This essay is based on a conversation with Dave Grossman, who runs the website. mile talk We also teach people the best ways to earn miles through credit cards and airline tickets.
As an avid Rewards points collector and user, my bucket list is to fly first class and stay in some of the world’s finest hotels for very little money.
I’ve spent years sharing tips for accumulating miles and reward points through my websites, MilesTalk and YourBestCreditCards. These sites aim to help people choose which cards to use and how to use them.
If you have dinner with me, I will always decide which card you pay with. The US is one of the best countries to earn miles, but people don’t take full advantage of the benefits as much as I would like.
Here are 7 of the worst credit card mistakes I see, but you can avoid them.
1) Choose a rewards credit card if you can’t pay your balance in full each month.
Points cards are great, but if you’re carrying a balance, they’re the worst choice because they have the highest annual percentage rate (APR) of any card type.
If so, choose a card with a 0% APR intro or balance transfer offer.
Get your balance down to zero and promise not to charge anything you can’t pay in full. Then you will receive a point card.
2) Pay all charges to an airline or hotel branded credit card.
Although these cards come with great perks, they are rarely the best choice for everyday spending.
You will be bound to the whims of that one program. This means that you will be stuck with any devaluation that this one brand brings.
Use cards that earn transferable points, like American Express Membership Rewards or Chase Ultimate Rewards. That way, you can transfer your points to the best airline or hotel program for each trip you’re planning.
That basically makes you a free agent.
3) Forgetting to have at least one card that gives you 2% back on everything.
It’s very easy to have a credit card like Citi Double Cash that has no annual fee and earns 2% back on every purchase.
But most people only have one or two cards in their wallet, and the default value for both cards is just 1%.
If you want to buy something that is not in the bonus category of one of the cards, you should always be able to rely on the default card, where you can earn at least 2%.
4) Lack of effort and wasting points on low value redemptions
The best use of your points are perks that require some effort to understand.
While flying first class to Asia, which can cost upwards of $20,000, may not be an option, you can often use transfer partners to redeem your award points.
Here’s the crazy part. You can probably do this with the same amount of points you would spend on a $600 worth of gift cards.
For example, with ANA as your transfer partner, you can travel around the world in business class up to eight times using just 125,000 to 145,000 Amex points. But you have to do your research.
5) Redemption of gift cards
This is often not a good use of points.
Most gift cards give you 1 cent per point, which isn’t a great deal, and in some cases it’s less than 1 cent.
Never accept less than 1 cent per point for transferable reward points. These are typically available at Amex, Chase, Citi, or Capital One.
6) Convert reward points into cash at checkout
Amazon likes to ask you to use points at checkout. Whether it’s Amex points, Hilton points, or any other program, the results are the same.
Cashing out at checkout is even worse value than using points on gift cards.
Amex points are valued at 1.7 cents when used with travel transportation partners, but each point earns just 0.7 cents at checkout on Amazon.
7) Ignore spend-for-money bonus categories.
Make sure your biggest spending categories are the ones that earn you at least 2x points.
If you spend a lot of money on groceries, you should have a card that gives you 4 to 6 times your income on groceries.
If you spend a lot of money on food, your earning rate should be 3-4 times higher.
Many people only earn 1x points on purchases, leaving them with a ton of value.