Choosing Your First Travel Rewards Credit Card: 3 Things To Consider
You’ve been eyeing it.
You’ve been monitoring your credit score, and you’re dying to take the plunge into travel hacking.
Who doesn’t want to travel the world for free?
But where to start?
If travel hacking is a brand new term for you, check out the basics of earning travel rewards in Travel Hacking: A 5-Star Life On A 3-Star Budget. Then meet us back here!
Before we dive in to my favorite travel rewards credit cards, there are some important things to think about. Here are the things you should consider before you apply for any travel rewards credit card:
#1 The condition of your credit.
If your FICO score isn’t 680 or above, work on raising your credit score before applying for a travel rewards card.
American Express cards have less strict requirements than Chase. For the more basic cards from American Express, like the American Express Everyday Preferred or the Starwood Preferred Guest card from American Express, you need good credit, but not pristine credit. For a card like the American Express Platinum card, which gives red carpet travel perks and carries a hefty $550 annual fee, you will need excellent credit, and it helps to already have another American Express card in good standing.
Chase will deny you for their Chase Sapphire Preferred (CSP for short) or Chase Sapphire Reserve (CSR for short) if you have a bankruptcy on your report or if you’ve opened more than 5 new cards in the last 24 months (referred to as the 5/24 rule). I’ve even read that they look at how much open credit you have available to you, because their minimum credit line for the CSP or CSR is $5000. If you have one, single secured card with a $200 limit, they’re likely to be hesitant to give you their card with a $5000 limit when you haven’t demonstrated you can handle that much credit. Learn how to make that secured card with a small limit work for you in Raise Your Credit Score Automatically.
I probably wouldn’t waste the inquiry for a Chase Sapphire (Preferred or Reserve) unless I had a clean report with no collections, no new cards opened within the last 6 months, credit utilization of under 20%, at least a few thousand in open credit card limits combined, and a FICO score of 700 to be safe or above.
#2 Your spending habits
Part of the art of racking up travel points is the bonuses you get for using your card. The bonus points that you want to look at before you apply are sign up bonuses and bonus spending categories.
Sign up bonuses:
These can be a huge chunk of points and are earned when you spend a certain amount on the card, typically in the first 3 months. Some of the most prestigious cards require you to spend a lot of money to earn the sign up bonus; for example, the Citi Prestige requires you to spend $7500 within 3 months to earn their 75,000 point sign up bonus. Be sure the required spending to get the bonus is within your budget.
Most travel rewards cards award 1 point per dollar spent for everything you buy with the card, but also have specific bonus categories where you can earn 2-5x points per dollar spent. I wouldn’t start with a card that bonuses heavily for stuff you don’t buy. I chose my cards because I get different types of spending bonuses on each one. I earn:
4x points per dollar spent on the American Express Everyday Preferred
3x points per dollar spent on the American Express Everyday Preferred
2x points per dollar spent on the Chase Sapphire Preferred
Travel spending is the most common bonus spending category, so you’ll find a lot of overlap here. 3 of my cards bonus for travel spending, so I use them strategically, and I’ll cover this more in a post about maximizing the way you earn your rewards. Choosing a card is going to depend on where you like to go and how you like to get there. Here is my earning potential on travel for my cards:
2x points per dollar spent on general travel expenses on the Chase Sapphire Preferred
2x points per dollar spent at Starwood Preferred Guest, Marriott or Ritz Carlton hotels on the Starwood Preferred Guest card from American Express
5x points per dollar spent on Amex Fine Hotels and Resorts on the American Express Platinum
5x points per dollar spent on airfare booked directly with the airline or on Amex Travel on the American Express Platinum
|If you spend on:||You’ll earn:||On this card:||With a sign up bonus of:||And annual fee of:|
|Groceries||3-4.5x Membership Rewards per $1 spent||American Express Everyday Preferred||20,000 Membership Rewards when you spend $1000 on the card in the first 3 months||$95|
|Gas||2-3x Membership Rewards per $1 spent||American Express Everyday Preferred||20,000 Membership Rewards when you spend $1000 on the card in the first 3 months||$95|
|Restaurants||2x Ultimate Rewards per $1 spent||Chase Sapphire Preferred||50,000 Ultimate Rewards when you spend $4000 on the card in the first 3 months. 5000 bonus points when you add an authorized user within the first 3 months||$0 for the first year, $95 after the first year|
|A wide range of travel expenses||2x Ultimate Rewards per $1 spent||Chase Sapphire Preferred||50,000 Ultimate Rewards when you spend $4000 on the card in the first 3 months. 5000 bonus points when you add an authorized user within the first 3 months||$0 for the first year, $95 after the first year|
|Starwood Preferred Guest/Marriott/Ritz Carlton hotels||2x SPG points per $1 spent||Starwood Preferred Guest card from American Express||25,000 bonus Starpoints when you spend $3000 on the card in the first 3 months||$0 for the first year, $95 after the first year|
|Amex Fine Hotels and Resorts||5x Membership Rewards per $1 spent||American Express Platinum||60,000 Membership Rewards when you spend $5000 on the card in the first 3 months||$550 for the primary cardholder, $175 for 3 authorized users|
|Airfare||5x Membership Rewards per $1 spent||American Express Platinum||60,000 Membership Rewards when you spend $5000 on the card in the first 3 months||$550 for the primary cardholder, $175 for 3 authorized users|
*This is not an all inclusive chart. There are other cards that earn these or similar rewards. I only review or recommend cards I have in my own wallet. If you apply through the links in this post, you can earn your sign up bonus, and I might get some bonus points for sharing all this information about the card with you!
Chase Sapphire Preferred & Reserve cards give bonuses for travel and restaurant spending. If you rarely eat out or spend on travel, this card is probably not going to be the best option for you to start. If, for example, you live in NYC, don’t own a vehicle, and order take out more often than not, you might be better off with the Chase Sapphire Preferred over the American Express Everyday Preferred, since you’ll get 2x points on your restaurant meals, Ubers, and cab fares.
Also keep in mind, when you get an airline or hotel co-branded card, like a Hilton or Delta card, generally you get bonus points when you use your card to book flights or hotels directly with that company. If you don’t book a lot of travel directly like that, you may be limiting your earning power to 1 point per dollar and have less flexibility in how you can use those points (depending on the brand). These cards can be very valuable if you do book hotels or flights directly, but be sure you’re getting the card that will help you earn points as quickly as possible!
#3 Where you want to go
You want to make sure you have the cards that are awarding the points you can use for the trip you want to take. Many travel points programs have transferrable points, which is great, but they don’t all transfer to every program and they don’t all transfer point for point.
If you understand what you’re working towards, you can earn a variety of points and transfer them strategically to get some amazing deals, but sometimes when you transfer from one rewards program to another, you lose a lot of points in the process.
For example, if you’ve been racking up Hilton points and later decide you want to redeem them for a flight, you can do that, but you’ll be disappointed when you learn that when you transfer your Hilton points to say, American Airlines, you’ll end up with 1 AA point for every 10 Hilton points you transfer. This makes your 150,000 Hilton points only 15,000 AA points, which is probably not going to take you far.
Maybe you just want to start earning something while you learn more about the whole travel hacking world. That’s okay! If you don’t have a specific trip in mind, the most flexible points out there are going to be (in order of most valuable to least, according to The Points Guy’s recent valuations):
- Starwood Preferred Guest Points
- Chase Ultimate Rewards
- Citi Thank You Points
- American Express Membership Rewards
The above points are valuable, flexible, and easy to earn just by spending within your budget (which is a must. Don’t even think about starting this hobby unless your spending is controlled!)
So, like everything else I teach, where to start depends on you. I can only speak on and attest to the value of the cards I carry in my own wallet (as with any 3rd party product/service on Bottom Up Wealth. I only will tell you about the things I’ve used myself!)
If your FICO score is around 700 (give or take a few points), and you buy a lot of gas and groceries, you may want to start racking up Membership Rewards with the American Express Everyday Preferred.
Sign up bonus: 20,000 Membership Rewards when you spend $1000 on your card in the first 3 months
If you’re single, have excellent credit, don’t have a big family to feed, travel a bit and don’t drive much, you may want to start with the Chase Sapphire Preferred (or Reserve, which I don’t have, but hear is a great card).
Sign up bonus: 50,000 Ultimate Rewards when you spend $4000 on your card in the first 3 months
If you don’t fall into either of the above categories, you might just start with the Starwood Preferred Guest card from American Express, because those points are more valuable and flexible than the others.
Sign up bonus: 25,000 Starwood Preferred Guest points when you spend $3000 on your card in the first 3 months
If you’re already a seasoned traveler with beautiful credit and take at least a couple international trips a year, perhaps you need a more sophisticated travel rewards card, like the American Express Platinum card. This card carries a high annual fee but is loaded with travel perks, which I will cover in a later post!
Sign up bonus: 60,000 Membership Rewards when you spend $5000 on your card in the first 3 months
If your credit isn’t quite where it needs to be, that’s okay too! Head on over to the Tutorial: Build Your Credit From Scratch With 6 Steps and Zero Debt.
Do you currently have a travel rewards card? How do you like it?