Airline mileage credit cards are a great way to save money on travel
They are worth thousands of dollars in free flights. If you manage your credit cards wisely you can potentially never have to pay for flights again, or rarely. Most of the best mileage cards have standard offers of 20-25000 miles when you sign up for the card and spend a certain amount of money on the card during the first three months. However, often pre-approved cards which you receive in the mail have better offers, usually as much as 50-60,000 miles, so it pays to wait for these offers to come along. Also, some banks have promotions at different times during the year where these higher-points offers also appear on their online websites, so it’s worth checking those sites occasionally. Some cards will also offer an additional points bonus if you put another person on the card. For couples, this works out nice.
Channel your monthly expenses through your new credit card
If you channel most of your monthly utilities and other recurring payments through your new credit card and are diligent in paying for everything you can using the card, it is usually pretty easy to spend the required amount to get the free miles. Sometimes we will delay a large purchase in order to be able to use a new card to pay for that purchase to fulfill our spend requirement. Once you have satisfied the monetary spend requirement to gain the free miles, you can apply for another card and move on to funding that card, and so on and so on. Usually the cards are free for the first year and then you are charged an annual fee for subsequent years, so you will want to cancel the card at the end of the year. Be sure to check the bank’s rules on cancelling your card. Some banks will revoke your bonus miles if you close the account in less than six months. We always wait until we get the first statement which includes the next year’s annual fee on it and then we close the card at that time and the bank always credits back the annual fee to us. Sometimes they will offer to let you keep the card for no fee with a reduction in points earning power. As an inducement to continue with their card, some banks offer an additional points bonus (usually 5000-6000 miles) when you pay the next year’s fees.
Beware of Yearly Fees
Some cards charge a first year fee, usually under $100, and sometimes the miles offer is good enough that it’s still worth signing up for the card. For example, at the time I’m writing this we have a new Southwest card that costs $99 for the first year and rewards 50,000 miles for spending $2000 in the first three months. Southwest has a great mileage plan which allows cancellations and rescheduling without penalties, free bags, and requires fewer points for trips to Mexico than other airlines, so it’s worth it to us to pay the first year fee. Of course you also earn miles for purchases you make using the credit card, but these miles usually are only a small amount compared to the free miles you get for opening the account.
Opening Credit Cards and your Credit Rating
Some people have claimed that opening and closing credit cards yearly can hurt your credit rating. We have been doing this for over 10 years and our credit ratings are both over 800, so I think the effect on our credit rating has been minimal. Don’t feel like you are abusing the credit card system by doing this. The reason for the minimum spend requirement to earn the miles is that the credit card companies are using their annual fees and commission on the money you spend during the first three months to help fund the miles they give back to you. They are well aware that some people are managing their mileage cards in this manner. Be advised that since they have gotten more savvy about people doing this, some banks, such as Chase are now tracking how many cards you have applied for in the last year and refusing to issue cards to people who have opened too many cards.
Too many credit card applications
Also, some banks will not issue a mileage card to people who have received a card from them in the previous 24 months. For a couple, you can alternate the person who is the primary account holder for the card each year and put your spouse on as a secondary account member. Since there are numerous banks offering mileage cards, you can just move to a different bank while you wait for the 24 month lockout to end. This 24 month rule is a relatively new development as we are writing this. If the bank offering us a pre-approved card is one where we previously had a mileage credit card (maybe even the same card type), we always call the bank to confirm that the offer is valid and that we will receive miles for fulfilling the terms of the new card. We had a recent situation where we signed up for the new card and after receiving the card the bank told us we couldn’t get the mileage bonus because 24 months hadn’t passed since our prior card application. We explained that we had been worried about this so we had talked to their customer service and been assured that we would receive the miles, otherwise we wouldn’t have applied for the card. Since we had contacted them before applying, they ended up giving us the miles, but this shows that they are getting more serious about enforcing these types of rules and you need to be careful to read the fine print and verify the validity of the mileage offers before applying for new cards. The last thing you want is to receive a new card and not get any miles for it.
Managing Credit Cards
There are many websites out there that address the issue of managing credit cards to obtain airline miles, hotel points, reward points for cash, etc. I recommend looking at <thepointsguy.com> as a starting point (get it?).
Preserving your combined credit limits
One thing to mention about canceling credit cards…If you are canceling a card and you have another credit card with the same bank, before you cancel the card, you can ask the bank to combine the credit limits from both cards to increase the credit limit on the card you are keeping. We always pay off our monthly balances, so we don’t really need the higher limit, but it looks better for your credit worthiness if you have a higher credit limit.
Always pay monthly balance in full
Obviously, you shouldn’t consider using this kind of credit card mileage scheme unless you are able to pay off your monthly credit card balance in full each month. Otherwise, the interest charges you pay on the card could cancel out any gains you make in free miles.
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