When I first started learning the ins and outs of the points game, I had to read a lot of articles and learn from my mistakes. While this approach was not ideal, I eventually figured out what worked and what didn’t. However, I wish there had been an easier and faster way to become proficient.
One of the most effective ways that I’ve learned to teach someone a skill is to simply give them a framework to follow and a set of “rules” to keep them from going off course. In my last email I sent my Complete Guide To Point Travel Booking which is the framework I created and today I’m giving you the 5 rules that I follow to avoid costly mistakes when earning or spending points on travel.
So, without further ado, here are those rules:
Rule #1 – Always pay off your credit cards in full each month.
While this is strong financial advice in general, it can be easy to overlook when you’re knee deep in the points game. Accruing points can be a lot of fun but you don’t want to get caught up buying things you can’t afford at the moment just to increase your point balance.
If you don’t pay your credit card balance off each month, you’ll have to pay interest. That’s a big no-no because paying interest will negate any value you have earned through gaining points. If you’re going to make the most of the points game, then this is a non-negotiable.
Rule #2 – Never pay cash when you can use a credit card for the same price.
If you’re making purchases with cash, check, or debit card then you’re not earning any points. And if you aren’t earning any points, then you’ll struggle to make any redemptions for flights or hotels.
You’ve worked hard to build good credit and be responsible with your money, so you deserve to be rewarded for it. That’s how I look at earning and traveling for free on points. To capitalize you’ll want to make every possible transaction via your credit card that will earn the most points. That way you’ll have a better chance of having enough points to make your next trip happen.
Not every transaction will be fee-free, though. Some bills like mortgages or tax bills will attempt to charge you a 3 percent transaction fee for using a credit card and this is the only time you shouldn’t use a card.
Rule #3 – Never redeem your points for cash back.
There’s a reason that redeeming your credit card points for cash is the simplest and easiest way to use them – because it’s the WORST way.
As I mentioned in my Complete Guide To Booking Point Travel, credit card companies make this so easy because they want you to do this; it costs them much less money. However, you’re smarter than that and are willing to put in a little effort to get WAY more benefit, right?
You worked so hard for those points and you’re not going to cash in your points at 1 cent each. Instead, you’ll want to transfer your points to travel partners that will earn you at least double that value, but likely much more.
Rule #4 – It almost never makes sense to buy points.
Airlines and hotel chains have started selling points because they know that many people will pay the incredulous prices and end up using their points on poor redemptions. As a matter of fact, these “point sales” have become quite the cash cow for airlines.
If you’re a beginner, then you should pass on these sales without hesitation. The heavily inflated prices only make sense if you need a small number of miles to complete a booking. Advanced point travelers may be able to find value in the occasional sale, but it is often a speculative investment that could come back to bite you.
Rule #5 – Don’t stockpile points haphazardly or let them expire.
It’s important to always keep an eye on how many points you have and be constantly planning how to use them in the future. The truth is that points are not a good long-term investment. That’s because they are subject to devaluation at any time and some even have expiration dates.
Credit card points are relatively stable in value, but airline miles or hotel points are subject to the constant devaluation from their respective company. That means that an airline can charge as many points as they want for a flight or increase its prices at any time. Changes happen consistently over time and they are almost never good for point enthusiasts. Not to mention, if you don’t use your points by a certain amount of time or have any activity with that travel program, your points could expire.
For these reasons, its never a good idea to stockpile points without a possible use for them in the relatively near future (3-12 months). You should aim to achieve a earn/spend balance that has you earning just enough for your next trip and be able to consistently repeat that over time.
