Beginners Guide to Credit Card Points: Why it’s Worth it and How to Start
A little bit of guidance goes a long way when it comes to both quantity and ease of points earned. In this article I’ll discuss why you should start earning points, and describe an excellent way to get started.
WHY YOU SHOULD START EARNING POINTS
This blog focuses on free and heavily discounted travel. However, credit card points can also be used for significant amounts of cashback. Over time, this will add thousands to your bank account with little effort from you.
UNLOCK LUXURY DESTINATIONS AND FREE TRAVEL
It doesn’t take a lot of points to start redeeming free flights and hotel rooms. Within a few months you can easily have enough points for two round trip domestic flights and several nights at a nice hotel.
A stash of points also makes aspirational travel realistic and affordable. Cash prices for luxury destinations like the Maldives and Bora Bora are often $10,000+. With points, the cash price goes down to $1,000-$2,000.
Another example is my recent business class flight from Los Angeles to New Zealand. This flight only cost 75,000 points and $94. You can earn 75,000 points with just one welcome offer. The cash price for the same seat that I flew in was an unbelievable $7,400.
EARN CASHBACK
While you will earn several hundred in cashback upfront from welcome offers, the idea with a cashback approach isn’t to quickly make thousands of dollars. Instead, the idea is that a small amount of work now (figuring out which cards are right for you and then applying for them), will earn you thousands over time.
BOOST YOUR CREDIT SCORE
A remarkable side effect of building a stash of credit card points is the impact it has on your credit score. In the short term, the hard pulls from applying for new cards will negatively impact your score. However, in the medium to long term, applying for new cards and using them responsibly will significantly boost your score.
The most important factor in calculating your credit score is your credit utilization rate. Simply put, this is how much credit you use compared to how much credit you have. Getting new cards increases the total credit available to you which quickly improves your utilization rate.
SAVE BIG ON LARGE PURCHASES
The biggest benefit of boosting your credit score is getting lower interest rates on loans for big purchases. If you have plans to buy a home or car, having a better credit score can save you thousands. If you already have a big ticket loan, a great score will put you in a better position to save big on better refinancing rates.
EXCELLENT STARTER CARDS
In my opinion, the best two cards to start with are the Chase Freedom Flex (CFF), and Chase Freedom Unlimited (CFU). These cards are complementary to each other, which we will explore later in the “Perks” section.
Neither are premium cards, which means they have no annual fees and they are easy to get approved for. They are both issued by Chase, which is a reputable company with a great app that makes managing your account simple.
WELCOME OFFERS
Both the CFF and CFU currently have $200 welcome offers. To get these $200 bonuses, all you need to do is spend $500 in the first 3 months of having the account.
For the sake of clarity, this offer is available for both cards. Most people will naturally spend more than $1,000 in 3 months, so applying for these cards and then using them earns you a quick $400.
THE PERKS
The welcome offer is only the beginning. Both of these cards are designed to provide significant value over time.
FREEDOM FLEX
The CFF’s primary draw is the 5x rotating calendar. Every quarter, Chase picks a few categories in which, for every dollar spent, you earn 5 points instead of the usual 1 point. Common categories include grocery stores, amazon, streaming services, and gas stations.
There is a limit for earning increased points in these categories of $1500 per quarter. If you meet that limit, you will have earned 7,500 points and will then earn 1 point per dollar until the next quarter.
It is important to know that you need to activate this offer each quarter. All you have to do is tap the offer in the app, or click “Activate” on the reminder email that Chase sends you.
FREEDOM UNLIMITED
The CFU’s primary draw is the 1.5 points per dollar spent on anything. Unlike the CFF, there is no limit, and no activation is required.
Additionally, this card earns 5x points on travel booked through the Chase travel portal, 3x points on drugstore purchases, and 3x points on dining.
HOW THESE CARDS WORK TOGETHER
The idea is that you use the CFF whenever your spend falls into one of the 5x categories, and the CFU for all other purchases. This is a simple and easy to manage strategy to maximize the number of points you earn.
FOR THOSE WHO LOVE TRAVEL: ONE MORE OPTION
These two cards are a powerful duo on their own, but for those with lots of travel plans, there is one more option to consider.
Adding the Chase Sapphire Preferred (CSP) or Chase Sapphire Reserve (CSR) multiplies the amount of free travel you can redeem. The combination of these three cards is called the “Chase Trifecta”.
The Trifecta has been written about extensively online, so I’ll keep things brief. With this setup, you primarily use the CFF and CFU to earn points, and then you transfer those points to the CSP or CSR. This allows you to take advantage of the 25-50% travel redemption bonus offered by the Sapphire cards.
FINAL THOUGHTS
Whether you’re interested in travel or cashback, a little bit of credit card planning now will pay off big in the long run. In the time saved by skipping that Sunday movie you plan to watch, you set yourself up for thousands of dollars or free vacations.
If you’re unsure which cards are best for you and would like our opinion, join our discord server and ask away!
