Credit Card Points 101

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WTF are credit card points anyway?  Aren’t they worthless and unless you spend crazy amounts a la  Lindsey Lohan style you will never get enough to do anything with anyway?  No!!!  Truth is you can buy a pack of gum and get enough points for two people to fly from LA to NYC round trip.  True story.

Credit card points can be a bit confusing or intimidating at first mainly because they can vary so much from credit card to credit card.  Some credit cards don’t even have them at all, but many (or even most) popular credit cards these days do have a points feature available.  A typical earning pattern for credit card reward points is one point earned per one dollar charged on the card.  In this scenario, say you  start your day by  going to Baby Gap and charge a new outfit for your kiddo for a grand total of $37.50, you will earn 37 points on your credit card.  You then go to the grocery store and spend $145.00 on groceries for the week, you have now earned an additional 145 points.  A tank of gas for your car runs you a shocking $75.00 (Cue heart attack!), 75 more points,  and to round out your morning errands a Chick-fil-a kid’s meal sets you back $4.00, 4 more points.  You get the idea.

After you have accumulated enough points, you redeem those points for airline miles, hotel points, discount travel certificates, even gift cards to various merchants such as Home Depot, Saks 5th Avenue, and Old Navy.  Again there is wide variation, but as a point of reference, a typical domestic round trip airline reward goes for 25,000 points or airline miles.  In our scenario above this busy mommy earned 261 points for her morning errands.  Before you whip out the calculator and decide that at that rate it would take half of forever (or roughly 96 days at that daily spend rate) to rack up enough points for a free flight you should also know that with almost any good credit card point program there is the opportunity for bonus points.

You can often shop through your credit card rewards program’s online shopping portal to really increase your rate of earning points.  A shopping portal basically just means you use their link to get to the online shopping website of your choice.  So, instead of spending precious time in your day (and precious over-priced gas in your car) driving to Baby Gap to spend $37.50, you can place that order online through your credit card rewards shopping portal and get say 3 times bonus points for doing so.  Bonus points vary, but that is the rate that my Chase Rewards Mastercard is currently giving for Baby Gap.  So, now instead of just earning 261 points for that day’s errands you have 336 by tripling points you earned at Baby Gap to 112.  Now you have reduced the days to get to a free airline ticket, at that daily spending pattern, from 96 down to 74 just by using a specialized link to make one purchase that you were going to make anyway.  This was a relatively small purchase, but when you do it for something large, like perhaps ordering materials online from Lowe’s or Home Depot (and utilizing free in-store pick-up) to build a new deck or fence for $2,000 – a 4 times points bonus (again the current offered on several of my cards for these stores) – you now have gone from earning 2,000 points for that purchase to 8,000.

Online shopping at retailers such as Baby Gap or Home Depot and Lowe’s also enables you to make great use of online coupon codes that you can get emailed to you directly from the retailer or you can search websites such as www.retailmenot.com so not only are you earning points, but you are often saving money in the process!

If those numbers still sound just like a bunch of gobbledygook to you and you would rather just buy a pack of gum and consequently fly across the country with your partner of choice for free, then here is another credit card “trick” that makes doing so super-simple.  That “trick” is drumroll…………………. credit card sign-up point bonuses!  Yeah, not really a “trick”, but super valuable in the points world.  Here’s the true story part, I recently encouraged/forced my mom to sign up for the Continental Onepass Plus Mastercard.  They run different sign-up bonuses at different times, but at that time the sign-up bonus was 50,000 Onepass (Continental Airlines frequent flier program) miles.  The card also came with no annual fee for the first year and the only thing you had to do to get the 50,000 miles deposited directly into your Onepass frequent flier account was make one purchase on the card.  So, you buy a pack of gum, get your 50,000 free points, and away you go.  Remember from above that 25,000 is typically your target in points or miles for a free domestic roundtrip airline ticket.  So, she and my dad on their fixed retirement income can now scratch another U.S. destination off their bucket list without spending a dime on airfare.  Though like with everything in this points crazy world that can vary, bonuses can make it less miles, flying to a nearby location can make it less miles, traveling on peak travel days can make it more points, etc…….. However, since this is just Credit Card Points 101 we will stick with the basic 25,000.

After you receive your credit card sign-up miles or points bonus you can choose to continue using the card or cancel it before your first year is up and the annual fee would be applied…….as is the case for my mom’s new card.  Obviously you have to have decent credit to sign up for new cards and get bonuses.  It’s obviously also not worth it if you know you will be tempted to rack up some more debt on 5,784,375,834  cute outfits at Baby Gap, but if you can trust yourself to use it responsibly then it is an easy sure fire way to criss-cross the country for free, (okay, for the price of gum).  You may be worried that applying for and opening new accounts will hurt your credit score.  I’m not a credit score expert, but from what I do know it may drop your score for a few months by a couple of points.  This drop is temporary and is not significant at all.  If you are about to try and finance something major, like a house, I would wait to play the sign up bonus game until after that is done.  Otherwise the effect on your credit report from doing this a few times a year should be negligible.

 

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