $100. If I still can’t live without it after sleeping on it and thinking it over, it could actually be worthwhile.
If you are a superstar budgeter, you can make it a 72-hour rule or even a one-week rule.
Make an annual fee calendar reminder
I was hesitant to get started with rewards credit cards early on because of the annual fees. Why should I get a card that costs $95 per year when I can use another cash back card with no annual fee?
I quickly learned that I get a heck of a lot more than $95 in rewards and value from my cards with a fee than those without a fee. Where I might have earned $250 in cash back credit card rewards, I can get $1,000 in free flights and hotel nights from better rewards cards.
However, every card is not worth the annual fee in the long-run. So I mark my Google Calendar with a recurring reminder a month before the fee would be charged for each card. I recently closed one hotel card because I wasn’t getting enough points to make up for the fee.
Credit score concerns
Keep in mind that opening new credit cards can temporarily lower your credit score. So if you are looking to buy a new home or car in the next three to six months and need to take out a loan, hold off on getting any new cards.
Closing any credit cards will also lower your total outstanding credit limit, which impacts your credit usage ratio.
If you are closing a card, make sure to call the bank and ask to convert to a no-fee card. This card can then sit at the back of a drawer unused. Or, move the open credit to another card with the same bank to keep your total available credit as high as possible.
Finally, opening and closing a lot of cards quickly may lower your score. It can also lower your average age of credit, another important credit metric. I
Instead of opening and closing cards quickly, try to keep them open as long as possible if they are not charging you a big fee. That will help your score increase over time.
Since I started “churning” rewards credit cards, my score has increased by about 100 points!
Start small with credit card rewards
The world of credit card rewards is big and has amazing potential. But there’s also a lot of confusing rules you have to wade through.
With so much to learn, it is best to start slowly and build up from there. Pick one favorite card, and when you get it down, start to expand to other rewards cards.
The sky’s the limit, so spend responsibly and enjoy all of those free credit card rewards!
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate||Visit SoFi|
|2.47% – 5.87%1||Undergrad & Graduate||Visit Earnest|
|2.47% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.95% – 6.37%2||Undergrad & Graduate||Visit Laurel Road|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.72% – 8.32%6||Undergrad & Graduate||Visit Citizens|