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I teach people how to plan their credit card strategies. This is what I tell them

I teach people how to plan their credit card strategies.  This is what I tell them

I’ve been obsessed with credit cards and award flights for almost two decades, and I’ve made a career writing about them.

Not surprisingly, people contacted me to ask how they too could travel for free, and I started offering individual award travel advice. After spending time talking to dozens of people from all walks of life about their credit cards and travel rewards, this is the advice I give most often.

1. Be careful how you spend your rewards points and miles

I always start my consultations with a list of the credit cards my clients have, as well as a list of their points and miles.

I often hear from my customers that they have been using the same card for their purchases for years, but that they currently do not have many points.

When I ask how they used them, I often hear that they redeemed them all for a plane ticket by calling the card issuer and redeeming their points directly through their travel agent.

It pains me to tell my clients this, but this is a huge mistake.

This typically only provides 1 cent of value per point redeemed. For example, American Express Travel offers 1 cent of value per Membership Rewards point redeemed, so a $2,000 ticket costs 200,000 points.

But you can get a lot more value if you transfer your points to a travel companion.

For example, 200,000 Membership Rewards points could have been redeemed for two round-trip business class tickets to Europe on a Star Alliance partner such as United, Air Canada, LOT Polish and Turkish, and others. Surely, two round-trip business class tickets to Europe are worth a lot more than $2,000.

2. Earn flexible reward points

Flexible rewards points can be extremely valuable when transferred to travel partners. Transfer programs include:

  • American Express Membership Rewards
  • Chase ultimate rewards
  • Citi ThankYou Points
  • Capital One Miles
  • Bilt rewards
  • Wells Fargo Rewards

But if you earn travel rewards points with Bank of America, US Bank, or Discover, you don’t have these options.

You also miss out on these valuable options if you earn money back. Only flexible travel points allow you to receive multiple cents worth of each point redeemed when you transfer your points to travel partners.

3. Don’t stand still

Are you still using the same smartphone you got 10 years ago? Probably not, because you know there are much better phones available these days.

The same goes for credit cards. As your travel and spending needs change, it may also be time to change the cards you use.

The credit card industry is so dynamic. New cards are released all the time and card issuers often offer valuable welcome bonuses to encourage people to try them.

If you haven’t reevaluated the credit cards in your wallet, you should do so regularly. Look for new offers with generous welcome bonuses, as well as offers that can provide lasting value.

4. Use the correct card for the task

You don’t use a sports car to help your friends move or to take your minivan to the race track. But that’s what you do when you use your travel rewards credit card to buy groceries, where you only earn 1 point per dollar (with some exceptions — like the Citi Strata Premier℠ Card or American Express® Gold Card).

And if you find a card that gives you a big bonus on groceries, don’t check into a hotel where you’ll get the bare minimum amount of rewards points or miles. Instead, switch to a card that offers higher rewards on hotel stays, like the IHG One Rewards Premier Credit Card.

You should always use the card that gives you the most points for each purchase. Sure, there are apps that will tell you how to do this, but you can also just put a piece of tape on your cards with labels like “gas,” “groceries,” “travel,” and “daily expenses.”

5. Don’t be afraid of annual costs

One of my clients recently asked me if it was worth paying a $375 annual fee (see Rates & Fees) for an American Express®️ Business Gold Card, which at the time had a 150,000-point bonus for spending $10,000 in the first three months of card membership.

I showed him how to redeem those points for thousands of dollars in travel, making the annual fee worth just a few cents compared to the value of this card. And if he later decides the card doesn’t provide lasting value, he can always cancel it before being charged the annual fee next year.

Terms and conditions apply to American Express benefits and offers. Certain American Express benefits and offers may require enrollment. Visit americanexpress.com for more information.

6. Never cancel your card immediately

When I advise my customers to apply for a new card and earn a big bonus, many ask if they should cancel the card immediately afterwards.

I always answer with an emphatic “No.”

Firstly, there is no point in cancelling the card until the next annual fee is charged. But then again, many card issuers look down on those who cancel their card immediately after receiving a bonus.

In fact, American Express specifically says it can take back your bonus if you do that. And finally, it is worth trying the card in good faith. You may eventually find that it’s worth keeping it for at least another year or two. You can always use it for small purchases or a subscription to avoid closing the card.

For American Express Business Gold Card rates and fees, click here.

The editorial content on this page is based solely on objective, independent reviews by our writers and is not influenced by advertising or partnerships. It is not provided or commissioned by third parties. However, we may receive compensation when you click on links to products or services offered by our partners.