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The Ultimate Guide to Mastering Credit Card Rewards Programs (or) Why It Could be Worth Paying $450 a Year for a Credit Card

Would you pay $450 a year for the privilege of having a credit card? It seems a bit counterproductive—you’re spending money for the privilege of spending more money. But when the Chase Sapphire Reserve card, with its whopping $450 annual fee, was released this summer, so many people applied that Chase ran out of the metallic credit cards and had to issue temporary plastic versions.

While most of the world is wondering who would pay that much for a credit card, reward card junkies know the truth—the perks of these high level reward cards outweigh any of the monetary negatives, offering free flights, hotels, and even money back in their pockets.

We had a chance to chat with Brian Karimzad, the director of MileCards.com, which is a travel rewards site that compares the benefits and rewards of every credit card offering currently available. He talked about the misconceptions of churning, his favorite travel tips, and how to know if you’re ready to start reaping the benefits of a rewards card.

Stash Wealth:  What are your thoughts on churning? Have you done it? Any tips/tricks for someone starting out?

Brian Karimzad:  Churning is bit of a misnomer. Real churning is applying for the same card over and over again to get an introductory bonus. That’s not something I recommend (and usually isn’t even possible). I prefer to talk about maximizing your reward opportunities.

Once you’re at a point where your credit score is good, and your budget can comfortably handle spending (and paying off!) $1,000 or so a month on a credit card, you’re in a great position to leverage your responsible behavior for big rewards.

The best way to get started is to get a big introductory offer. Think of it this way:

If you find a card that gives you 50,000 points for spending $4,000 in 3 months, that’s like earning over 12 points per dollar you spend. Much better than the 1 or 2 points per dollar you’d earn outside a bonus period.

If you do a couple of those over the course of a year, trying out cards to see how they fit in your lifestyle, they can add up really fast. So a great strategy to start is to sign up for a couple of cards with big intro deals over the course of a year. You can rack up 100,000 or more points very quickly.

If meeting a minimum spending requirement is daunting, you’re probably not ready. Yes there are ways to stretch like buying some gift cards for things you plan to buy later to get you over the finish line, but if you’re stretching like that as a beginner that’s a sign to wait until your budget can handle the minimum spending without shifting things around.

Of course if you have a big event like a wedding, that’s a great time to focus on intro bonuses when you have the opportunity to pay vendors with a credit card.

SW:  What's better?  Points or cash back?

BK:  If you are someone who can afford the time and expense of travel, and use points for big international trips, then travel points and miles are the bigger upfront deal.

For example, 60,000 United miles can get you a roundtrip to Europe that will often cost you $1,600 in cash. That’s over 2.5 cents per mile in value. Compound that with bonus categories like 2x for dining on many cards, you’re probably averaging 3 cents or more in value per dollar you spend on your card. Compare that to 2 cents at best for a good cash back card like the Citi Double Cash. 

And of course, when you’re spending time on an intro offer, those returns are in the 10 cent plus range per dollar spent. 

But not all points are created equal. The best points are transferable points currencies like Chase Ultimate Rewards or Amex Membership Rewards. They let you either use your points like cash to book flights without award restrictions, or unlock the power of airline miles by letting you transfer them to many airline mile programs. Chase points let you transfer to United MileagePlus, Southwest Rapid Rewards, and more. So instead of being stuck with just one kind of miles, you have over 10 kinds of miles and points to choose from any time.

We wrote an in depth guide here to Chase Ultimate Rewards that helps you understand all the opportunities at your disposal.

SW: We read ALL your Conde Nast Traveler articles, and we loved all your airline hacks.  What would be your favorite hack you've ever pulled off? What is an easy hack anyone could attempt the next time they travel?

BK: Well, a hack implies breaking into a system, which I wouldn’t advise. But one of my favorite tips is to keep an eye open for airline schedule changes.

Airlines are constantly moving flight times around, generally about 2 or 3 months before departure. If you buy a ticket ahead of time, and the airline later decides to change the flight time, you could be eligible to change your flight for free. For example, for this Thanksgiving I booked an award ticket to California with a layover in Minneapolis because that was all that was available. I just got a notice that the airline changed the schedule, which will get me to California over an hour later than originally booked.

Airlines will generally let you change your flight for free if the schedule is off by more than an hour. So I called and got moved to a nonstop flight for free, saving 3 hours in travel time, and getting me a seat that would cost over $1,000 in cash. 

Usually you’ll get an email notifying you that there was a change. Most people ignore it, because those emails don’t always tell you your options and rights. 

Another trick is taking advantage of stopovers on tickets. These let you extend a layover for days at a time, letting you see two cities at once. The best way to find them is experiment. If a good fare or mileage ticket has you transiting a city you’re interested in seeing, try forcing an extended stay there when you search by using the ‘multi city’ search on your favorite travel website. Here’s a list of all our favorite stopover tips.

SW:  I feel like some of these point/travel tips come so easy to the people who write about it, but executing in real life seems a lot more difficult.  What would be your tips to someone who wants to start, but isn't sure how.  (For instance, I've been hoarding points for a while to spend on one amazing trip, but I'm not sure how to really make sure I'm redeeming them in the best way.)

BK:  Don’t get caught up on a ‘best’ redemption. A good redemption is one that is to a place you want to visit and that saves you cash.

And keep your expectations in check. Don’t expect business class award tickets to Australia if you can’t be flexible with dates by a few months. Better to plan your honeymoon date around when there is availability for mileage award seats rather than trying to shoe horn the awards into a window of a few days.

Miles and points reward being creative and flexible with your plans to take you to places you didn’t dream were possible.

If all your travel is around specific wedding dates and holidays you’ll be disappointed. 

SW:  What's your favorite card for cash back?  For travel?  For points? 

BK:  For straight up cash back, the Citi Double Cash is an easy, rewarding choice with no annual fee and double cash on everything.

For points the most exciting deal right now is the Chase Sapphire Reserve, with 100,000 points to start and a great flexible currency that lets you turn points into United miles, Southwest points and more. There’s a $450 annual fee to think about, but they throw in a $300 travel credit that makes it a lot more palatable. It’s a great card if you’re at the intermediate level. You can check out our review of the card here.

If you’re just getting started, the Chase Sapphire Preferred with a lower annual fee is a great starter card. It’s the Swiss Army knife of rewards cards with transferable Chase Ultimate Rewards points and 50,000 points to start. If you decide travel rewards aren’t your thing, you can always redeem them for cash back. 

If you don’t want to deal with annual fees at all, the Amex Everyday gets you in the transferable points game with no annual fee. The tradeoff is it doesn’t come with an exciting introductory offer. Read more of our thoughts about this card here.

But a great way to shop and narrow your choices is to use a calculator that shows you how many points you can earn based on your budget. This calculator at MileCards.com does just that, factoring the intro offer and spending category bonuses to let you see which cards are most rewarding.

SW:  How do you figure out how to balance out which cards you get?  For instance, I have the Chase Sapphire Preferred Card.... but now I'm reading that you should get the Marriott card too because the intro bonus is so good.  Once you hit those initial "intro bonus spend levels", how do you spread out purchases?  Is there a magical number for each?  And how do those people over on Reddit keep so many cards going at once?

BK:  Let your lifestyle dictate. There are always new cards and products coming along, and banks want you to try them out. Two or three a year is a reasonable pace if your budget easily fits the minimum spending requirements. You’ll probably find some of them are well worth keeping in your wallet long term. 

Think of it two ways:

Cards you keep for ongoing spending - these cards have good category or base spending bonuses, like the Citi Double Cash with double points on everything, or Chase Sapphire Reserve with 3x points on travel and dining

Cards you keep for perks - for example the IHG Rewards credit card gives you a free night at any IHG hotel (Intercontinental, Crowne Plaza, etc) every year for only a $49 annual fee. It’s not hard to save over $200 on a hotel night with this perk. Read our review here.

Or, the Platinum Card from American Express which gets you access to luxe Centurion Lounges and Delta Sky Clubs when you fly, plus Starwood and Hilton Gold status for room upgrades at hotels.

SW:  Besides MileCards, what are the best reward card resources and blogs to follow? 

BK:  BoardingArea.com will keep you up to date on all the travel news.  TheFlightDeal.com will keep you up to speed on great airfare deals.