CHAPTER 2: Points, Points, Points

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Since 2012, I have accumulated more than 2,501,638 points. This is the story of how I did that, without destroying my financial future in the process.

In late 2011 I spent a weekend at a Marriott hotel. The room was paid for by someone else for two nights, and I wanted to ensure that I was enrolled in Marriott’s loyalty program. But when I did the math, I realized I would earn only a few hundred points for my stay, while redemptions were, at minimum, tens of thousands of points each. That seemed silly. It will take far too long to collect enough points to do anything meaningful!

That’s what led me to the blogosphere of points collection.

One search, led to another, which led to another. A complex web of website after website, each giving me more nuggets of information. I ate it up. I waded back through months and years of prior posts, trying to understand an extensive operation that had allowed so many others to enjoy thousands of dollars worth of free travel by following a few simple rules.

And what I learned immediately was that, short of spending hundreds of thousands of dollars a year, the best way to quickly earn points is through sign-up bonuses for credit cards. Right this moment, there are two credit cards available that will reward their owners with 100,000 points after meeting a minimum spending requirement. There are at least a half-dozen more offering 50,000 points each. And these points are valuable. At minimum, they’re worth a penny a piece, but if used properly, they can be leveraged for as much as ten or fifteen cents each, making a sign up bonus from a credit card worth as much as $15,000!

That’s insane!

Over the last five years, I have applied for dozens upon dozens of credit cards, with the express purpose of spending enough on them to earn their lucrative bonuses and then setting them aside.

But wait!

You may be thinking – that’s crazy! You’re ruining your credit score and your financial security!

You’re right that it is crazy, but the cost in dollars has been almost nothing to me over five years, and my credit score is now over 800. Yes, 800. I have excellent credit. As does Danielle. Everything you’ve been told about not applying for credit cards because doing so would ruin your credit score was wrong.

Yes, every credit card application results in what is called a “hard inquiry” on your credit report, and each hard inquiry lowers your score by a few points. But that ding on your score rebounds only a few months later, and the negative effect on your credit score can quickly be made up for in the positive impact that more credit and a longer credit history will ultimately have for you.

I have ground rules: I apply for credit cards 3-4 times a year, max, applying for no more than a few at once, spreading the applications among various banks and products (I even get Danielle in on the game too, effectively doubling our potential reward); I put all my spending on credit cards, but I never spend a dime that I don’t have – every credit card is always paid off at the end of the month (don’t read any further if that’s not something you can do; paying interest fees in the pursuit of free travel is a losing proposition); I close most cards before any annual fee is due; I keep very close tabs on my credit score and credit report using Credit Karma.

I keep track of all my points with a website called Award Wallet. Award Wallet shows me up-to-date balances on all my accounts, allowing me to strategize over where to prioritize my efforts, depending on what types of rewards I hope to redeem.

It’s important to remember that every point is not created equal. Points come in many forms: there are points that are worth money; there are points that are worth miles; there even crazy are wild points that can transfer from one program to another.

Let’s take a look at the options:

Fixed-Value Points

Many credit cards offer “cash back”, giving you one (or two or three) points per dollar spent, worth one cent a piece. It’s a fairly simple scheme rewarding you a few percentage points back on your spending. There is nothing aspirational to do here, but sometimes credit cards can offer significant value in fixed-value points through sign-up bonuses. (For example, the Barclaycard Arrival Plus offers 50,000 points worth $525 upon completing minimum spend).

Similarly, some airline miles are worth a fixed value. Southwest, Virgin, JetBlue, even Delta more and more fit into this category. There’s good value to be had in terms of free travel, but nothing aspirational. I tend to avoid these, mostly.

Miles

You can earn airline and hotel miles by utilizing the actual programs (eg. fly on an airplane or stay at a hotel) as well as large sign-up bonuses for credit cards. Miles are particularly lucrative because redemption prices are not pegged to a dollar value (though the trajectory is that more and more programs are moving in that direction, unfortunately), which means that a mile can be spent at a cash value of anywhere from $.01 to even $.15 a piece.

Think about that for a second. Many credit cards will reward you as many as two or three points for certain transactions. Some cards even offer up to five points on certain expenses. If you can redeem a point for the equivalent of $.15 in value, and you earned three points per dollar spent on a transaction, you are, in effect, leveraging points to the equivalent of a 45% rebate on spending that you had to do anyway. If you can use 100,000 points from the sign up bonus of a credit card for a round-trip business class ticket to Europe, you’ve received as much as $5,000 in value just from signing up for a credit card! And that’s not even as aspirational as it gets!

If you use your miles right, you start to see very quickly just how insane the whole system is. There is ludicrous value to be had, if only you focus on earning the right miles and spending them in the best ways possible.

Transferable Points

Lastly, the king of points are those points that can be transferred to other programs. These points are the most useful because they are the most versatile. The most important players to know of are Chase Ultimate Rewards, American Express Membership Rewards and Citi ThankYou Points.

Each of these programs’ points can be earned by a handful of different credit cards, and each program allows you to transfer their points to other Airline and Hotel programs. Chase Ultimate Rewards points can be transferred to United Airlines, to Hyatt, to Marriott, to Singapore Airlines even! American Express points can go to a handful of other travel partners, and same with Citi ThankYou Points. Having a store of hundreds of thousands of points in programs like these means I’m never locked in to a restricted group of redemption options.

There’s one more program to mention on this front: Starwood Preferred Guest. SPG Points are the currency earned at all SPG hotels (Sheraton, W, St. Regis, etc.). They can also be earned by using the American Express Starwood Preferred Guest Credit Card. SPG points can be transferred 1:1.25 to almost every airline out there, making SPG extremely valuable.

That’s the lay of the land.

Since 2012 I have maximized credit card sign up bonuses, been deliberate in which credit cards I use for the majority of my every day spending and maximized the business expenses I’ve been able to carry on my personal credit cards (for three years, I was able to run the majority of my organization’s $100,000 operating budget through a personal business credit card) in order to earn more than 2,501,638 points.

2.5 MILLION!

Those points have been extremely extremely useful. But before I start to describe some of the most aspirational experiences these points have enabled, I need to tell you a little bit about some of the other valuable perks I’ve been able to maximize along the way.

Next up on #PointedOut, the side perks, how I get free breakfast, free suites, and lots and lots of free travel.