Getting Started with Credit Cards
I need to rewrite this to make it more visual and beginner friendly.
This guide is for folks looking to dip their toes into the world of points and miles. It keeps recommendations very simple, just 1-2 cards. Using the strategies here, you ought to be able to turn $20,000 in annual spend into $800 of free travel annually in addition to earning $1000-$2000 worth of travel from signup bonuses.
Disclaimer
Always pay your credit card balance off in full every month. If you don’t, the interest will wipe out any gains you have from points and miles.
Priorities in Picking Your First Cards
If you are new to travel rewards, we recommend you start with 1-2 cards that:
- Provide solid base earning rates in categories (1.5-2x everywhere).
- Bonus categories where you spend the most (3-4x dining, supermarkets).
- Earn transferable currencies.
Solid Base Earnings
Several credit cards offer 1.5-2x anywhere and you should never earn less than that. Use these cards as your default credit card for any purchases.
- 2x Capital One Venture and VentureX
- 2x Citi Double Cash (with Citi Premier)
- 1.5x Chase Freedom Unlimited (with Sapphire Preferred)
- 2x Amex Blue Business Cash
Bonus Category Earnings
Many premium cards offer excellent earning rates on categories where you spend the most. By combining a high earner with an everyday earner, you ought to be able to average 2.25-2.5x which can result in a 4% rebate on spend for travel.
| Card | Dining | Grocery | Gas | Travel |
|---|---|---|---|---|
| Amex Gold | 4x | 4x | 1x | 1x |
| Bilt | 3x | 2x | 1x | 2x |
| Chase Sapphire Preferred | 3x | *3x | 1x | 2x |
| Chase Sapphire Reserve | 3x | 3x | 1x | 3x |
| Citi Premier | 3x | 3x | 3x | 3x |
Earning Transferable Points
Some banks offer travel cards that earn transferable currencies. For example, you could transfer 60,000 Chase Ultimate Rewards to United for flights, to Hyatt for hotel stays or to Virgin Atlantic for a cruise.
Earning points this way has three key advantages over earning points from a co-branded card (Hyatt, United, etc) or a cash back card.
Better Earning
Good travel cards generally earn at higher rates than co-branded cards or cash back cards. For example, imagine you pay for $100 in dining spend on one of three cards.
| Card | Rate | Earnings on $100 | Value at Hyatt |
|---|---|---|---|
| Chase Sapphire Preferred | 3x | 300 Ultimate Rewards | $6 |
| World of Hyatt | 2x | 200 Hyatt Points | $4 |
| Citi Double Cash | 2% | $2 | $2 |
The Chase Sapphire Preferred earns 3x points, which transfer to Hyatt 1:1, and Hyatt points are worth about $0.02 each. As a result, the Sapphire Preferred gives you a 6% rebate in value if Hyatt is your redemption.
Transfer Bonuses
Although most credit card currencies transfer 1:1 to partners, it is not unusual for them to offer bonuses. Below are some examples of past transfer bonuses.
- 1.25 Amex to JetBlue
- 1.25 Citi to Avianca LifeMiles
- 1.3 Chase to Virgin Atlantic
Stability and Devaluations
Unfortunately, it’s not unusual for programs to devalue their currencies. Imagine you’ve got 100,000 United Miles you’ve been saving for a trip to Europe. Without notice, United could double the award price of transatlantic routes. All of a sudden you need twice as many miles to book your trip. If those points were held in a transferable currency, this would likely be no big deal because there are 7-10 other airlines you could use to book your trip, potentially while still flying on United. As a result, transferable currencies are considered to be far more stable.
Quick Aside: Devaluations get a bad rap, but we’ve seen points devaluations that were much less extreme than cash price increases. This was especially common post pandemic when the cash cost of flights and hotels went through the roof but the point price didn’t increase nearly as much.
Chase Cards
Recommendations
Booking the Essentials
Things to look for
- Transferrable Points Card
- Everyday Spend*
- A mastercard