The Basics
Paying for Travel with Points
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Points are a rewards currency that banks offer as an incentive to open new credit cards
“Currency” is an accurate description because you can use points to pay for travel expenses
Flights to Hawaii, Hotel stays in Italy, Airbnb in Florida, Rental car in Nashville…points can cover all of those costs
With points, you receive rewards points for spending money that you were going to spend anyways
Instead of using a debit card, you can open a travel rewards credit card and start using it for all of your regular spending
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Not all credit cards earn points
The type of credit cards that earn points are referred to as “Travel Rewards Credit Cards”
There are 2 different types of Travel Rewards Credit Cards: “Bank cards” and “Co-branded cards”
Bank credit cards are issued by major banks like Chase, Capital One and American Express
Each bank has their own unique rewards program. When you use a “bank card,” you earn points that can be used within that bank’s rewards program
Each bank has a “travel portal” where you can book flights, hotel stays and rental cars. The points you earn with these cards can be used to pay for the travel that is booked within the travel portal
These points are often referred to as “flexible points.” They are flexible because you also have the option to transfer the points to any of the bank's travel partners
Each bank partners with specific hotels and airlines. When you transfer your flexible points to a partner, you usually get the most value for your points (rather than using them in the travel portal or to “erase” charges)
The Chase Sapphire Preferred and Capital One Venture are examples of “bank cards” that earn flexible points
Co-branded credit cards are tied to a specific hotel or airline
With these cards you only earn points with the hotel chain or airline that offers the card
You can only use these points to book hotels or flights through that brand’s specific rewards program
The United Explorer card or the Hilton Honors card are examples of co-branded cards
These points are not flexible because you don’t have many options when it comes to redeeming them
For example if you have a Delta card, you can only use those points to book flights through Delta
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Earning sign-up bonuses on travel rewards credit cards will help you accumulate points fast
When you get a new travel rewards credit card, it usually comes with a sign-up bonus offer, something like: “Earn 60,000 points after spending $4,000 within the first 3 months”
This is your golden ticket. This is the bread and butter to earning points quickly.
The amount of points, the minimum spend requirement and the deadline will vary based on the card and offer
No more using the same credit card for years on end
Put simply, to earn points quickly:
Get a credit card that has a good offer and makes sense for your lifestyle
Earn the sign-up bonus points by meeting the minimum spend by the deadline
Get another card (and another bonus) once you are ready
Rinse and repeat
Common Concerns
What about my credit?
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Many people are concerned that opening credit cards will have a negative impact on their credit. But overall, having more available credit and using cards responsibly can significantly improve your credit score.
To be successful, you need to use credit cards in the same way you would use a debit card.
Only use credit cards for your normal expenses and pay your statement balance in full every month.
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Here is a breakdown of what credit scores are composed of and how using credit cards could impact each of those factors:
Payment history (35%): If you pay your credit card bills on time each month, this should help your score increase. This is the biggest factor in your score, so set up autopay and never be late on a payment!
Credit utilization/Amount owed (30%): Utilization is all about how much credit you are actively using. A low utilization rate means you are using a small amount of your available credit—this improves your score. Utilization accounts for 30% of your total credit score so it is an important factor to remember.
*Each credit card you open adds to your available credit—as long as you use less than 30% of your overall limit, your score in this category should be impacted positively. Never max out your cards!
Credit history (15%): Keep your oldest credit card open…even if you don’t use it often (or at all). If the card carries a high annual fee, call the bank and ask to downgrade the card to a no-fee version. This maintains your account history and keeps a good relationship with the bank.
Credit mix (10%): Having several different lines of credit should have a positive impact (mortgage, credit card, car loan, etc.).
New credit (10%): When you get a hard inquiry while applying for new credit, your score may drop a few points. But if you space out your applications and maintain old accounts, this shouldn't affect you in a major way (it's only 10% of your score).
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All of the major banks that issue travel rewards credit cards offer free credit monitoring services once you are logged into their app
You can also check your score for free at creditkarma.com
You can pull your credit reports for free from annualcreditreport.com
For more information about how credit works, read this article. To better understand how credit cards can be used to improve credit, check out this article.
The Guidebook contains a lot of useful information about credit, including a section on how to improve your credit, so you can get approved for travel rewards credit cards and start earning points!
Is the travel actually free?
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When you pay with points, you reduce your costs drastically—but it usually won’t be completely free.
How much you spend out of pocket depends on many factors including:
How many points you have. If you have enough points, your travel can be nearly free!
You can usually pay with a combination of points & cash if you do not have enough points. This is a good way to cut down on your travel expenses, even if you don’t have a ton of points.
How you are booking your travel matters. Your out of pocket costs will vary depending on if you: Transfer your points to a partner, Book your travel in a bank portal, or Apply points towards a statement credit
Which hotel and/or airline you choose will also determine the amount of money you will need to pay out of pocket.
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Many hotels charge a modest nightly “resort fee.” Typically you can’t use points to pay this fee.
Hyatt and Hilton do not charge those fees when paying with points, so those hotel stays can actually be completely free if you have enough points
When you book airfare using points, you will always need to pay taxes and fees out of pocket.
Taxes and fees vary significantly depending on:
If it is a domestic or international flight
Which airline you are booking with (i.e. some airlines pass on surcharges for fuel to passengers…others do not)
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A workaround to paying taxes and fees is if you book in the bank’s travel portal, instead of transferring your points to a partner airline/hotel
Usually you do not get the same value for your points as you would if you book directly with the hotel and airline
But in the bank’s travel portal, taxes and fees are typically included and payable with points
So if your goal is for your trip to be as close to free as possible, travel portals could be a good option for you
Check out your bank’s travel portal: Chase, Capital One, American Express
Another option is to use your points to “erase” travel charges
Capital One is known for their “purchase eraser” functionality…but most major banks offer this option too
This is the least recommended way to use your points because you will likely get the least value for your points this way. The value drops considerably when using points for a statement credit
Your points can be worth double, triple or even more when you use them in other ways
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If you open travel rewards credit cards, use them responsibly and earn the sign-up bonuses, you will accumulate a stockpile of points
Now you can travel anywhere in the world. There is no trip that is too expensive if you have enough points. Bucket-list trips can become a reality
Paying with points gives you the capability to save thousands of dollars on travel
You control how many points you earn and how you use them
Check out The Comparison to see the difference between paying with points vs. not using points (paying cash)
Do I keep these cards forever?
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Many people are scared of paying an annual fee on a credit card
Usually cards with high annual fees come with much higher sign-up bonuses, so you should always consider them
It is typically worth it to get a card with an annual fee because the points you are awarded can be worth thousands of dollars in travel.
Would you pay a $99 fee to receive $1,000? When you transfer points to partners, the value can equate to thousands of dollars!
These cards typically come with many other benefits, besides points, that make them worth their fee
See The Comparison for real-life examples of the cost differential when using points vs. paying without points
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Sometimes it is worth it to keep a credit card for the benefits that come with it. Each card has different benefits. Be sure to research them before canceling the card.
These are examples of the many benefits that credit cards may come with:
Free checked bags
Early boarding
Rental car status (skip the line, car upgrades)
Rental car insurance
Status at a hotel chain (free room upgrades, late check-out)
Annual travel credits
Cell phone insurance
Trip cancellation insurance
Credit for TSA PreCheck or Global Entry
No foreign transaction fees
Reimbursement for delayed or lost baggage
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If you do not want to keep the card, consider downgrading to a different card
You can call the bank and ask to change your card to a credit card with no annual fee
Benefits of downgrading:
Keeps your line of credit open, which helps your credit score
Keeps your account open, which lengthens the age of your account and ensures access to any existing points (as long as you downgrade to a card that earns points!)
Keeps a good relationship with the bank, so you will be more likely to be approved for other cards later on
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You can cancel your credit card but you should always wait at least one year to avoid it hurting your credit and your relationship with the bank
You could ask the bank for a retention offer when you call to cancel
Sometimes they will offer you more points if you spend some money on the card, to help offset the fee
Advanced Strategies
Chase 5/24 Rule
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The 5/24 rule is an unwritten guideline from Chase bank.
It basically states that if you open more than 5 personal credit cards with any bank over the course of 24 months, then you will not be approved for any Chase credit cards
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This is an important guideline to keep in mind when applying for credit cards because Chase points are some of the most valuable points you can earn. So it is in your best interest to stay in good-standing with them
Chase offers the ability to earn “Ultimate Rewards” points with their bank cards. These points can be transferred to some very valuable partner airlines and hotels
Chase has many co-branded cards as well as several business cards that you would be denied for if you are “over” the 5/24 rule
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Get a partner and take turns getting new cards
Get Chase cards first, then move onto other banks where 5/24 doesn’t matter
Focus on getting business cards
Business Cards
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Business credit cards are an excellent strategy to earn a stockpile of points
Most business cards do not add to your 5/24 count
The sign-up bonuses are usually higher than personal cards
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Most people qualify for business credit cards and don’t even realize it. You don’t need an LLC to qualify. You can apply as a sole proprietor if you:
Sell used items on Facebook
Own rental property
Have been paid to be a baby-sitter, dog-sitter, house-sitter, etc.
Drive for Uber, etc.
Check out The Guidebook for lots of tips and tricks about applying for business cards
Airline Alliances
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Airline Alliances are groups of airlines that work together to share resources and extend their networks
There are 3 major Airline Alliances: SkyTeam, OneWorld and Star Alliance
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Airline alliances are important because you can book flights with airlines that you may not have points with
If airlines are within the same alliance, they often list partner airline flights on their websites
Keep in mind: Availability of alliance partner flights is not guaranteed
For example: If you want to book a specific flight on Delta, but you do not have Delta points or American Express points, then you cannot book the Delta flight through Delta.
But, you can check Delta’s alliance partners to see if they are offering the flight you are looking for. You can then use your flexible bank points or partner airline points to book your desired Delta flight through an alliance partner
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The best part about Airline Alliances is that the airline that offers the flight on their website sets the points price they will charge
This leads to several different prices for the same exact flight, depending on who you book the flight with…giving you the ability to save a lot of points
In The Comparison, I outline 2 bookings that I completed using Airline Alliances:
I booked United Airlines flights to Hawaii —but I booked the flights through Turkish Airlines because they are in the same alliance as United and they had my desired United flights on their website for a fraction of the cost
I also did an alliance partner booking when I booked my family’s flights to Paris. I wanted to fly Delta but Delta was charging way too many points. So I found the exact Delta flights I wanted on the Air France website and booked them there instead
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The key is to only use your credit cards for your regular expenses
If you start spending extra in order to meet your minimum spend requirements, then you’re missing the point
If you don’t pay off your credit card balances in full every month, you need to pay interest and it will impact your credit
Paying your bill in full every month should increase your credit score and keep you accountable for your spending
The goal is to leverage everyday spending to earn points, so that your travel costs are mostly covered
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You will need good credit to start, since the process is based on getting approved for travel rewards credit cards
Credit not stellar? Don’t be discouraged. Here are some great suggestions to boost your credit score fast
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Once you are ready, there is no limit to how many points you can earn. You will never run out of cards to get.
If you need a hand in figuring all of this out, check out The Services
Your biggest travel concern will be, “Where should I go next?”
Your life is about to change.