Level up your credit card rewards.
Understanding the "points system" for credit card rewards can be confusing. But it doesn't have to be! Here's how Katie and Henah maximize their own points, which cards they personally use, and how they redeem them for travel. For more information, check out our guide on How to Travel for Free with Credit Card Points: https://moneywithkatie.com/travel-credit-cards
Welcome back to #RichGirlRoundup, Money with Katie's weekly segment where Katie and MWK's Executive Producer, Henah, answer your burning money questions.
Watch their full conversations here: https://www.youtube.com/playlist?list=PLHvvquEbj_eVTRet6cw2ZzhDux3lybWS8
New episodes every Friday. Each month, we'll put out a call for questions on her Instagram (@moneywithkatie) and select a few to answer.
Transcripts can be found at podcast.moneywithkatie.com.
Read Money with Katie: https://moneywithkatie.com/
Follow Money with Katie!
Instagram - https://www.instagram.com/moneywithkatie
Twitter - https://twitter.com/moneywithkatie
Katie: Welcome back, Rich Girls and Boys, to the Rich Girl Roundup weekly discussion of The Money with Katie Show. I'm your host, Katie Gatti Tassin. And every Friday my executive producer, Henah, and I are gonna get into a quick little hit, an interesting, relevant topic, discuss it, based on a listener question. So this way you can easily search the questions that you care about and then judge from the title whether or not it's a financial topic that you wanna hear about. So before we dive in, here is a quick message from our sponsors.
Sponsored content: Paid non-client of Betterment. Views may not be representative. See more reviews at the App Store and Google Play Store. Learn more about this relationship at betterment.com/moneywithkatie. Investing involves risk. Performance not guaranteed. This segment is brought to you by Betterment, the online investing platform that gives you the tools, inspiration and guidance to help you and your finances stay on track no matter what's happening in the markets.
Katie: Henah, welcome back. I have a feeling we are going to butt heads today over the AmEx versus Chase debate, but we will try to keep that in line.
Henah: You know my boxing gloves are ready. They're off screen but they're here, so let's get into it.
Katie: Perfect. You know I love to hear that as the host, that you're ready to fight. All right, great. So this week's question is from someone who is also named Katie. Great name, love it.
“What is the best way to divide your spending amongst your credit cards to maximize reward potential? Points are confusing enough, so the prospect of trying to figure out how to put what expenses on what cards to maximize points is daunting, and has me continuing to pay for things on my debit card or out of my checking account.”
Ugh, dagger in my soul. So I guess for the uninitiated, let's give a quick little primer. The credit card points that are being referred to in this question broadly refer to the travel rewards system, where you have these major banks that offer credit card products, where as you spend on the card, you earn points that are then redeemable for travel, whether that be flights or hotels or rental cars or things of that nature.
So this is kind of in contrast to the cash back cards, where rather than having a unit of currency that's redeemable for something specific, you just get cash back. And Henah, I'm gonna go out on a limb here and assume that we prefer that approach, given our lifestyles and our enjoyment of travel. But if you're someone that wants to get started with this and you really don't know anything, we have a little free mini course—it's like a 10-day email drip. It'll send you different resources every day, and kind of give you the lay of the land from start to finish, that we’ll link in the description of this episode. So it's called Travel Rewards 101. You can sign up; it's free. Anyway, Henah, before we dive into the details, any thoughts?
Henah: So I agree that the point system can be really confusing. It's very hard to figure out sometimes, but even having a single card, whether it's a Chase, an AmEx, like a cash back card, they're usually more valuable than just using a debit or checking account. So I would say at least start with a baseline, if that's an option, if your credit and your budget are in a place where you can do that. Each credit card is going to have different hero categories. So things where they're giving the most back. So some cards give four times the points for dining or only two points for gas, or two points for everything and five points for dining, whatever that is. And so when you're building out the strategy of like, how do I maximize my potential, you kind of wanna look at all the cards that you have, or are interested in, and align that with your spending to figure out what is the most optimal combination here.
Katie: I would also add, too, that sometimes people get confused when cards have multiple, overlapping categories. So like you might have two cards that both give you points on travel. Where it becomes very confusing is where one card appears to be more valuable based on the number of points you're being given. But that those points may actually be worth less. So for example, I think we both have the Marriott Bonvoy card. I only keep that card because you get an annual free night, and I believe you might also get bonus points. Okay, see, like the annual fee is $95 but you get a free night worth, I don't know, 35,000, or it might have even gone up now, points per night, which can be a $300 room, depending on what you're booking. So even if I were going to book a Marriott hotel in cash, the Bonvoy card would give me six times points, but those six Bonvoy points are not worth as much as, say, five times points on travel from the AmEx Platinum. So I think that's where people tend to get into like, “Oh my gosh, this is just so confusing. I just wanna give up.”
But to your point, Henah, I think it's worth highlighting that, assuming you are paying off your credit cards in full, you don't have a problem wherein you have credit card debt, you're always gonna be better off putting that spend on at least one card that is earning something, anything, rather than using a debit card. And I would highlight that debit cards also kind of open you up to fraud more expressly.
Henah: You would know. You would know.
Katie: I would know. I had my identity stolen, because my debit card number got lifted off of a magnetic strip that I used it at, and I swore that day forward, I will never use a debit card in public again, because they can access your checking account directly if they get your debit card number, and it is just much harder and a way bigger headache to try to get your money back when they actually access the checking account, as opposed to defrauding a credit card. So anyway, the point is, even a “wrong,” quote unquote “wrong” choice will still net a more positive outcome than using debit or checking, because even points to a program that are not as valuable as something else, still more valuable than paying cash, getting nothing.
Henah: Speaking of wrong choices…
Katie: Oh my god.
Henah: I think we can talk about your wrong take on…no, I'm just kidding. For the uninitiated, Katie is an AmEx girl, AmEx Platinum girl, and I'm a Chase Sapphire Reserve queen. And notice that I said girl and queen.
Katie: I did notice. Thank you for explicitly calling it out.
Henah: So I know that that's not the question, but I do think that it's worth addressing, because we each have those cards and they both are listed as two of the top cards for maximizing potential. So Katie, do you wanna start with maybe your strategy of how you incorrectly use your AmEx?
Katie: Oh my god. It's good to highlight, right? Because I think it gets to the point that the types of cards that are gonna be best for you is just dependent on the type of traveler you are, or if you are not dealing with points at all, the type of spender you are. I personally like to use my points and my travel awards to have very lavish vacations, and try to get the most bang for the buck, like in an insular trip. So like I wanna stay at the Ritz Carlton on points, I wanna fly business class on points, I wanna have these experiences that I would not pay cash for. That way, I can experience different things. Whereas some travelers, like Henah, wrongly prefer to spread their points…I'm just kidding…to spread their points out and to try to get as much travel as possible for the points.
So my particular strategy is, I have, I don't know, seven credit cards, but I only spend regularly on a couple of them, which probably highlights another piece of this, which is, you can get that sign-up bonus and extend your line of credit that's available to you, and keep your credit utilization low by having a bunch of different cards for airlines and hotels that you may not be actually putting ongoing spend on. So I put all my food spending, restaurants and groceries, on my AmEx Gold card. It gets four times points. I put travel and then other expensive purchases that I want to have extra protection around, extra warranty around, on my AmEx Platinum card, because I get five times points on travel, as well as additional insurance and warranty benefits. And then everything else, for the most part, goes on my Chase Sapphire Preferred card, because that earns one point per dollar and I wanna have access to the Ultimate Rewards portal, because it gives me the ability to transfer points to airlines and hotels that AmEx doesn't cover. So it kind of allows me to like patch up any holes in the AmEx strategy. Henah, what is your strategy?
Henah: Well, since you have so many holes in your strategy, I'll start with my foolproof…no, I'm just kidding. Before we get into this, though, that to your point, yes, I've definitely opened up a couple credit cards under Chase to leverage the sign-up bonus, but it is really important to be mindful of that annual fee, because if you're paying seven different annual fees around the same time every year, it's a big dent in the wallet, not speaking from personal experience or anything. 'Cause this month I'll be hit with three of them.
Henah: So it is something to be mindful of. For my personal strategy, I have a mix of the Chase Sapphire Reserve. I share an AmEx Gold with my husband, and we use the United card for lounge access and free baggage, because United hubs are where we live near, so it makes sense for us as quote unquote “loyal travelers” with United.
But for Chase it's a $550 annual fee, which sounds extremely steep, and it can be, but you get $300 back for your travel credit right away. And unlike AmEx, where you have to book a specific flight and then the $200 credit goes towards like seats and food on flight or whatever, Chase considers anything in the travel category as travel credit. So that includes flights, and I really enjoy that. I love their insurance and warranty and kind of like additional coverage that they offer. I know AmEx does the same thing, but mostly I've just found that the Chase Sapphire Reserve points are worth so much to me, and I know that some people wanna spend it all in one place, and that's great for those folks. It's kind of something my husband pokes fun at. I literally always keep a reserve of like 200,000 Chase points, just because you never know.
Katie: Oh my god.
Henah: Yeah, but you never know!
Katie: 200,000 points?
Henah: Which I got mostly on all sign-up bonuses, but I've been replenishing the same stock of points for years.
Katie: Oh my god.
Henah: Like seven years. I've been able to just keep it at that and just travel consistently for free.
Katie: Have you ever churned a card, like closed a Chase card and then reopened the same Chase card four years later to get the sign-up bonus again?
Henah: I have not done that, but I have opened up the Chase Sapphire Reserve and then downgraded my Preferred to a free card. So I was only paying one annual fee, but I still got to leverage the sign-up bonus. We're probably getting too into the weeds here…
Katie: We might be in the weeds. But on that note, though, that is an option. But they do have a limit where you get a Sapphire bonus every 48 months.
Henah: Yeah, they have the 5/24 rule. So if you're interested in…
Katie: Which is different.
Henah: Yes. If you're looking at Chase, hit me up. I'm Henah on Instagram. We can talk. But I will say, Katie, you've gotten amazing redemptions on your end with your points. I know I've been able to travel for free, like on my honeymoon, we went to Kenya for $1,200 flights for free. So I think it's really, really valuable.
The other card I will just mention, if you are someone who's paying rent, whether you pay on a portal or you're paying via check and you wanna maximize that payment, Bilt is the new card that's out there. And so right now I'm renting a home and I get thousands of those points that I wouldn't have normally gotten otherwise. And then you can just transfer them to United or American or like a billion different travel partners. So that's another option if you're in the renting world. But I do think that there are really, really great resources out there. Like The Points Guy, Straight to the Points. Katie, you have Max Miles Points is your friend and he's great. Our travel page on the website is a really great deep dive to start.
Katie: Yeah. I would say, if you wanna do travel rewards without making it your entire personality, just get a Chase Sapphire Preferred card. It's a $95 annual fee. There's usually a pretty good sign-up bonus. Those points are very valuable. You could do that card and then kind of call it a day. So we'll link the Travel Rewards 101 free mini course in the description so you can learn more if you're interested. But thank you for tuning in to another week of Rich Girl Roundup. We will be back next Friday.
Henah: See you guys then!