I talk to many people about earning miles and points. What I hear from most people that I talk to is that they don't know where to start. First it should be noted that collecting miles and points is not for everyone. Largely because signing up for credit cards is the primary method for earning miles and points. Many people should not be signing up for credit cards or maybe cannot sign up for credit cards because they have no credit or bad credit.
I have put together this post for absolute beginners to collecting miles and points. This will be set up as a step-by-step process for anyone interested in signing up for rewards credit card to receive points to travel the world for almost free.
Step 1 - Ensure that You Have NO Credit Card Debt
Step 2 - Know Your Credit Score
Step 3 - Determine if Your Credit Score is Good Enough to be Eligible for the Best Rewards Credit Cards
Step 4 - Understand How Applying for Credit Cards Affects Your Credit Score
Step 5 - Pick Your First Rewards Credit Card(s) to Apply for
Step 6 - How to Apply for the Best Credit Cards
Step 7 - Meeting Minimum Spending Requirements
The first step to entering the miles and points world is to first Ensure that you have NO credit card debit, and you are able to pay off your credit cards in full every month! So if you want to get into the miles and points world you need to first focus on paying off all your credit card debit. I personally have 15 credit cards and I have not maintained a credit card balance since I got out of college in 2007.
After you have ensured that you have no credit card debt and you can pay off your credit cards every month, you can move on to the next step. Know your credit score! There are a lot of services out there that offer you a free credit report. All of these are pretty much scams. The will give you a free credit report without a credit score and expect you to pay additional for the credit score. I use two absolutely free services. The first one is Credit Karma. This a great website that offers a free credit report and credit score. The other website is Credit Sesame. This is another great website that offers a free credit report and credit score. Credit Karma is a great site because it provides very good detail on the workings of your credit report. Credit Karma also offers a free TransUnion credit score (only updates once per month) which is one of the three major credit reporting agencies
In comparison, Credit Sesame offers you your free Experian Credit Score once per month. If you want it updated more than that you have to pay. Credit Sesame does not offer the same credit report details that Credit Karma does. Ultimately, I use both services, and I check them regularly. Sign up today!
After you know your credit score, the next step is to Determine if Your Credit Score is Good Enough to be Eligible for the Best Rewards Credit Cards. As a general rule, a score 700 or greater is desired if you are going to apply for the top rewards credit cards. It is quite possible to get approved for top rewards credit cards with a credit score of less than 700. If your score is sub 700, your focus should be on trying to improve your credit score before going out and trying to earn miles and points.
When I tell people about applying for credit cards to reap the rewards to travel for almost free, one of the first questions I am asked is, "doesn't applying for credit cards hurt your credit score?" The answer is yes and no. Step 4 is Understand How Applying for Credit Cards Affects Your Credit Score. Our credit score is derived from a number of different factors, some of which are proprietary. What you should know is that applying for a credit card results in a hard credit inquiry. Hard credit inquiries show lenders that a person has been looking for new credit. A single hard credit inquiry can reduce your score from 2 - 5 points depending on the make up of your individual credit report. The impact of individual credit inquiries to your credit report diminishes after 90 days. The hard credit inquiries will still be recorded on your credit report, but they will no have much impact on your credit score after 90 days. Credit inquiries stay on your credit report for two years. So 90 days after a hard credit inquiry your credit will likely go up all other factors held constant. This is how applying for credit cards can decrease your credit score.
You credit score is made up of five main factors: payment history, amounts owed, length of credit history, new credit, and types of credit used. The hard credit inquiries fall into the new credit category which makes up 10% of your overall score.
On the other side, getting new credit cards can actually increase your credit score in the long run. This is because another important make up of your credit score is the credit utilization or amounts owed. Credit utilization is the ratio of total credit being used compared to total credit you have available. In other words if you have one credit card with a $5,000 credit limit and during the month you spend $2,000 on your credit card this would be a 40% credit utilization. The lower the credit utilization the better. Generally anything over 20% utilization is a negative factor. When you apply for a new credit card your total available credit increases therefore your credit utilization decrease which is a good thing. Amounts owed makes up 30% of your overall credit score.
Applying for new credit cards will also impact the average length of credit history which makes up 15% of your credit score. If you have only one open line of credit (credit card, car loan, student loan, etc..) which you have had for five years and you open a new credit card, your average length of credit history would go from five years to two and a half years which would reduce your credit score.
Be aware that in the short run your credit score will go down as a result of applying for credit cards. Also, you are at risk of being declined new credit if you have too many credit inquiries in a short period of time. Proceed with caution!
Now it is time to Pick Your First Rewards Credit Card(s) to Apply for. When starting out in the miles and points game begin with just one or two credit cards for your first applications. Make sure you can meet the minimum spend requirements, pay off your credit cards in full, and pay credit cards on time before getting too zealous and damaging your credit or getting yourself in trouble by not being able to pay off your credit cards in full.
There are many, many different rewards credit cards. There is a much smaller number of rewards credit cards that are considered the great rewards credit cards. Which credit card(s) you decide on first depends on your location and travel goals.
My recommendation for the top airline rewards credit cards available right now are:
The standard offer for this American Airlines credit card only offers just 30,000 miles, but this offer comes with 50,000 bonus miles. A great card that can get you two domestic round trip tickets for free.
Before you actually apply for any new credit cards you should know How to Apply for the Best Credit Cards. First be aware that all credit offers for the same credit card are not created equal. As above, the standard offer for the
How to Meet Minimum Spending Requirements for Credit Cards - Amazon Payments
How to Meet Minimum Spending on Credit Cards - Debit Gift Cards to Money Orders
How to Meet Minimum Spending on Credit Cards - Bluebird
How to Meet Minimum Spending with Loyal3
I have put together this post for absolute beginners to collecting miles and points. This will be set up as a step-by-step process for anyone interested in signing up for rewards credit card to receive points to travel the world for almost free.
Step 1 - Ensure that You Have NO Credit Card Debt
Step 2 - Know Your Credit Score
Step 3 - Determine if Your Credit Score is Good Enough to be Eligible for the Best Rewards Credit Cards
Step 4 - Understand How Applying for Credit Cards Affects Your Credit Score
Step 5 - Pick Your First Rewards Credit Card(s) to Apply for
Step 6 - How to Apply for the Best Credit Cards
Step 7 - Meeting Minimum Spending Requirements
The first step to entering the miles and points world is to first Ensure that you have NO credit card debit, and you are able to pay off your credit cards in full every month! So if you want to get into the miles and points world you need to first focus on paying off all your credit card debit. I personally have 15 credit cards and I have not maintained a credit card balance since I got out of college in 2007.
After you have ensured that you have no credit card debt and you can pay off your credit cards every month, you can move on to the next step. Know your credit score! There are a lot of services out there that offer you a free credit report. All of these are pretty much scams. The will give you a free credit report without a credit score and expect you to pay additional for the credit score. I use two absolutely free services. The first one is Credit Karma. This a great website that offers a free credit report and credit score. The other website is Credit Sesame. This is another great website that offers a free credit report and credit score. Credit Karma is a great site because it provides very good detail on the workings of your credit report. Credit Karma also offers a free TransUnion credit score (only updates once per month) which is one of the three major credit reporting agencies
In comparison, Credit Sesame offers you your free Experian Credit Score once per month. If you want it updated more than that you have to pay. Credit Sesame does not offer the same credit report details that Credit Karma does. Ultimately, I use both services, and I check them regularly. Sign up today!
After you know your credit score, the next step is to Determine if Your Credit Score is Good Enough to be Eligible for the Best Rewards Credit Cards. As a general rule, a score 700 or greater is desired if you are going to apply for the top rewards credit cards. It is quite possible to get approved for top rewards credit cards with a credit score of less than 700. If your score is sub 700, your focus should be on trying to improve your credit score before going out and trying to earn miles and points.
When I tell people about applying for credit cards to reap the rewards to travel for almost free, one of the first questions I am asked is, "doesn't applying for credit cards hurt your credit score?" The answer is yes and no. Step 4 is Understand How Applying for Credit Cards Affects Your Credit Score. Our credit score is derived from a number of different factors, some of which are proprietary. What you should know is that applying for a credit card results in a hard credit inquiry. Hard credit inquiries show lenders that a person has been looking for new credit. A single hard credit inquiry can reduce your score from 2 - 5 points depending on the make up of your individual credit report. The impact of individual credit inquiries to your credit report diminishes after 90 days. The hard credit inquiries will still be recorded on your credit report, but they will no have much impact on your credit score after 90 days. Credit inquiries stay on your credit report for two years. So 90 days after a hard credit inquiry your credit will likely go up all other factors held constant. This is how applying for credit cards can decrease your credit score.
You credit score is made up of five main factors: payment history, amounts owed, length of credit history, new credit, and types of credit used. The hard credit inquiries fall into the new credit category which makes up 10% of your overall score.
On the other side, getting new credit cards can actually increase your credit score in the long run. This is because another important make up of your credit score is the credit utilization or amounts owed. Credit utilization is the ratio of total credit being used compared to total credit you have available. In other words if you have one credit card with a $5,000 credit limit and during the month you spend $2,000 on your credit card this would be a 40% credit utilization. The lower the credit utilization the better. Generally anything over 20% utilization is a negative factor. When you apply for a new credit card your total available credit increases therefore your credit utilization decrease which is a good thing. Amounts owed makes up 30% of your overall credit score.
Applying for new credit cards will also impact the average length of credit history which makes up 15% of your credit score. If you have only one open line of credit (credit card, car loan, student loan, etc..) which you have had for five years and you open a new credit card, your average length of credit history would go from five years to two and a half years which would reduce your credit score.
Be aware that in the short run your credit score will go down as a result of applying for credit cards. Also, you are at risk of being declined new credit if you have too many credit inquiries in a short period of time. Proceed with caution!
Now it is time to Pick Your First Rewards Credit Card(s) to Apply for. When starting out in the miles and points game begin with just one or two credit cards for your first applications. Make sure you can meet the minimum spend requirements, pay off your credit cards in full, and pay credit cards on time before getting too zealous and damaging your credit or getting yourself in trouble by not being able to pay off your credit cards in full.
There are many, many different rewards credit cards. There is a much smaller number of rewards credit cards that are considered the great rewards credit cards. Which credit card(s) you decide on first depends on your location and travel goals.
My recommendation for the top airline rewards credit cards available right now are:
Chase Sapphire Preferred
This is my top pick credit card for beginners to the miles and points game. Not only does it earn great flexible rewards in the Ultimate Rewards Program with many different Airline and Hotel Partners, but the 2x categories on dining and travel are great perks as well. United Airlines is the best transfer partner with the Ultimate Rewards Program. With the 40,000 bonus points, 5,000 additional points for adding an authorized user, and the $3,000 minimum spending you will earn a total of 48,000 points or 48,000 United Airlines miles. - 40,000 Ultimate Rewards Points after $3,000 spend in 90 days
- No foreign transaction fees
- 5,000 additional UR points after adding an authorized user
- Fee free first year then $95
- 2x Points on dining and travel
Citi Platinum Select Aadvantage World MasterCard
The standard offer for this American Airlines credit card only offers just 30,000 miles, but this offer comes with 50,000 bonus miles. A great card that can get you two domestic round trip tickets for free.
- 50,000 bonus miles after spending $3,000 in first 90 days
- $95 fee waived for the first year
- one free checked back on American Airlines flights
Before you actually apply for any new credit cards you should know How to Apply for the Best Credit Cards. First be aware that all credit offers for the same credit card are not created equal. As above, the standard offer for the
Citi Platinum Select Aadvantage World MasterCard is just 30,000 miles, but a little bit of research will show that there is a much better 50,000 mile offer available. Do not apply for a new credit card without first making sure you are applying for the best available offer.
If you choose to apply for more than one new credit card for your first round of applications you should apply for all credit cards at the same time. This means when you sit down to fill out the credit card applications you should do so simultaneously with both(all) credit card applications. You want to do this because submitting a credit card application results in a hard credit inquiry on your credit report. If you make sure to submit your applications at the same time this will ensure that the new credit inquiries do not appear on your credit report when it is pulled for the application. Too many hard credit inquiries will result in being denied new credit cards even if you have an excellent credit score. Fill out the applications together so that one application page does not time out while you are completing the other. Once both applications are completed, submit one right after the other.
Once you have submitted your applications, hopefully you will receive immediate approval. Congratulations! If you do not receive immediate approval, don't freak out! This happens frequently, that you will see a response that says your application is pending. If this occurs you should call the credit card company reconsideration line immediately to try to get your application approved. The most frequent reason that I have not been approved immediately was because of the many change of addresses that I have had. Once I confirmed my mailing address, I was approved over the phone. Here is a link to the back door reconsideration line phone numbers for all major credit card companies thanks to The Points Guy.
Once you have been approved for your new credit card(s) you still have to Meet the Minimum Spending Requirement before you receive your bonus points. All of us have a monthly amount that we naturally spend on credit cards. For me this is around $1,000 per month. If I sign up for one credit card with a $3,000 spending requirement over the next three months, I can meet the minimum spending requirement without a problem. Now if I apply for two credit cards that require $3.000 each over the next 3 months now I have a problem. I do not naturally spend $2,000 per month on credit cards. What to do? This is where manufactured spending comes in.
Manufactured spending is the term used to describe spending money on credit cards without really spending money, or purchasing cash equivalents with a credit card for the purpose of earning points, then liquidating to cash as quickly as possible.
I have blogged several posts on methods for manufactured spending. Here are a few links to previous posts:
How to Meet Minimum Spending on Credit Cards - Debit Gift Cards to Money Orders
How to Meet Minimum Spending on Credit Cards - Bluebird
How to Meet Minimum Spending with Loyal3
Hopefully, this post will give you a basic understanding of miles and points. If you have any questions or comments, please leave them below.
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