As financially savvy as people are these days, it’s amazing how many smart people are using the wrong credit card! (Not to mention that so many people are still using debit cards that don’t earn any points at all.) The biggest mistake I see with beginners is that they “think” they have the best card for their situation, and they are proud of how much free travel they get.
The truth is, they are nowhere close to maximizing their free travel! If this is you, or you’re a total beginner without any rewards cards, I’m here to help.
Here are the different categories of rewards cards and why we like them.
1. Transferrable Cards: All-Star Wildcards
This type of rewards cards is the most recommended for beginners! These cards are actually the most valuable and flexible. They can be redeemed for almost any type of travel AND they have transfer partners that can allow you to send points to the programs you use most.
The rewards for these cards are tied to the bank’s rewards programs. The big names are Chase (Chase Ultimate Rewards), Citi (Citi ThankYou Points), American Express (Amex Membership Rewards), and Capital One Miles (Capital One Miles). One of the best starter cards is the Chase Sapphire Preferred card. Often, these cards offer a great sign-up bonus for an annual fee around ~$100, but sometimes the first year fee is waived. Sign-up bonus values can range from $250 to $750.
Why do we like All-Star cards?
Let’s play Uno for a second to illustrate why we like All-Star cards. Which player has the best hand? And, what’s the most valuable card for any situation?
Obviously… it’s Player 3 because of the Wildcards. The other players can’t even make a play!
This is how a lot of people feel when it comes time to use their rewards. They have a lot of miles for one specific program. When it comes time to redeem them, they may not be able to get the flights they want. This can be really frustrating. This is where the beauty of “Wild” or All-Star cards comes in.
These cards are commonly known as transferable cards. They are the marquee card of each bank with their own bank rewards program. The two wildcards I recommend the most are the Chase Sapphire Preferred (Here’s Why), and the Capital One® Venture® Rewards Credit Card (Here’s Why).
Once you have a transferable “Wild” or All-Star card in your wallet, you’re going to earn a HUGE sign-up bonus right away. Then, you’ll be earning an average of 2-3x more for everyday spending compared to the co-branded cards most people use.
The last point, there are a lot of loyal fans of Southwest, JetBlue, and United out there. Did you know that you can transfer your Chase points to those programs? That’s just one example of how people are missing out on thousands of points with very little effort.
Our favorite is the Chase Sapphire Preferred: 6 Reasons We Love Chase Sapphire Preferred.
2. Co-branded Cards: Airlines and Hotel Cards
These cards are called “co-branded” because there is an airline or hotel that has partnered with a bank to offer a credit card. They are the most common type of rewards card but NOT the best kind of cards. These cards offer specific earnings for that particular loyalty program and often come with benefits (e.g. free night stay or free checked bags) exclusive to the card and company. Two examples are the Chase Southwest Rapid Rewards Priority Credit Card or the American Express Marriott Bonvoy Billiant Card.
Why do we like Co-branded cards? Ease-of-Use and Stand-alone Points
If you always travel on Southwest or love to stay at Marriott Hotels, then it makes sense to get a card with a great bonus and rack up the points with that particular brand. Most brands give you extra points for purchasing their flights or hotel stays when you use their card.
Don’t stop there! Picking one airline card and using it exclusively for the rest of your life will never maximize your free travel. It might be easy, but you’re missing out on thousands of dollars!
For example: Did you know that the All-star, transferrable cards could include your favorite airlines and hotels as transfer partners? This knowledge could end up getting you an extra 100,000 points! Here’s a classic example of someone thinking they only need a Southwest card because they only fly on Southwest: You’ll be shocked at how much free travel you could earn this year.
Last point on co-branded cards: Earned rewards go directly to your loyalty account. Therefore, if you ever cancel or change your co-branded credit card, you don’t have to worry about losing your points.
Note: Airline rewards usually have the best value for free travelers. It makes sense when you realize that you can always get a discounted hotel, but you rarely get discounted airfare. However, hotel cards are starting to offer some amazing bonuses and benefits. So, once you get your card(s) for free airfare, make sure you pick up a hotel card for free stays.
3. Reimbursement for Free Travel Cards
The Capital One Venture card and Barclays Arrival Plus (no longer available) card work differently than the programs with Amex, Chase, and Citi. These miles end up serving as statement credits towards travel purchases you have already made. This can be super helpful if other rewards don’t cover certain travel expenses, or you find cheap flights that are a better value than redeeming points for an award flight. Note, Capital One Miles are also transferable.
Why do we like Statement Credit cards? Ease and diversity of use.
Think of these cards as helping to pay for all kinds of travel: airfare, hotels, Airbnb stays, trains, cruises, tours, or other travel-related expenses. You use the card for your travel expenses, then you “erase” the purchases on your credit card statement, like a rebate, using your miles.
Example 1: Let’s say you go to Europe with free flights using Chase points. You can use Venture Miles or Arrival Miles to get other travel expenses covered. For example, you get 2 train tickets in Europe for $250. You can use your Venture card to purchase them. Then, a month later you can use 25,000 miles to erase the $250 charge. These miles can also work if you find an awesome hotel on Priceline, Hotels.com, or want to stay at an Airbnb.
Example 2: I used my Barclays Arrival Plus card to pay for a 2-day private tour of Machu Picchu. When the credit card statement arrived, I used miles to erase that cost on our statement because the charge was coded as “travel.”
The strength of this type of card is that you don’t have much to figure out. You purchase your travel with the card. You reimburse yourself later with miles.
Some people wait to get a credit card until right before they travel. If they get this type of card, they can go ahead and use the card on the trip for travel purchases that will end up being free. In other words, you don’t have to hit your bonus on the card before you can make rebate-eligible purchases with it. So if you are leaving for Europe in three weeks, consider getting one of these cards so you can get some free travel! These miles come in super handy when you want to do that excursion or tour that would otherwise be outside of your travel budget.
Pro Tip: Points enthusiasts are not as keen on these kinds of cards because their value has a low ceiling, whereas rewards programs with transfer partners can be really valuable. For example, you could get an International Business Class ticket by transferring 70,000 points and booking with United Miles. To use Capital One Miles, you would have to pay retail price for the flight. That ticket may cost you $6,000, meaning 600,000 Capital One Miles!
4. No Annual Fee Credit Cards: Great if you’re starting out or building credit
There are some really good cards that do not have an annual fee. While cards with an annual fee will generally have higher sign-up bonuses, you can still get some good bonuses and good value out of no annual fee cards.
Why do we like No Annual Fee cards? They are essential.
No Annual Fee cards are still great to have for several reasons. If you’re just dipping your toes in credit cards or don’t spend a lot, a no annual fee card can be an easier way to get a bonus. The last reason is that people without credit history need to get a starter card to establish a history of good credit and on-time payments. With a no annual fee, you can keep building up your credit without worrying about any fees.
Remember, it’s always good to keep your oldest credit card. I made this mistake several years ago before I knew any better. I thought I was helping my credit score by getting rid of the card. However, your oldest card has the longest credit history. The banks love to see a long history of good credit. If you cancel your oldest card, you will lose that good history!
Note: Many people absolutely refuse to pay extra fees to a bank. That’s totally understandable. If you’re doing that on principle, it’s important to do the math in order to see if a card with an annual fee would actually bring you more value. For example, if a “no annual fee” card gets you $100 in free travel, you are netting a $100 value. If a $95 annual fee gets you $625 in free travel, you are up to $530! Keep in mind, many annual fee cards have the first year waived, and you always have the option to either cancel or downgrade a card in the future if you don’t want to pay the annual fee in the future.
So, here’s the question. What kind of cards do YOU want in your wallet?
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