Previously, we discussed some credit card basics and how you can use cash back credit cards to make your travels more affordable. Now we are going to tackle the basics of travel rewards credit cards, how you can maximize your spending to get those points and travel with them as quickly as possible, and transferable points systems and why those points are much more valuable than a single airline or hotel loyalty program.
Now, I am going to let you in on a little secret. When I first discovered travel rewards credit cards back in 2014, I originally was skeptical and decided at first to stick with cash back credit cards. Firstly, I only traveled a few times a year at that point and did not think travel rewards cards could be worthwhile if I did not travel frequently. Secondly, most travel reward credit cards have an annual fee and that was certainly an adjustment period for me.
With regards to the first point, the most important thing that I learned and that you should learn at the start, is that literally anything you spend money on could be turned into travel points with these travel reward credit cards. Even better? Unlike cash back cards which usually only earn 1 cent or point per dollar spent, a lot of these travel cards offer multiple points per dollar spent for your everyday spend. Spend a lot each month on groceries? You can earn 4 points per each dollar spent at supermarkets with the American Express Gold card. Enjoy dining out with friends? You can earn 3 points per each dollar spent at restaurants and bars. Of course these cards also earn more than 1 point per dollar spent on different types of travel as well. All of those points can then be pooled into the Chase or American Express transferable points systems to be used for travel.
The second part is a little bit more involved, but I will go over a basic example. The Chase Sapphire Reserve has a high annual fee of $450 and will likely be going up to $550 in 2021. When I first started I absolutely thought something like that was crazy. The Sapphire Reserve though offers some incredible perks that offset the cost of that fee rather quickly. Each year Chase gives you a $300 annual travel credit that can be applied towards any travel (Subways, buses, cabs, hotels, airfare etc.) essentially lowering the fee to $150. You also receive a free Priority Pass lounge membership which has a growing number of lounges in the US and many internationally. You also get your TSA Precheck or Global Entry signup and renewal fees reimbursed in full thanks to the Sapphire Reserve, no need to take off your shoes or wait in crazy long TSA lines. There are more perks, but you can see how quickly the card starts to pay for itself.
SIGN UP BONUSES AND MAXIMIZING POINTS EARNING
Now we are going to touch on the quickest way to accumulate a big stash of travel rewards points. Just like the cash back credit cards, these travel rewards credit cards offer sign up bonuses, but in the form of bonus travel points, whether it is with a specific airline (United), hotel (Hyatt), or even within a specific transferable points system (more on that shortly). The most lucrative travel credit cards offer bonuses of 50,000 points, 60,000 points and even more at times for meeting certain spending requirements within the first 90 days of your card account opening. For example the Amex Platinum card which you can find linked here, is currently offering 60,000 bonus American Express points for spending $5,000 in 90 days and occasionally increases that to 75,000 or even 100,000 bonus points!
Of course spending $5,000 in the first 90 days and paying a $550 annual fee might not be possible for everyone and we strongly encourage only signing up and spending what you feel comfortable you can pay back in full each month. These travel rewards credit cards have a high interest rate from the start and you do not want to miss a monthly payment. Personally, I just have the Green card with American Express which only requires $2,000 in spend in the first 90 days for a bonus of 30,000 points and comes with a much more manageable $150 annual fee.
I recently gave up on the American Express Gold card as my spending habits changed recently. The most important thing to remember is that you can start with a card like the Green card and sign up for the Platinum later when you feel more comfortable to hit the spending requirement and still receive the sign up bonus for it!
When you are just starting with travel credit card rewards, hitting the sign up bonus on these cards is the quickest way to begin accumulating large amounts of points to be applied to travel quickly. For example, the Chase Sapphire Preferred also has a 60,000 point sign up bonus, this time for spending $4,000 in 90 days (if you feel comfortable with that spending requirement). With those 60,000 points earned with Chase’s transferable point system, you can then transfer them to Chase’s hotel partner Hyatt (you need to create a Hyatt account first if you do not have one before transfering) to stay at one of the Hyatt hotels near Disney for 4 or 5 nights totally for free. Not a bad return on your spend, right?
TRANSFERABLE POINTS SYSTEMS
All right, now it is finally time to answer just what the heck is a transferable points system. In a nutshell, you can sign up for and earn points with a credit card company like American Express or Chase and then have the option to either use them directly with American Express or Chase, or you can transfer them to different airline and hotel partners that each program has.
Why earn points just with Marriott if you can earn Chase points and then choose to transfer to Marriott or transfer to Hyatt if one has a better deal for a hotel than the other. Just note, I am focusing on American Express and Chase in this post as they are the best two systems, however, Capital One and Citi both have transferable points systems as well that we will look into later on.
The main reason I (and you should) value transferable points systems higher than a specific airline or hotel is due to that flexibility to transfer where you please amongst their partners and that the points have a generally consistent value. Whereas, each individual airline or hotel has the option to value their points as they see fit. If you only have United points, and United decides to decrease the value of their points, you are stuck. If you have Chase points, you can choose to transfer them to another airline instead or use them directly on the Chase travel portal and will nott lose out on United (a Chase transfer partner) decreasing the value of their points.
American Express current has 11 airline partners and 3 hotel partners, of which you can find them all here. Chase currently has 10 airline partners and 3 hotel partners and you can see them listed below. You will notice quickly that there is a decent amount of crossover among the two programs, which can work out to your benefit. Do you really want to fly Singapore Airlines with points? Well you can create a Singapore Airlines account (if you do not already have one) and transfer in your American Express and Chase points to your new Singapore account, all without ever previously stepping foot on a Singapore Airlines plane.
THE BASICS OF USING YOUR POINTS AND AIRLINE ALLIANCES
So, how do you know if transferring your points is a good deal or if it makes more sense to either use your points directly through Amex or Chase or even pay in cash? I like to use the Chase Sapphire Reserve as my baseline. With the Reserve your points are given a 1.5x multiplier if redeemed through the Chase Travel Portal. Meaning if a British Airways flight cost $150 for the night, you would need to redeem 10,000 Chase points for that flight on the Chase Travel Portal. This means each point is worth at least 1.5 cents.
If that same flight through British Airways points system costs only 7,500 points it then makes sense to transfer over to British Airways. If it cost 13,000 points on British Airways system, it makes sense to either pay in points directly on the Chase Travel Portal, or more likely pay in cash. Why cash? Well perhaps you can use those 10,000 Chase points to cover a $200 hotel night at a Hyatt instead. Tha is the power of transferable points systems, you can pick and choose where to spend your points to get the most return for them and we will go more into specific examples when we go in depth with each system.
The most important thing to know is that once you decide to transfer your points out from Amex or Chase you cannot transfer them back. That means you must do your research beforehand to make sure there is award availability before transferring to a partner. Open a new account with that partner if you do not have one and begin searching. Some partners, like Hyatt below, make it obvious where to find the option to search with points while others you need to dig a little. In general hotels are much easier to find availability than with airlines. It is as simple as putting in your destination and dates, and hitting search with points. You will then see if the hotel has a “standard room” available for redemption.
For airlines the most simple redemption would be transferring Chase points to United or Southwest and just redeeming your transferred points for a flight on United or Southwest. That said, airline point redemptions get a lot more complicated than hotels. A basic example is it will cost you less points to fly to Hawaii with United Airlines by transferring your Chase points to Singapore Airlines, rather than transferring them directly to United… wait, what?
Like we mentioned earlier, each individual airline values their points differently and knowing which airlines have more valuable points for the type of flight you want is the key to getting the most value for your points in this situation.
Before fully diving into individual programs, the best place to start is to understand the three major airline alliances. Singapore and United both belong to Star Alliance with airlines like Lufthansa and ANA. British Airways, American, and Japan Airlines belong to the Oneworld Alliance. Delta, Air France-KLM and Korean Air belong to the Skyteam Alliance.
Generally speaking you can use points with one partner to book on another partner like in the example above with United and Singapore. It is also how you can still fly on Delta with Chase points by transferring to a partner like Air France-KLM. I recommend studying those partner alliances to at least get the basics down as to where you can transfer your Chase or Amex (or Citi or Capital One) points and on which partners you can then book with after making those transfers. Unfortunately it gets a little more complicated than that with non-alliance partnerships, but we will save that for another time, for now learn the basics to get started.
Oneworld Alliance: https://www.oneworld.com/members
Skyteam Alliance: https://www.skyteam.com/EN/about
Star Alliance: https://www.staralliance.com/en/
NEXT UP
Next time, we will jump head first into my favorite transferable points system, Chase Ultimate Rewards and the different ways to earn and use Ultimate Rewards points.
In the meantime, if you have any questions on the basics, whether it is transferable points or the airline alliances, be sure to leave a comment and let us know!
(Disclosure: If you sign up for a card through our sign up link, we will receive a referral bonus, but there will be no extra obligation on you).
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Hi, we are Gökçe and Steve, a married Turkish and American full time travel couple. We left behind our New York City office jobs and our home to experience the world and all its wonderful cultures. We also want to teach you how you too can turn the money you spend every single day into FREE or CHEAP TRAVEL, just like we do, through using credit card points here on this channel! We hope to inspire you to chase your own dreams and we thank you for subscribing to our channel to follow us along on our journey!