It’s been a little over a year since my last blog post. As I mentioned in my first blog post, I will sometimes neglect this site. I’m not like most points bloggers who are building their sites primarily for income (in points referrals or cash) and post 3 times a day, regurgitating news from other blogs. This site is for my friends and family, whom I’ve spent the better part of a decade or so trying to encourage them to reap the benefits I do by collecting points and travelling the world in style for next to nothing.
To date about 6 of my family and friends have started to get involved in some degree to this points collecting game. While some have just started and have yet to take their first flights, others have already experienced the joy of international BizClass travel for almost-free. Without exception though, there are improvements each could make to accelerate their points accumulation. So this blog post will attempt to reiterate the basic rules of the game and highlight strategies that need to be mastered.
Never Carry a Balance
Consider this Rule #1, the Golden Rule, the Holy Grail if you will. You can not succeed in this game if you carry a balance on your credit cards. This is a two fold problem. First, every dollar spent servicing debt is a dollar that could be earning you points. Second, and probably more important, is that carrying a balance makes it difficult to get approved for additional credit cards, which is at the heart of the strategy.
The amount of points you can earn through sign-up bonuses dwarfs what you can earn through simple spending. Which brings me to the second basic tenet of the strategy.
Sign-Up Bonuses are Key
If the above is the Golden Rule, this is the Gold-Pated Rule. You win this game by getting the most cost-effective sign-up bonuses, not by spending the most money.
Using myself and Mrs. Biz as an example, we collectively earn an average household income and are lucky if we spend maybe $50,000 a year on credit cards. If all we did was use the same credit card for all the spending without any additional strategy, we’d earn at most 62,500 points in a year (1.25 points/dollar). That extra .25 points/dollar only comes with the premium credit cards which cost about $500/year. If you pay $500 a year for an extra 12,500 points, you may as well stop because it’s cheaper to pay cash for your flights.
A basic card earns 1 point per dollar and costs about $120-$150 a year. While paying $120 for 50,000 points is a good deal, it will take you about 6 years to earn enough points to fly one round trip for two in BizClass to Europe.
Instead, by leveraging the power of sign-up bonuses, we are able to turn that $50,000 in spending into 300,000-400,000 points. Enough for us to take that kind of round trip in BizClass every single year.
The key takeaway is this: You don’t earn points by spending lots of money. You earn points by qualifying for lots of sign-up bonuses.
- If you’ve received all of your bonus points for a card, stop using that card and start spending on a different card towards a new sign-up bonus (within certain limitations), and most importantly,
- Always ensure you meet the qualifications to earn the big bonuses!
Don’t Use Cash (or Debit)
Every time I see someone pay for something with a debit card, a little piece of me dies inside. There simply is no reason to ever pay for something with a debit card. If you are using a debit card to buy $100 in groceries, that means you have $100 cash in your bank. Instead of throwing that cash away and earning zero points, transfer that $100 onto your credit card and buy the groceries with the credit card. The end result is the same, you spent $100 on groceries and have added nothing to your debt. By using the credit card though, you could earn 100 points, or better yet, you have a new Amex Cobalt credit card and you just earned 1000 points because that card earns 5x points per dollar at grocery stores and comes with a monthly bonus that effectively doubles the points earned!
Costco only takes MasterCard. I don’t have a MasterCard, but I shop at Costco sometimes. I could pay with debit, but why would I? I would earn no points, so instead I could go online and buy a Costco Shop card, which you can pay for with Visa. So if I buy a $500 Costco Shop card I’d earn at least 500 points. Better yet, if you have an Amex Cobalt card, you could buy a gift MasterCard at the grocery store and earn 2500 points. Is the extra 2000 points worth the $10 activation fee you’ll pay? Well, that works out to half a cent per point, so yes, most definitely that’s worth it.
Half a Cent or Less
Remember that headline. Any time you can buy points for half a cent or less, that’s a good deal. The flip side of that is, never pay more than 1 cent per point. Why? because one cent per point is what you earn at with basic spending and also what you can cash out the points for. Amex cards, for example, will let you spend your points towards paying off your balance at 1 cent per point, so that’s the least amount they’re worth. By the way, never do that. They’re worth so much more, which I’ll talk about in a moment.
If you’re buying points for half a cent each, and can use them for at least 1 cent each, at a minimum you’re doubling your money. Use that formula when considering whether any sign-up bonus, or points purchase offer, is worth your time. For example:
If you have an offer for a new Aeroplan credit card that offers 25,000 points for a fee of $120, is it worth it? Well, $120 divided by 25,000 points is .48 cents per point, so yes! Now, if the deal is a new Aeroplan credit card offering 65,000 points for a $499 fee, the math says that’s .77 cents per point, so no, don’t do that deal.
Even though, as I’m about to show you, points can be worth much more than 1 cent per point. I never go for a bonus that costs me more than half a cent per point. Credit cards deals change about 4 times a year, some are better than others. Eventually, you’ll find one for half a cent or less. There’s no need to pay more. Sometimes you’ll find deals that work out to a quarter of a cent per point, and then I’ll be texting you saying “GET THIS CARD!!”, so you don’t have to worry about missing those. If you know me, you’ve already received a few of those texts, so you know what I’m talking about.
There is a current deal offering 65,000 points for $99. That’s .15 cents per point! It requires a referral link, which I’m happy to give you if you know me.
Cancel Most of the Cards
If you’re like most people, you are used to having one or two credit cards and using them for years and years. In this game, you simply can’t keep all the cards for years or you’ll go broke. The big sign-up bonuses you earn are a one-time incentive. After that, each yearly fee will earn you nothing extra. If you earned 50,000 points at the cost of half a cent per point, that’s great, but as soon as the annual fee hits at the start of the 2nd year, you’ve suddenly paid 1 cent per point, which is way too much. You must (with some exceptions) cancel those cards before you’re stuck with the next fee.
The most important exception is that you should not cancel your oldest card. Average age of account is an important component of your credit score. Having one or two cards that you’ve had open for decades will offset all the cards you’re churning through. If your long-time card has an annual fee, you can usually “switch” the card to a no-fee card within the same card family (Visa, MC, Amex) without closing the account. This is also a strategy to earn more points which I cover in a different blog post.
Don’t cancel the cards the moment you receive the bonus either. Keep the card for at least the full year, cancelling just prior to the next annual fee. Most fees are applied at the end of the first month, so the 2nd fee is applied at the end of the 13th month. In those cases, cancel in the middle of the 12th month. The reason for this is to avoid computer algorithms that look for cancellations less than 1 year in length as something negative. To that end, it’s also a good idea to use the cards you hold long term on a semi regular basis, as card “abandonment” is also something the algorithms can look for.
Keeping the algorithms happy is what keeps the computers continually approving you for more credit cards.
Remember the Multipliers
Each card will, in addition to earning 1 point per dollar, have some categories of spending which will earn multiple points per dollar. The major categories are: Dining (which includes bars), Gas, Groceries, Office Supplies, Electronics, Travel, Transportation, Drug Stores, Food Delivery, and General Merchandise. Some places, such as Walmart, will code as “General Merchandise” even though they sell groceries. It’s not what you buy, it’s where you buy it that counts.
Sometimes something will code in a way you’re not expecting, which can be exploited. For example, most co-op gas stations in Calgary will code as groceries, not gas. This is a great opportunity to earn 5x points using your Amex Cobalt card instead of the 3x points you’d normally earn using your Amex Business Edge card, for example.
Using the right card at the right store goes a long way to maximizing your points earning and should always be taken into consideration, but you should never let it prevent you from hitting a sign-up bonus.
If you’re playing the game well you could, at any given time, have 5 or more credit cards and it can be confusing to remember which cards to use for which category, even for someone experienced, like me. That’s why it’s never a bad idea to create a small cheat sheet that you carry with you to help remind you. Just remember to update it each time you get a new card.
Business Class Flights Only
Once all the points are earned and you’re ready to fly, there may be a temptation if you’ve never flown international BizClass, to book an economy flight. After all, they’re cheaper and you may not have enough points for a BizClass seat on the same flight. Don’t do it! There’s 2 very good reasons why you should only use your points for BizClass flights and more specifically, international long-haul BizClass flights.
First, a long-haul (more than 8 hours) flight is a ridiculously long time to spend sitting in a little seat with little to no recline. You can actually get blood clots from that. Many long haul flights are overnight or get you to your destination in a completely different time zone. Without sleep, you will arrive at your destination completely bagged and you’ll have a hard time adjusting to the new time zone. This can effectively wreck the first couple days of your trip and can make you sick.
Long haul BizClass seats are wider than economy seats, usually 22″ to 30″ wide, whereas economy seats are typically 18″ wide. But most importantly, the BizClass seat will fold down to become a fully flat bed. Let me reiterate… A BED IN THE SKY!
There are many other creature comforts that accompany BizClass flights, better food, better drinks, lounge access, front of line service, but mainly, it’s all about the bed.
The second reason is simply, the math. Let’s look at an example of a flight from Vancouver to Tokyo, Japan. This is a 10.5 hour flight. The cost for this flight in cash is $1817 round trip in economy and $6382 round trip in BizClass. That BizClass seat (bed) costs 350% the price of the economy seat. In points, however, it’s a different story. That round trip economy seat costs 70,000 points. So you’d expect that the BizClass seat would be 350% as much, or 245,000 points, but it’s actually just 110,000 points!
Let’s put the above example into cents per point. Your points are being used at a value of 2.3 cents per point if you buy the economy seat. But the value of your points jumps to 5.8 cents per point when used towards the BizClass seat. In fact, I have booked flights on some very premium BizClass seats that saw my points worth over 15 cents per point!
Given the small premium in points vs the huge advantage in value (and comfort) you should only ever use your points for long haul BizClass.
Plan Ahead for Best Results
Lastly, there is skill involved in booking reward flights because typically the number of seats airlines will allow to be booked on points is limited, at least initially. Sometimes it’s easy to determine, either the seats are available to book for a set amount or they’re not. It can get confusing however if the other seats are offered for sale to points for a premium above what the cheapest rates are. Air Canada is one such airline that will sell you any seat they have available, but they’ll charge you a ridiculous amount of points, so you should only buy seats from them if the price is right.
This topic is involved and I cover the topic in another blog post and will post another discussion about it later on. The thing to remember is, this site is for people who know me, so you have the advantage of being able to simply contact me and talk about how to do it, ideally more than a year in advance of when you want to travel, although I’m available anytime. As you know, I like nothing more than to talk about points travel.