Beginners Guide Part 4: Know Your Spending Habits Really Well

Hopefully by now you’ve figured out what you want, are taking advantage of limited time offers, and are accruing points in lots of accounts.

But how do you ensure that you’re earning the most points possible on your everyday purchases? If you have over a dozen credit cards like myself, you’re likely in a position of having so many credit cards that you don’t know which one earns you the most points.

If that sounds like you…don’t worry! As with everything in the points world (and most things in life), a little learning can go a long way.

First I need to make the distinction between getting cards for the sign-up bonus and getting cards to keep. For casual travelers, most cards are NOT worth keeping beyond the first year (after which you’ll generally have to pay the yearly fee). In this case the goal should be to get the card, meet the minimum spend requirement and earn the bonus, and put it away until you cancel it before getting hit with the fee.

Other cards are worth holding on to for everyday purchases, like for gas, groceries, restaurants, or travel. Different cards have different bonus categories, and some are clear choices over others for certain purchases, but for beginners the choice may not be so obvious.

If you’re trying to meet a minimum spend requirement on one or more cards, make those a priority. It’s much more important to earn your minimum spend bonus than it is to maximize points on each individual purchase, because sign up bonuses are the easiest and fastest way to build your mileage and point balances.

Everyday spend is a different animal. I think the most effective way to explain this is to go over some of the popular cards and the best uses for them. Keep in mind that everyone has their own preferences and goals, so these can vary from person to person. Also note that if you feel like more of an expert you can just skip directly to The Frequent Miler’s trick to earn 5 points per dollar on every purchase (although this trick may not work anymore).

Chase Sapphire Preferred Card: This card seems to be almost everyone’s go-to card. It earns 2x points on food and travel, which many would agree are  two of the best things in the world. This card has no foreign transaction fees, so it’s perfect for travel abroad. These points are very flexible as Chase has many transfer partners. Also remember that you receive a 7% dividend on the points you earn every year, so you effectively earn 2.14 points on many purchases. This card has a $95 annual fee.

Chase Freedom Card: This card has rotating quarterly categories for which you earn 5x points on the first $1,500 in purchases per quarter. Categories vary from restaurants, gas, groceries, airfare, hotel, and retailers like Best Buy and Amazon and more. Earning 5x is as good as you can get on any card, so use the Freedom card for anything within the bonus categories each quarter, but only up to the $1,500 limit. This card is also valuable if you have a Chase checking account because of the Chase Exclusives program (see my analysis), which gives you 10 points per purchase plus a 10% bonus on the purchase price. For example, a $1 purchase would net 1 point from the purchase itself, plus the 10 point bonus, plus 1 more point as part of the 10% bonus (they round up). That’s 12x on that purchase! This means this card is good for most small purchases.

Amex Premier Rewards Gold  (Amex PRG) Card: This card offers 3x points on airfare and 2x on gas and groceries. It’s a very attractive card since most people have spend in those categories, but it carries a hefty $175 yearly fee. For most casual travelers this card is not worth it, but if you have a lot of airfare purchases you should definitely consider it. The 2x on gas and groceries is a great benefit, but alone are not worth the $175 fee in my opinion. Amex has lots of transfer partners, so keep that in mind as well.

SPG Amex Card: This card is valuable for a several reasons. SPG points are known to be the most valuable points currency because of their dozens of airline partners and potential redemption value at SPG hotels. Aside from the no-brainer of using it at SPG hotels, it’s hard to say what other purchases you should make on this card since it really does depend on what you value. I personally value these points highly because I have status with SPG and because it gives me the option to get American Airlines points, which I wouldn’t otherwise have with my Amex and Chase cards. The yearly fee is also a reasonable $65. I know many people that use this card for spend on all non-travel and non-food purchases.

Airline/Hotel Co-branded Cards (i.e. Chase United Card, Barclays US Airways Mastercard, Citi American Airlines Cards, Citi Hilton Reserve, etc.): Co-branded credit cards are usually only good for frequent travelers of a particular airline or hotel. You get quite a few benefits from airline cards including priority check-in, boarding, free checked bags, and more, plus usually 2x points on purchases on that particular airline. For hotels you can get free internet, breakfast, or even status, among other benefits. The 2x for airlines itself isn’t that great since the Chase Sapphire gives 2.14x and the Amex PRG gives 3x, but still might be worthwhile for the other benefits.

So here’s the lesson: most of the credit cards you sign up for should be purely for the sign-up bonus. If you’re a frequent traveler of a particular airline or hotel chain, you should consider holding on to the co-branded card because of other benefits it will provide you, but be mindful of the yearly fees. In general, the Chase Sapphire Preferred card is good for international and everyday purchases, the Freedom is good for small purchases when used with the Chase Exclusives Program or for bonus category purchases, and the SPG Amex is good if you want flexibility in transferring to various airlines.

I know this post doesn’t really give solid advice towards one card or another, but that’s the nature of the points game. You have to determine what you value and make all your decisions based on that. Hopefully this will give beginners some direction on which cards are useful.

Beginner’s Guide to Points – A 5-Part Series

Part 1: Starting Out – REALLY Know What You Want

Part 2: Do Not Underestimate the Importance of Timing

Part 3: It’s Good to Diversify…Usually

Part 4: Know Your Spending Habits Really Well

Part 5: There are LOTS of Ways to Earn Points

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Comments

  1. Wow, you really put a lot of thought into this. Great post!

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  3. [...] want, are taking advantage of limited time offers, are accruing points in lots of accounts, and know your spending habits really well. If you’ve gotten to this point, it’s time to turn up the miles/points-earning [...]

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