This is the last post in a series on credit cards.
One of the biggest points of disagreement with plastic revolves around credit card rewards. Some claim they are useless junk, and others say they are plastic gold.
Today, we’ll uncover the truth (from my experiences) …
Air Miles Credit Card Rewards = Junk
I spent a good part of my first 2-3 years of marriage trying to accumulate airline rewards points. I specifically focused on getting NWA World Perks points. We ‘cycled’ everything through the plastic. By using credit cards and other strategies, I was able to accumulate a pretty decent amount of points with Northwest – without ever flying.
The biggest problem with airline miles and points is that they are only valuable in theory. Almost every time I’ve tried to redeem airline points, the flights I want are not available with the points I have. While I accumulated enough points to fly round trip to Europe (four times), I have not yet used any of those miles (six years later).
The problem with airline miles credit cards is twofold.
- Availability. Unless you want to book 364 days and 6 hours in advance, you will probably find that the seats are all sold out.
- Award seats are inflexible. I could use them to fly if I left before 4 a.m. on a Wednesday and returned between 11:45p and 11:55p on a Sunday.
On my travel blog, I shared some recent frustrations trying to book travel with my points.
Honesty, at this point today, I think each and every one of those points was a useless waste of time and effort – my air miles are plastic junk. Perhaps when (IF!!!) I actually use them, my opinion will change.
One exception is the Southwest credit card which gives you enough bonus points to get a free flight. And guess what? With Southwest you can usually actually redeem your points. For an ongoing basis there are better cards than the Southwest credit card, but for the sign-up bonus you can’t hardly beat it.
Hotel Credit Card Rewards = Plastic Gold
Within the last two years, I’ve wised up and focused most of my rewards points on hotels. For me, I’ve found they have the most lucrative rate of return.
Hotel points are much, much, much more valuable than air mile points and cash back rewards.
Why are hotel points more valuable than air points or cash back?
Remember all those air points that I earned that were theoretically valuable? Well, I have accumulated and already used a bunch of hotel points for some serious dollar savings.
Here are just a few examples:
Chase Priority Clubs Credit Card Rewards
One Card + One Purchase = $470.00 worth of rewards
To show you that you can actually get something of value from credit rewards, I want to share how we got $470 worth of rewards from just one account.
My wife applied for the Chase Priority Clubs card.
Bonus: 15,000 priority clubs points + $20.00 credit.
Action: Made one purchase for $11.00
Action: Stayed two nights at the Holiday Inn Avon in Christchurch, NZ and one night at the Crown Plaza in Queenstown, NZ. Each night was a Point Breaker offering, so each night cost us 5,000 points for a total of 15,000 points (same as our bonus). Savings = $450.00 USD.
Action: After the vacation, she called and canceled the card.
Action: Chase sent us a check for $9.00
I also got the same card in my name, and this June I’ll be using 5,000 points to say at the Crowne Plaza hotel in Port Moresby, PNG. The hotel costs over $250 USD per night. At this value, each point is worth 5 cents or a 5% cash back.
AMEX Starwood Credit Card
This has by far been the best credit card I’ve owned.
In fact, my family is planning a trip to Sydney, Australia in June. We’ll be staying five nights at the Four Points Darling Harbor. Because of our family size, the two rooms for five nights cost us 56,000 points. The cost of those rooms would be $1,700 USD, so that represents about 3 cents per dollar spent or a 3% cash back.
In the last two years, we stayed 13 free nights in hotels. Once we get through this summer travel, our total will be up to 19 nights free hotels in the last two years. Most of those points come through hotel credit card rewards.
Cash Back Credit Cards = Neither Junk Nor Gold
I call the cash back cards the old faithful cards. You guarantee use – it is cash after all. They provide a reasonable return on your spending dollars and ultimate flexibility.
We just got the Schwab credit card that gives us 2% cash back on every purchase (it’s a good thing too. FMF just posted 4/26/10 saying that the Schwab card is no longe available to new customers). A nice rate of return, but extra nice considering the 0% foreign exchange credit card fee. Since most companies charge between 2.7-3% to use the card overseas, our Schwab card will save us 5% overseas compared to other options.
Depending on your occupation you may find better card offerings. Here’s a list of the best military credit cards.
Now this is the time for my credit card warning. If you use a credit card, you must have spending guidelines. You do spend more money with a credit card than cash, but a credit card has nice added benefits that might make it worth the extra money. If you are in credit card debt no amount of rewards will ever make it worth it.
What is your favorite rewards credit card? Do you think people really come out ahead by getting credit card rewards, or is it just a ploy? What is more valuable air points, hotel points, or cash back?