Categories: Credit Cards

Credit Card Rewards Programs

Posted on Mar 9, 2016 by JakeA
Updated on Sep 1, 2016

You can make the topic of credit card rewards as simple or as complicated as you want it to be. The basic premise is that the rewards given out by credit card companies can help you offset your travel costs or even get you travel perks you normally wouldn't want to pay for. In fact, I started doing all of the research on credit card rewards programs because I absolutely hate the flying experience as it is now and I either kept my flights as short as possible or avoided it altogether. Since my wife loves to travel to Europe and Japan however, I wanted to at least make the flying experience bearable by making it as comfortable as possible. So it's not like I actually hate traveling, I just hate flying but love my wife enough to go through with it (hence the name!). That meant at least lie-flat seats which is only in business class. Since I have an abundance of personal and business expenditures, I figured to at least make it work for me and get the better seats with miles and points. Even if money was no object for you or you don't travel at all, not using a rewards card for many of your every day purchases is just leaving money on the table as I'll explain in this post.

But before all of that, I'm going to give the warning that I feel many of these types of posts you find on the Internet lack. The credit card rewards game is not for people who are unable to manage their finances. If you carry a balance on any of your cards (paying credit card interest is a sin) or tend to miss payments, you should turn away now. Maximizing credit card rewards requires keeping on top of your expenses, not letting the rewards lead to unnecessary spending, and a little bit of math. Someone without good financial habits will more than likely be on the losing end of this game. On the other hand, that's how banks can continue offering these incentives because there are far more people who lose out on these deals than those that win.

This site is going to focus on the fundamentals. I'm not going to get into churning (cycling through credit cards to get the sign up bonus), manufactured spending to meet minimum spends, or anything the average person wouldn't normally do. I keep the cards that fit my natural spending and have the rewards that I want to redeem. If you want to go deeper into this subject after going through this post, visit the /r/churning subreddit and jump into that rabbit hole.

For people who don't want to think about miles or spending categories

If you just don't want to think about this at all yet you also don't want to leave money on the table, I recommend the Citi Double Cash Credit Card (none of the links on this page are affiliate links by the way). It's a 2% cash back card with no annual fee (1% back on purchases and another 1% when you pay your balance) which effectively gives you a 2% discount on every purchase you make. Many people recommend the Capital One Venture Card for everyday spending because you get 2x miles per $1 spent on anything and you get to redeem it for travel as a statement credit at $0.01 per point but this effectively makes it a 2% cash back card but only redeemable for travel. With redemptions limited to the last three statements and a $59 annual fee, the Citi Double Cash beats it handily. The one drawback I can think of with the Citi Double Cash Card against the Venture Card is that the Double Cash charges a 3% foreign transaction fee which makes it a terrible travel card to use overseas. If you want to stop reading here and simply use the Citi Double Cash card on all of your U.S. spending, this card is pretty solid.

Citi Double Cash alternative for Bank of America / Merril Lynch customers

An interesting alternative to the Citi Double Cash is the no-fee BankAmericard Travel Rewards credit card. It's not a cash back card and its points are only redeemable for airline and hotel purchases as a statement credit valued at $0.01 per point. Not to mention the base card only earns 1.5 points per dollar which sounds like it's worse than the Citi Double Cash with its 2%. So why would I recommend this? If you happen to be a Platinum or Platinum Honors member of the Bank of America Preferred Rewards program you get an additional 50% or 75% bonus on those 1.5 points increasing your point earn to 2.25 and 2.625 points per $1, respectively. That works out to a 2.25% (Platinum) or a 2.625% (Platinum Honors) discount on your hotel and airline purchases. If you spend your cash back on travel purchases, this makes it a more rewarding card than the Citi Double Cash. It's even more valuable than the Citi Double Cash if you need to use it overseas since the BankAmericard Travel Rewards card does not charge foreign transaction fees.

One disadvantage with this card compared to the Citi Double Cash is that you have to redeem those points for travel for that rate as opposed to getting cash back. Another caveat is that Platinum and Platinum Honors membership requires a combined balance of $50K+ and $100K+, respectively, in bank and investment accounts. I'd normally scoff at the idea of leaving large amounts of cash in a low interest earning bank account but the Merril Lynch option makes this worthwhile since many people already have over $100K in their investment accounts. If that's you, definitely take a look at this card.

More cash back on groceries, gas stations, and department stores

If you want to maximize your cash back to over 2% in certain categories, I recommend adding the American Express Blue Cash Preferred Card to your wallet as it gives you 6% cash back at U.S. supermarkets up to the first $6000 per year and 3% cash back at gas stations and U.S. departments stores like Macy's, Sears, and Nordstrom. The annual fee is $75 but the Blue Cash Preferred is worth it if you spend over $1250 (6% x $1250 = $75 annual fee) a year in groceries at supermarkets. Add the 3% discount on gas and department stores, and it's a pretty nice card if you spend a lot on these categories.

Miles and points

This is where it gets interesting. Oftentimes with point cards, you earn maybe 2 points per $1. If you redeem each point at $0.01 then that's no better than a 2% cashback card so why do it? Truth is, points and miles valuations can be fluid. For instance, booking a category 7 hotel at Hyatt is always going to cost 30,000 points whether or not the room for that date costs $800 or $1000 giving you anywhere between $0.027 to $0.033 per point. For airlines, I've seen one redemption go as high as $0.19 per point! If you travel often, especially if you favor certain airlines and hotels over others, points and miles can potentially be much more valuable to you than a straight cash back card.

When it comes to credit card rewards programs, the big four are Chase Ultimate Rewards, American Express Membership Rewards, Starwood Preferred Guest (SPG), and Citi ThankYou. If you do plan to dip your toe into more than one program, I would suggest starting with Chase due to their 5/24 rule in that Chase will disallow you from applying for their cards if you've signed up for five or more cards in the last 24 months. This will be a really long post if I write this all here so I'll be writing about each of these programs separately under the following links below (no link means I haven't written it yet!).

Chase Ultimate Rewards
American Express Membership Rewards
Starwood Preferred Guest (SPG)
Citi ThankYou

The cards I own and plan to keep

I currently own the Chase Sapphire Reserve, Chase Ink Bold (discontinued but you can get the Ink Plus), Chase Freedom, Chase Freedom Unlimited, Chase Hyatt, Starwood Preferred Guest (Amex SPG), Amex Blue Cash Preferred, and the JetBlue Business card. I use the Chase Sapphire Reserve, Chase Ink Bold, Chase Hyatt, Amex SPG, and the JetBlue Business card for business expenses relating to travel, dining, office supply, and telecom purchases. The Chase Freedom is used for 5x points on rotating quarterly categories while the the Chase Freedom Unlimited is used for personal spending on non-bonus categories. Lastly, the Amex Blue Cash Preferred is used for groceries.

This is how my spending profile looks like:

Business

  • Chase Sapphire Reserve: Dining and travel expenses (3x bonus)
  • Chase Ink Bold: Telecom and office supply purchases (5x bonus)
  • Chase Hyatt: Hyatt stays (3x bonus) and annual free night at category 1-4 hotels
  • Starwood Preferred Guest: Hotel expenses on SPG properties (2x bonus) and non-bonus business spend (1 point per dollar)
  • JetBlue Plus: Business air travel on JetBlue (6x bonus on JetBlue purchases)

Personal

  • Chase Freedom Unlimited: Spending on non-bonus categories (1.5x bonus)
  • Chase Freedom: Spending on rotating quarterly categories (5x bonus)
  • Amex Blue Cash Preferred: Groceries (6% cash back)

Value is relative

It goes without saying that you shouldn't get the JetBlue card if you don't ride on JetBlue (I personally think JetBlue's Mint class cabin is one of the more comfortable first class domestic offerings in the United States).

I value Chase points highly because of its ability to transfer to Hyatt and to Korean Air where I can get good point redemptions for first class seats from New York or California to Seoul then to Osaka (a trip I take often). Since I have the Chase Sapphire Reserve, I can earn 3x points on dining and travel but without the Reserve, it might make sense to make use of Citi's Prestige card which has a 3x bonus on air travel and hotels which you can then transfer to partner airlines like Singapore Air, a common transfer partner with Chase.

The SPG program not only gives an extra 5,000 bonus points for each 20,000 point transfer out to partners, but it also has the most transfer partners out of any other program (as of this writing) which makes their points very valuable. However, since they don't have bonus categories other than spending on SPG properties, I placed all of my non-bonus business spend on that card. If you value SPG's transfer partners over Chase's, then it may make sense to place your non-bonus spending on this card instead of on the Freedom Unlimited (assuming you don't have to keep a strict separation of business and personal expenses like me).

I find that this combination of cards works for me in the meantime but I'll certainly make updates to this page as terms and values change and I find a more optimal mix.