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Want To Earn More Points & Miles? Here’s How To Know What Kinds To Get

joeheg
a credit cards and a plane flying
  1. Before you start earning miles and points from your credit cards, it’s really important to know what type of points you’re earning. There are several types of reward miles/points that banks offer and they can be most easily be divided into four categories:

I’ll go over some of the basics for each of these points below:

Transferable (Flexible) Points

There are three banks that give these type of points:

These points are the most desirable ones to collect for miles and points enthusiasts because of their flexibility. You can earn them in your account, hold them until you have a use for them and then transfer them to the program which is most beneficial to you at the time.

With each type of point, you have a number of different transfer partners specific to each program. This is to your advantage because if you have points in each program, you have a multitude of options open to you when you need to book travel. More options means you’re likely to be able to book the trip that you want, when you want, for the lowest price. These are the big three of points redemptions (Where, When and How Much).  Therefore, collecting each of these points is best if you don’t have a set redemption in mind because this way you’re not locked into a single airline’s or hotel’s points program.

The downside of these type of points is that in order to transfer points, you usually have to hold a premium card with an annual fee. You also need to keep your account open (and pay the annual fee) to keep your points. If you decide to close your account and still have your points sitting there, you’ll lose them. Losing points is one of the big no-nos of collecting miles and points. You can stop this from happening (transferring them before closing the account is one way) but you always need to keep that in mind.

Airline Miles and Hotel Points

The way these type of cards work is usually easier to understand. When you earn points or miles with airline or hotel credit cards, they’re deposited directly into your account with that program (not with the bank). Some of the most common programs with credit cards are:

There are many other programs with offers for their own credit card that earns points or miles. If you tend to fly a specific airline, having their co-branded card can have its advantages. Besides earning miles/points in the respective programs, these credit cards often provide additional benefits such as free checked bags or preferred boarding on airlines or free internet or upgraded room at hotels.

The benefit of earning miles/points with credit cards with these programs is that if you cancel the credit card, you don’t lose the points, as they are already deposited in your program account. You only need to keep your account active with the airline or hotel (each program has its own specific requirements to do so) to keep from losing your miles.

The disadvantage is that your points/miles are locked into that program. So if that airline/hotel has no availability where you want to go, too bad.

The one hotel program which has additional benefits is Marriott. With their program, you’re allowed to transfer your hotel points from your account to several airline programs (some of which have no other transfer partners). When you transfer points into airline miles, you get a 5,000 mile bonus for every 20,000 points you transfer. This perk makes Marriott points more valuable than other hotel points.. Many miles/points websites consider Marriott points as a flexible point currency instead of hotel points.

Fixed Value Points

By far, these are the easiest points for people to understand. You earn points which are worth a fixed value, usually about 1-2 cents per point. So if you want to book an airline ticket worth $200 and your points are worth 1 cent each, you’ll need 20,000 points. The credit cards that work like this include but are not limited to:

These points are easy to use because if there’s a ticket available, you can most likely use your points to pay for it. You either have to book tickets through the program’s travel portal or book the ticket/room yourself and apply your balance to cover the payment on your statement, depending on the program. Check with the particular program to make sure how it works before making any reservations.

With the ease of redeeming these points, it would seem that they would be the most preferable ones to collect. That may be true if you’re only looking to book low cost domestic airfare. It’s true that availability with airline miles can be difficult to find for flights within the U.S. But with fixed value points, if there’s a seat available, you can use your points to pay for it. Although this can serve a purpose in a diversified portfolio of points, it has limitations.

The disadvantage is that you can only get a fixed value for your redemption. Most travelers don’t get into collecting miles and points to redeem them for inexpensive domestic flights. The value in points/miles is using them for something you usually couldn’t pay cash for. Something like that business class ticket to Paris to see the Eiffel Tower. If that ticket cost $2500 cash, you’d need 250,000 fixed value points to get it. As of this writing, using Delta Skymiles would only cost you 140,000 miles (if you can find availability).

Fixed Value travel cards aren’t very popular because of a similar credit card product which is available and has more advantages.

Cash Back Cards

Cash is still king. When earning flexible points, airline miles, hotel points or fixed value points, you always need to remember than you could have been earning cash back instead.

It’s very easy to understand a cash back card. Some of the most popular cards are:

The Citi Double Cash card and the Fidelity Rewards card both earn 2% cash back on all purchases. Citi pays 1% when you make the charge and 1% when you pay the bill. Fidelity pays the 2% back as a deposit into your Fidelity account (so it helps if you already do some banking or investing with them). The Chase Freedom Unlimited earns 1.5% back on all purchases.

The Discover It, American Express Blue Cash and Chase Freedom all earn back 1% on most purchases. They also have bonus categories where you can earn additional money back in certain categories like restaurants, gas and groceries. Both the Chase Freedom cards also have the advantage of that if you have an another Chase Ultimate Rewards card that earns flexible points, you can transfer your Freedom points to that account. When you do that, the cash back points transform into flexible points.

Comparing a cash back card to a fixed value card, you see that since you can earn at least 2% on any purchase, only earning 1% back on a fixed value card just doesn’t make sense.

Conclusion

So which points should you collect? It really depends on what travel goals you have. I personally have a combination of all of these cards, except for a fixed value one. Most of my spending goes on cards with flexible points (including Starwood points). I do have a cash back card which I use to maximize bonus categories, as I value 5% cash back more than any point I could earn. Your Mileage May Vary on which card or combination of cards works the best for you. Understanding the difference between the types of points or miles you can earn with credit cards allows you to make an informed choice when deciding which ones to apply for …and now you know.

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