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Welcome to the most comprehensive credit card rewards beginner’s guide on the web!
Maximizing the benefits of credit card rewards begins with understanding the basics, and below you’ll find everything you need get you started.
What Are Credit Card Rewards?
Many credit card companies offer reward programs with the goal of encouraging potential cardholders to sign up, and actively use, their cards.
Cardholders can accrue rewards in the form of a large initial sign up bonus—which many cards offer to get users to initially sign up, and tends to be the most lucrative perk of a travel rewards card—or by actively making purchases with the credit card. For example, a credit card may reward a cardholder with one point for every dollar they spend.
Rewards come in many shapes and sizes, including general-use points, airline miles, hotel points, hotel nights, and monetary sums. It’s worth considering the varying value of all reward types when planning a strategy for a trip or evaluating which credit card to get.
Types Of Rewards Credit Cards
General-use point credit cards generally provide the most flexibility of all rewards cards. They allow the cardholder to use the points earned in a variety of ways, including for travel, shopping, and even cash.
General travel credit cards also have flexibility, but their benefits are skewed in favor of travel rewards. This category is great for travelers who have no loyalty to a specific airline or hotel group, and instead prefer maximum choice when redeeming travel rewards.
Airline-specific credit cards are typically associated with one airline. These cards are ideal for travelers loyal to a particular airline, as the cards tend to offer perks like additional points for purchasing tickets with that airline, priority boarding access, and waived baggage fees. Miles can be redeemed for free flights on the airline and its partners, including first class seats and round the world flights if the cardholder has accrued the necessary rewards balance.
Hotel-specific credit cards are usually tied to one hotel group. These cards are perfect for travelers who prefer a particular hotel brand, as they often grant the cardholder a level of hotel status. Additionally, the cards tend to offer perks like bonus points for purchasing nights at their hotels, room upgrades, and various other benefits. Rewards can be redeemed for free nights at hotels, including luxury 5-star hotels and extended stays if the cardholder has accrued the necessary rewards balance.
Cash-back cards reward cardholders with cash for every purchase they make. For each dollar spent on the card, the cardholder gets back a percentage as a cash reward—normally between 1% - 2%. Depending on the card, there might also be a higher reward rate for specific categories (purchases made on gas, for example) or for higher spend usage on the card. Sign-up bonuses, for cash-back cards that offer them, tend to come in form of a cash reward. While cash-back cards can provide nice benefits, particularly for small business owners, they are less valuable for travel than other cards.
Retail cards are best for the active shopper. The cards are co-branded with a specific large retailer (such as Macy’s), and reward cardholders with points for making purchases. The main value of retail cards is that cardholders can earn multiple points per dollar for purchases made at the co-branded retailer. These cards are great for shopaholics who love, and regularly shop at, a particular retailer. Point redemptions for retail cards are limited to only the products / services that the retailer offers, making them of little value to travelers.
At FreePassengers, we’ll focus specifically on the rewards and credit cards that can make your travel dreams come true. You’ll find that some of the cards we’ll review charge an annual fee (although many waive that fee for the first 12 months), but you’ll also realize that the benefits and value of the rewards the cards offer will far outweigh the fees. For example, the Marriott Rewards® Premier Credit Card has an $85 annual fee, but the 80,000 bonus points you receive when signing up could be redeemed for 6 free nights at the Courtyard Boca Raton—that’s a $1,140 value for just $85! There are endless opportunities to find great deals like that, and we’ll show how to find them and plan your trip for just a few cents on the dollar.
Why Loyalty Programs Exist
The hotel and airline industries are brutally competitive. The cost of acquiring new customers tends to be very high, as the scale of competition allows potential clients to choose from an array of options. Consequently, it’s generally much cheaper for a hotel or airline to retain an existing customer rather than to acquire a new one, and the value of a lifelong customer can be extremely lucrative.
Consider a typical traveler—as they grow older and wealthier, they will be able to afford more frequent travel, and ultimately purchase plane tickets and hotel stays for an entire family. If the traveler is successfully retained by the airline/hotel, they will likely generate significant lifetime revenue.
Understanding this value, airlines and hotel groups began offering loyalty programs in the early 1980’s as a means to acquire customers at a lower price, and with the goal of retaining those customers for a longer time period. Those programs have evolved over time, and expanded into the rewards card space. There’s no better time than now to get on board! (no pun intended)
Travel Rewards, Explained
Identifying and signing up for the right credit cards and travel programs can result in the accumulation of large point & mile bonuses. When redeemed, those bonuses can lead to incredible vacations that would have otherwise been impossible to afford.
Redeeming an award is typically either very cheap (you might have to pay a small fee to book an award plane ticket) or completely free (most hotel redemptions). For example, this dream vacation for two to Hawaii would cost you just $172.40 with reward redemptions—but has a price tag of over $3,975 if paid in cash. Imagine if every trip you took was that affordable?
A DREAM VACATION IN MAUI FOR UNDER $200 IS JUST A FEW CLICKS AWAY
The final step before getting started is to understand the various types of travel points and the different methods to accrue them.
There are many types of travel rewards, which can be confusing for beginners. The last thing you want is to accumulate different kinds of points that don’t add up to anything of significant value, so it’s helpful to know the difference between them:
Airline Miles and Hotel Points
Airline miles are the reward type that you might be most familiar with, they’re also known as frequent flyer miles. In addition to earning miles by flying on an airline, they can be earned through a sign-up bonus when signing up for the airline’s credit card, and then for every dollar spent on that card (usually one mile for every dollar spent). The same concept applies to hotel loyalty programs, where the cardholder is rewarded for stays at any of the hotel brands under a particular hotel group.
These mile and point rewards are tied to a rewards program account, (frequent flyer accounts for airlines, and loyalty programs for hotels) so the cardholder must have an account with the airline or hotel they plan on redeeming them with. The accounts are free and can be created in minutes. Once created, connecting the accounts to the credit card is very easy and ensures all spending is properly rewarded and any signup bonus is added to the total reward balance.
Miles and points earned on a credit card will be deposited into the corresponding rewards program account soon after the statement close each month. At that point, the earned rewards are independent from the credit card—so even if the card is canceled the rewards will still be valid for as long as the program allows (some programs set expiration dates, others don’t let them expire).
Once a cardholder has enough miles accumulated to redeem a free flight, they should review the airline’s award chart to identify the best deals and eligible travel dates. They may also redeem flights on partner airlines; airline alliances allow mile transfers within the participating airlines in the alliance. However, transferring miles between airlines that have no partnership is usually not allowed, so it’s helpful to understand the airline alliance ecosystem before planning any mile transfers.
STAR ALLIANCE, SKYTEAM, AND ONEWORLD ARE THE THREE BIGGEST AIRLINE ALLIANCES IN THE WORLD.
Similarly, once a cardholder has enough hotel points for free night(s), they can easily see their options with an award search on the hotel’s website. Large hotel groups (such as Marriott and Hilton) have many different brands under them and free nights can be redeemed at any of the brands under the group’s portfolio, with the cost of a free night varying primarily by the luxury level of the brand, the location, and the time of the year (among other factors). Transferring points to another hotel group is normally not possible.
Rather than reward new users with a point bonus for signing up for their credit card, some hotel groups offer free nights outright. The typical reward is for two free nights at the hotel group’s properties and with some limitations on what hotels they can be redeemed at (usually excludes the very premium properties). This perk could be incredibly valuable, since you may be able to redeem free nights at hotels that would otherwise require an unattainable point total.
A great example is the Ritz-Carlton card, which gives new cardholders two free nights at any Tier 1-4 Ritz-Carlton hotel worldwide; the nights could be used to book two reward nights at the Ritz-Carlton Half Moon Bay, where rooms start at over $600 / night! Staying at a hotel of that level would require a large point balance that would be tough to accrue if just using a point-based sign-up bonus, making the night-based rewards really valuable for luxury stays. Conversely, for those interested in booking several nights at lower tier hotels, a points-based redemption would make more sense.
ENJOY BREATHTAKING VIEWS OF THE PACIFIC OCEAN FROM YOUR HOTEL ROOM AT THE RITZ-CARLTON HALF MOON BAY
Many hotel cards will also reward their cardholders with a free night on the cardholder’s anniversary (once they’ve paid the annual fee for the card). This is a valuable perk, and makes most hotel card annual fees worth it, but like the sign-up bonus it tends to come with limitations on what hotels the free nights can be redeemed at. For example, some hotel groups rank their hotels on a scale of 1 to 8 and limit the free anniversary night redemption to hotels level 1-4.
Fixed Value Bank Points
Offered by banks for some of their rewards credit cards, fixed value points can be redeemed for a fixed dollar amount of travel rewards. The monetary value of each point earned is usually one or two cents, so in a one-cent program 10,000 points would equal $100 worth of potential travel redemptions.
There are significant pros and cons to these types of points. On the positive side, they provide flexibility in how rewards are redeemed, letting the cardholder choose any airline or hotel without blackout dates. Blackout dates are especially prevalent in domestic economy flights, making the points useful for such flights. Additionally, because this is essentially a cash purchase, frequent flyer or hotel loyalty points can be accrued for redemptions—this is ordinarily not the case with miles or hotel-point redemptions.
THE BARCLAYCARD ARRIVAL PLUS™ WORLD ELITE MASTERCARD® IS ONE OF THE MORE POPULAR FIXED VALUE BANK CARDS ON THE MARKET
The main downside of fixed value points is their…. fixed value, which removes the possibility of finding great deals for award redemptions. This is particularly unfavorable for international flights, long haul domestic flights, premium cabin domestic flights, or luxury hotel stays, where the monetary cost is high and fixed value points likely won’t be enough. For example, flights from New York to Hawaii can cost as little as 45,000 United Airlines miles (+$11.20 in fees) via Saver Fares on United’s award calendar. The United MileagePlus® Explorer Card is currently offering a 50,000 miles sign-up bonus, which is enough to cover the full cost of that flight. However, the same flight would cost $748 if paid in cash. With a premium fixed value point card, such as the Barclaycard Arrival Plus™ World Elite MasterCard® offering 50,000 bonus points for signup at a value of $0.01 per point (equal to $500), that flight would require an extra $248 out of pocket. In this situation, fixed value points would provide a much lower value than the more dynamic mile alternative. An additional con, caused due to the points being tied to the credit card account and not a frequent flyer or hotel rewards program, is the likelihood that the points would be forfeited if not used before the card is closed.
How points are redeemed varies by bank, with some simply issuing a statement credit when a user makes a purchase and others requiring the booking to be done in the bank’s own booking portal.
Flexible / Convertible Points
The most premium bank credit cards and rewards programs, such as American Express Membership Rewards and Chase Ultimate Rewards, offer convertible points. These are highly sought after points thanks to the way they can be redeemed, which includes both the fixed value model where each point is worth a monetary amount, and also the convertible model where points can be transferred directly to the program’s airline and hotel transfer partners.
THERE ARE MANY REDEMPTION OPPORTUNITIES WITH CHASE ULTIMATE REWARDS AND AMERICAN EXPRESS REWARDS POINTS
Convertible points can really open up the door to accumulating large point balances on one airline or hotel program, allowing the cardholder to make a large or luxurious redemption, or to simply transfer a few points to their frequent flyer program when they’re close to redeeming a free flight. For example, a user who had signed up for the Chase Sapphire Preferred and received the 50,000 Ultimate Reward point sign-up bonus, and then also signed up for the United MileagePlus® Explorer Card (50,000 points as well), could transfer the Chase points to United for a total of 100,000 points. With a balance that high, the cardholder could redeem—with plenty of miles to spare—a round-trip flight from New York to Sydney, Australia for 80,000 points and $200 in fees. That same flight in cash would cost almost $1,400!
As great as convertible points are, there are a couple of downsides. Like fixed points, convertible points can be forfeited if the card is closed, so it’s important to know the bank’s rules and to transfer or redeem the points before closing the card. Moreover, convertible points can only be transferred to the program’s transfer partners. For instance, Chase Ultimate Rewards can be transferred to United and Hyatt, but not to to Delta and Hilton—the opposite is true for American Express Membership Rewards.
The freedom to choose between fixed and flexible redemptions makes these points very valuable. They provide a redemption option for almost any situation, and their cards tend to come with a collection of other perks to sweeten the offering.
There’s a variety of ways to accrue points and miles, and you can benefit from all of them. By knowing the different ways, you’ll reach your goals quicker and avoid missing out on great opportunities to earn rewards:
Sign-up bonuses are the crème-de-la-crème when it comes to travel rewards. They can often be enough to redeem an international flight or a stay at a luxury hotel.
Depending on the card, bonuses may be rewarded in the form of points, miles, or hotel nights. To receive the bonus, the cardholder simply needs to meet the minimum spend requirement in the established timeframe. For example, the Chase Sapphire Preferred offers new users 50,000 points once they spend $4,000 in the first three months of account opening.
Points For Spend
To encourage cardholders to actively use their card, rewards programs award users for every dollar they spend. A typical reward is one point for every dollar spent; with certain categories (like spend on travel and dining) awarding more points per dollar.
Beyond the spend itself, there is nothing the cardholder needs to do to redeem the points. The points will automatically post into the rewards account a few weeks after each transaction and be ready for use.
Most of the best rewards cards have an annual fee (although some cards waive the fee for the first 12 months), leading many cardholders to cancel their card once they have claimed the sign-up bonus and before the second year fee kicks in.
To prevent this, some credit cards—particularly hotel cards—will offer users with a bonus upon the payment of the annual fee as an incentive to keep the card open. The cash value of a free night is usually higher than the annual fee, which makes the bonus a good reason to keep the card active.
Flying / Spending Nights
The main reason airlines and hotel groups offer rewards credit cards is to encourage users to become long-time loyal customers of their brands. As an incentive, they will offer their cardholders points or miles for every hotel booking or flight taken.
The size of an airline mileage reward will vary based on the distance traveled or cost of the flight (different airlines calculate it differently), while hotel rewards are usually determined by the cost of each night. For travelers that who loyal to one airline or hotel, particularly those on frequent business travel where expenses are covered by company dime, the rewards can really add up.
Additionally, most travel credit cards will provide an incremental number of points/miles for every dollar spent on purchases directly with the hotel or airline the card is associated with. For example, the Starwood Preferred Guest® Credit Card rewards users with 5 points for every dollar spent on Starwood Hotels bookings vs. the 1 point per dollar it rewards on every-day purchases. This means that cardholders who book hotel stays using their branded card will earn points both via the credit card multiple, as well as for the cost of the stay.
Recent surveys show that shoppers are now making more of their purchases online than in-store. Realizing this growing opportunity, many banks, airlines, and hotel groups are offering shopping portals on their site where users can earn extra points for shopping directly on the portal. The model is fairly simple: retailers will partner with the portals by placing their brand and shopping links on the site, and then pay the portal a percentage of the purchases made. To incentivize shoppers to make their purchases directly through them, portals will provide rewards for every completed purchase made via the portal.
Point rewards can fall within a wide range, with certain stores/products offering as high as 20 points per dollar (sometimes even higher for seasonal deals), or be given as a cash-back incentive. Next time you’re making a purchase, take a look at your card’s shopping portal for lucrative deals that could get you a little closer to your goal. And look out for seasonal deals like the ones Chase's shopping portal offered for Mother's Day:
YOU CAN FIND AMAZING POINT BONUSES AT THE CHASE ULTIMATE REWARDS SHOPPING PORTAL
The majority of rewards credit cards offer users additional points per dollar spent at restaurants, with two points per dollar being a common reward rate. This is a nice benefit of dining out, and it’s fortunately only a part of the potential dining perks available through credit card spending. Many airline and hotel groups also offer dining programs, where users who register their credit cards earn additional points per dollar spent at participating restaurants (participating restaurant lists are usually pretty comprehensive).
Dining programs are an easy way to tally up points. They don’t require a specific credit card to claim points—you could use your United Airlines credit card on the American Airlines dining program, for example—and let you register multiple cards in the program. Airline programs generally offer up to 5 points per dollar, with hotel programs going up to 8 points. Keep an eye out for special offers, as programs will often offer sign-up bonuses, such as 3,000 points for signing up and dining 3 times at participating restaurants within 30 days (as seen in Delta's current offer below).
Now that you’ve learned the basics of credit card rewards, it’s time to apply for your first card! Start with these steps below and you’ll soon be piling up the points to book your trip:
1) Sign Up For Travel Rewards Programs
Step one is to make sure you earn points on all the travel programs that interest you, and that begins with signing up for those programs.
There’s dozens of programs and signing up for all of them is not realistic, nor is it necessary. However, you should sign up for all the programs that you expect to use. For example, if you typically fly on United Airlines and stay at Hyatt properties, then you should sign up for both MileagePlus and Hyatt Gold Passport (their respective loyalty programs).
JOINING UNITED AIRLINE'S MILEAGEPLUS PROGRAM WILL TAKE YOU JUST A COUPLE MINUTES.
And if you ever plan to book a flight or stay at a hotel with a program you don’t have an account with, make sure you sign up for their loyalty program first to ensure you get the points. Even if it’s a program you don’t expect to frequently use, points can add up and the few minutes it takes to sign up could come in handy later on.
2) Get Organized
It may be daunting to think of having to juggle various cards, track how many points you have with every program, and make sure you don’t forget about any expiration dates. Fortunately, point managers are here to make it very easy for you. Being organized is key to success when optimizing your travel rewards, and this is a good way to start.
There are many great point managers out there, such as AwardWallet, Points.com, and TripIt. The earlier you start plugging in all your info, the easier it will be to keep your data updated—so create an account before you apply for your first card.
SIGN UP FREE AT POINTS.COM
3) Plan Your Strategy & Pick The Right Cards
Where and when do you want to go? And what are the best hotel and flight options to make the trip possible?
Answering these two questions will require a little research, but it will help you identify which cards to apply for, and how much time you’ll need to accrue the necessary points. For example, let’s say you and your significant other want to travel to Hawaii from New York next winter. You might find that United Airlines has the best award rates and Hyatt offers the best hotel options. So, if you both got the Chase Sapphire Preferred® Card (currently offering a 50,000 point sign-up bonus, transferrable to United Airlines at a 1:1 ratio) and the Hyatt Visa Card (40,000 point sign-up bonus), you would be able to fly to Maui round-trip and stay four nights at the Hyatt Regency Maui Resort and Spa for a grand total of $172.40 in fees. That same trip would cost you $3,975+ in cash!
The research will really pay off. You can read more on figuring out your strategy with our strategy guide.
4) Know The Details
Every card issuer has different eligibility rules for its cards—both for being approved and then for redeeming sign-up bonuses. It’s essential that you know about these rules before applying to ensure you don’t get rejected or miss out on the bonus. Some of the more noteworthy rules include:
Credit Score: The best rewards cards (airline, hotel, and point cards like the Chase Sapphire Preferred) usually require that applicants have excellent credit. You’ll be able to find good cash-back cards with looser credit requirements, but the most lucrative travel offers will tend to be more selective.
Business Credit Cards: As the name dictates, these cards are for business-owners. You don’t need to own a huge business, or necessarily make any money at all (if it’s early in your business’s life), but you do need to have a for-profit business to be considered and may have to provide proof to back it up.
American Express Lifetime Rule: To curb card churning, American Express will only let a user get one sign-up bonus per credit card per lifetime on each of their personal credit cards. Make sure that if you apply for an AMEX card, it comes with a high sign-up bonus—you won’t be able to receive the bonus for the same card ever again.
2 Year Rule: Most other issuers are less strict, but normally still only let you get the sign-up bonus once every two years. So if you sign up and get a bonus today, you’ll have to wait two years from the date you received the bonus to be eligible again for that same card’s sign-up offer.
Chase 5/24 Rule: In 2016, Chase implemented a 5/24 rule. This rule essentially states that users who have opened 5 or more credit card accounts in the last 24 months (from any issuer) won’t be approved for any Chase credit card applications. Chase offers a lot of great products beyond it’s own branded cards (such as the United Airlines, Hyatt Hotels, and Southwest Airlines cards) that all fall under this rule, so keeping track of account opening dates, and timing applications properly, will ensure you don’t miss out on a great offer. Credit card pre-approvals, which you can inquire about at any Chase branch, have been a successful workaround to this rule.
Applying is easy. You can apply online in just a few minutes and often get a response just as quickly. Cards usually arrive in the mail within 1-2 weeks.
Although immediate approvals are common, sometimes the issuer will need additional information to consider your application. For this reason, it’s recommended to apply during business hours so that you can immediately call the issuer—while the best staff is working—and address any of their questions.
At FreePassengers, we always appreciate if you apply through our referral links—that’s how we pay the bills to keep the site running :)
6) Sign Up For Dining Programs
Dining programs are a very easy way to earn extra points for dining out. Once you sign up for a program—let’s say MileagePlus Dining, United Airlines’ program—all you have to do is add the credit card(s) of your choice to your account and use it at an eligible restaurant. You’ll receive extra United Airlines miles for every dollar spent. Easy as that!
Most airlines and hotels offer dining programs, so if you’re planning a trip and already know which airline or hotel you’ll be redeeming at, sign up for its dining program to help reach your goal faster.
DON'T MISS OUT ON THE SIGN-UP BONUS AT UNITED MILEAGEPLUS DINING
7) Take Advantage Of All Spend Opportunities
Every single point you earn can get you a bit closer to your goal, so it’s in your best interest to embrace every opportunity to accumulate them. Use your credit card for all expenses possible (avoid using cash unless necessary!) and keep an eye out for additional point-earning opportunities, like special deals and point giveaways.
By keeping travel rewards top of mind, you’ll see your points add up fast and soon be on your way. Happy travels!