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Points, Miles, and Cash, Oh My! How To Use Credit Cards

by Charles on January 21, 2013 · 10 comments

Some people are scared to death of credit cards. They cringe when those two words are spoken of as if the cards will come to haunt them in their sleep. Not me though. I love credit cards and I use them as often as possible. If the merchant takes credit cards, then I take out one of my 16 12 credit cards from one of my two wallets and will use it to make my purchase. I use credit cards for almost everything including gas, groceries, bills, shopping and food. Why do I love credit cards so much? I’ll sum it in three simple words: Points, Miles, and Cash.

Not all credit cards are created equal. In terms of usage, they all work the same. It’s a classic “buy now, pay later” scheme. However, the way you collect your benefits may differ drastically. There are basically three major types of credit cards available to everyone.

Airlines
Airline credit cards such as Gold Delta Skymiles credit card by American Express will earn you Delta Skymiles for each dollar you spend using your Gold Delta Skymiles credit card. Same goes for United MileagePlus Explorer credit card by Chase and Southwest Airlines Rapid Rewards credit cards. The more you spend, the more miles you will earn. If you earn enough miles, you can redeem your miles for free round trip on your next vacation. Currently, I have Delta, United, Southwest, Virgin Atlantic, and US Airways credit cards with enough miles for a round trip anywhere in the continental US for each of these airline rewards programs. This is one of the reasons why I love credit cards – free flights!

Hotels
Hotel cards work pretty much exactly the same way as airline credit cards. You earn hotel points for each dollar you spend. Some programs will earn you more points per dollar than others. But that necessarily does not mean that they’re more valuable. For example, American Express Hilton HHonors credit card earns you 3 points for every dollar spent while American Express Starwood Preferred Guest card earns you only 1 point per dollar spent. I value Hilton HHonors points at around 0.50-0.75 cents per point. For instance, last year I used 30,000 Hilton Honors points to redeem for a $150 room in New Jersey, just outside of New York. However, I value Starpoints at around 2.5-3.0 cents per point. You can redeem a category 1 hotel room for as low as 4,000 points. Currently, I own American Express Hilton, Citibank Hilton, American Express Starwood Preferred Guest, and Barclay Club Carlson credit cards with enough hotel points for free multiple nights for my next vacation. This is another reason why I love credit cards – free hotel nights!

Cash Back and Points
One of my very first credit cards I applied for was the Discover card. I’m not exactly sure what they called it back then, but now it’s dubbed as the Discover More card. It gave me 1% cash back on all my purchases and additional 4% cash back on purchases that fell into a certain purchase category as part of the quarterly rotational 5% cash back promotion. I have earned more $1,000 in cash back over the years for simply using my credit card for my every day expenses. The More card is no longer available but Discover is currently promoting their new card dubbed as the Discover it®. Another type of cash back program uses points instead of cash back. It’s essentially the same as cash back, but you use points to redeem for cash or statement credits. Citibank ThankYou and Chase Ultimate Rewards are such programs that use the point system instead of cash back system. Currently, I have over $400 worth of points in my ThankYou account and almost $2,000 worth of points in my Ultimate Rewards account. This is yet another reason why I love credit cards – free money!

How To Sign Up For Credit Cards
If these three reasons are convincing enough to love credit cards as much as I do, then here are a few cards I recommend for each of these categories:

Southwest Airlines Rapid Rewards – Receive 25,000-50,000 Rapid Rewards points. Use www.southwest.com (not an affiliate link) to receive 50,000 (2 roundtrip flights). This offer is valid until August, 2013

United MileagePlus Explorer – Receive 30,000 miles

Gold Delta SkyMiles -  Receive 30,000 miles (affiliate link), after spending $1,000 in 3 months

AAdvantage Visa Signature – Receive 30,000 miles

US Airways Premier World Mastercard – Receive 50,000 miles

Starwood Preferred Guest® Credit Card from American Express – Receive 25,000 points (affiliate link), after spending $5,000 in 6 months

Marriotts Rewards Premier – Receive 50,000 points

Citi Hilton HHonors Visa – Receive 40,000 points (affiliate link)

Chase Freedom Visa – Earn $100 (or 10,000 points)

Chase Sapphire Preferred – Earn $400 (or 40,000 points)

Citi ThankYou Preferred – $150 Cash Back (or 15,000 points)

Barclaycard Arrival World Mastercard – 40,000 points (affiliate link), after spending $1,000 in 3 months

All these cards can be found at Creditcards.com (affiliate link) website. Just click on menu on the left pane to find the card you are interested in. For your information, I receive a small commission if you use the link above. Before you sign up, please read all of the fine print and understand all terms and conditions. Please do your own due diligence before signing up for anything.

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{ 9 comments… read them below or add one }

Nunzio Bruno January 23, 2013 at 12:24 PM

It’s so important to choose a card that works best for you. I can’t tell you how many people I’ve coached that have all these great rewards but incur all kinds of crazy expenses to use them – like forcing yourself to take a trip even though you aren’t really a traveler per-say just to not lose out on the points. You’ve outlined so many awesome points and I hope your readers really take a second to think about what will work best for them. The idea is to use these rewards to maximize the efficiency of our spending right :)

Reply

Charles January 23, 2013 at 1:57 PM

@Nunzio, you’re absolutely right. Credit cards are not for everyone, but it should be. If you’re not comfortable with buying now and paying later, then cash is the way to go.

Reply

Jules@Faithful With a Few January 23, 2013 at 2:41 PM

Wow! I am amazed that you can keep track of all those. Credit cards and me do NOT mix. That’s awesome that you have reaped the rewards!
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Fred January 27, 2013 at 3:49 AM

I agree with Nunzio, however when you do need to start travelling for say business then getting free miles is a godsend!

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STEVEN J. FROMM, ATTORNEY, LL.M. (TAXATION) February 21, 2013 at 9:06 AM

Thanks for the post. As far as the airline cards, I have a USAir card but good luck trying to use if for any meaningful flight. They are impossible to deal with and their rules are impossible. Not really sure it is worth it. Tried to use them for travel international and the flights for envoy were over $5,000 and they would not allow me to use my points. If I booked coach, they currently will not allow an upgrade with points. They said I have to keep calling back to see if and when upgrades become available. Yeh, that is all I have time to do; keep calling back an airline for something that probably will not happen. Very frustrating. Any suggestions or strategies you can offer?

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