In 1999 David Phillips (aka The Pudding Guy) calculated that he could acquire a lifetime supply of travel by purchasing $3,000 worth of pudding and pocketing the airmiles he got with each purchase (for about 1.2 Million total miles). While this is an extreme example of airmiles arbitrage it highlights an important point about loyalty programs in modern economies. These days, virtually ever economic transaction you make is worth something in terms of loyalty whether it gets you a night in a hotel, an airline flight, cash back or some other free stuff.
But you can't just jump at every rewards offer out there or apply for every possible rewards credit card. Taking advantage of the different programs and rewards that exist requires style, nuance and grace. Here's some tips to get you started in the glorious world of loyalty programs and reward credit cards.
Apply for Every Program You Can:
You should never be caught without a loyalty program number. Never take a flight or stay in a hotel or rent a car without acquiring some form of mileage for doing so. If you are really smart you will research the programs and partners that the provider supports and look into double dipping or transferring mileage from their program into another one that you prefer. FlyerTalk.com is one of the best sources available for this type of knowledge. Their forums provide a vast amount of information on how to mix and match programs and benefits.
For example, you might take a one-time trip on Singapore Airlines to Asia from the USA which means you will rack up a lot of mileage in their KrisFlyer program. But you should be aware that KrisFlyer miles are transferable into Star Alliance which means that you can put your air miles into United Mileage Plus if that is your preferred domestic carrier. That's a much better use of the mileage if you intend to fly United more often.
Forget Cash:
Never use cash or checks or a debit card to purchase anything if you can help it. With the exception of people who travel constantly for a living, rewards credit cards will be your single greatest source of loyalty program mileage. Reward credit cards that are linked to loyalty programs offer a very efficient method of accruing mileage without actually having to travel. Interest rates and the carrying of balances aside, you should be putting as much of your monthly expenses on your credit card as you can so that you accrue as many miles as possible. You should be waving your reward credit cards at the vendor even if you are buying a pack of gum. Repeat: Never use cash.
Which Rewards Credit Card to Choose?
When it comes to travel the two biggest expenses are airfare and hotel costs. The rewards credit card market for air miles and hotels is completely saturated with offers so choosing the best reward credit card can be difficult but the best strategy is this: Spend for the hotel program and apply for the air miles credit card offers when they present themselves. Consider the reasoning: A plane ride lasts for several hours where you sit in a tiny space and do virtually nothing. On the other hand, a hotel is a full 24 hours with a roof over your head, a comfortable bed, private bathroom and other great amenities that can't be obtained on a plane. At the same time, your average domestic flight and 3 days in a hotel are comparable in terms of cost. Therefore, if you are going to rack up mileage in a program, hotel programs will provide about the same cost savings and more benefit.
Spend For The Hotel Program:
American Express has two excellent hotel program reward credit cards which are regarded as the best. The Hilton Honors Amex and the Starwood Preferred Guest Amex are comparable in terms of benefits so you really only need to decide which hotel group you prefer (At the time of writing, opinion is leaning towards the Starwood Card). Try to run up as much of your monthly spending on a hotel credit card as you can so you can obtain as many free nights as possible. These credit cards also offer Gold status with the program so when you redeem the points you should be politely requesting as many comps and freebies and they can stand to give you.
Take Advantage Of The Airline Offers:
Credit card companies offer bonus miles for signing up for their rewards credit cards all the time. Offers where you receive 20,000 or 25,000 airmiles for the first $1,000 in purchases are quite common and the bonus is usually enough for a free domestic flight. Once you sign up for the rewards credit card and spend the minimum amount required to receive the bonus mileage you should put the rewards credit card in your drawer and/or cancel it. You can usually pull this trick at least a few times a year if you keep a clean credit record. Remember to keep the limit on the credit card low ($2000 - $3000) when you apply so you can have multiple credit cards at once without raising big flags with lenders. Remember, applying for too many rewards credit cards at once and trying to get big limits is considered credit-seeking behavior and it will negatively impact your credit record. So keep the limits low and don't apply for every single offer. Instead pick some related loyalty programs and try to grab up a few good offers. Then wait about 6 months before trying again so you don't raise any credit flags.
The best thing to do is to apply for rewards credit cards where the carriers have partnered programs. For example, Citibank has a credit card for American Airlines and Chase has one for British Airways. These two carriers are partners so BA miles are transferable to an AA domestic flight. By applying for both credit cards and getting the bonus miles after the first spend, you should be able to acquire two domestic round trip tickets.
Travel For Free:
After about a year of taking advantage of multiple airline offers and racking up points in your hotel program you should have enough mileage in various programs to get a couple of round trip domestic tickets and several nights in a hotel. Congratulations, you're traveling for free and it is all thanks to choosing the best rewards credit cards.
