The following post is a guest blog, written by J.R. Duren (personal finance reporter at Highya.com).
Credit card rewards are not unlike the fashion world. While trends come and go, there are some consistent styles out there. Those who are most successful in the industry can pair tried-and-true methods with trending techniques.
For a prime example in the world of credit card rewards, just look at gift cards. Cards with grocery store bonuses became gold mines for rewards chasers who would buy hundreds or thousands of dollars’ worth of gift cards at grocery stores to get those multipliers. However, with the increased awareness of fraud-related gift-card purchases, grocery stores wised up and started prohibiting the purchase of gift cards with credit cards. While this left die-hard rewards chasers disappointed about lost opportunities for bonus points, they adapted.
For some, it was a matter of signing up for the Chase Sapphire Reserve, the luxury unicorn that admittedly lost Chase money because response reached ultra-viral levels. Unboxing videos were flooding the internet like reaction montages after World Series or World Cup wins. The card was so popular that, this past December, JPMorgan Chase & Co. CEO Jamie Dimon told investors the Reserve cost Chase about $200-$300 million in Q4 2016.
If the rewards landscape was littered with unicorns prancing about, maximizing your spend would be easy. Unfortunately, that isn’t the case. Sometimes you strike when the proverbial iron is hot, and other times you have to grind it out. Here are four hacks to find the best credit cards with rewards that will work in your favor.
1. The Chase Freedom card never fails
Perhaps the most basic rewards hack of all time is using the Chase Freedom card exclusively for bonus categories. Every three months, the card rotates purchase categories that can get you 5 points per dollar. Faithful rewardists track these changes, sign up for the new bonus categories and whip out the green-edged card to rack up points.
Is this method the one that’s going to hit headlines from Forbes to Bloomberg to MSNBC? No. Sexy it is not. But there’s no arguing its effectiveness.
This April, for example, the Freedom’s rewards calendar switches to grocery and drug-store purchases. Anytime you swipe your card at these locations (excluding warehouse/discount stores, Target and Walmart) you’ll get five Chase Ultimate Rewards points for every dollar you spend.
Let’s put this upcoming quarter’s bonus purchases in perspective. The USDA says a moderate monthly grocery bill for a family of four is about $1,050 a month. That means your family can expect to reap 5,250 Ultimate Rewards points in one month, a fantastic perk considering you can book any Category 1 Hyatt hotel on a 1:1 points transfer.
Here’s the catch, though: Chase caps your rewards-eligible purchases to $1,500 each quarter. So you’ll max out at 7,500 Chase Ultimate Rewards points per quarter in the bonus category. The cap is frustrating, but the points you can rack up are well worth it.
2. Don’t underestimate Southwest
For many years, Southwest Airlines carried the “discount” reputation because flights were cheap but perks were non-existent. Many travelers have this notion that Southwest flights are cramped free-for-alls that pale in comparison to more accommodating spaces in United, Delta or American flights.
Of course, if you’ve flown anytime in the past year, you know those stereotypes aren’t true. I looked at the recline distances on Southwest Boeing 737 flights and found they’re on the same level as United, and the distance between headrests is virtually equal as well.
This is an important distinction for rewards chasers for one major reason: Your Rapid Rewards points can take you a lot farther than United MileagePlus miles, Delta SkyMiles or American’s AAdvantage miles. So, when you’re deciding whether you want to transfer your Chase Ultimate Rewards points to a domestic carrier, put some serious thought into skipping United and using Southwest.
I spent some time researching flights on popular routes and found that Southwest had shorter flight times, quicker layovers and more pleasant arrival and departure times. To me, that’s the gold standard for budget travelers.
Do you get preferred seating, lounge passes or priority placement for upgrades like you do on United? No. If that’s what you want, consider the MileagePlus Explorer. Your card gets you priority boarding and two free passes to United Club lounges each year.
3. Be Creative: Look for the loopholes and outcasts
Every active member of the military should know they can get their annual fee waived for American Express (a CreditCardForum advertising partner) and Barclaycard. The MasterCard Gold Luxury Card has an annual fee of $995. A recent post from a service member who contributed a Gold Card review to The Points Guy indicated that his fee was waived on this card.
While he cooled on the card’s merits with the annual fee, the Gold Card’s double rewards rate on purchases, $200 travel credit and standard Global Entry reimbursement were a steal (naturally) without the annual fee. Not to mention the fact that the card’s face is plated with 24k gold.
Other cards worth your time could be the Platinum and Starwood Preferred Guest cards from American Express, as well as the Barclaycard Arrival Plus World Elite Mastercard.
As for the outcasts, this is a topic that doesn’t get much coverage because the world of rewards credit cards has become one of the haves and the have-nots—why even consider a Choice Privileges Visa when you can have the AmEx Starwood Preferred Guest card or the Chase Sapphire Reserve, right? However, what rewards sites fail to consider is what the average American needs.
In many cases, American families don’t travel much. A particularly insightful 2015 Skift article indicates that 42 percent of Americans didn’t take vacation days in 2014 and 63 percent of American adults didn’t travel at all. With that in mind, the rewards conversation should shift from, “What’s the most luxury and value I can get out of a card?” to discussions focused on maximizing free hotel nights and flights for the average family.
Consider this: The Choice Privileges Visa Signature gives 15:1 points on Choice Hotel purchases, 5:1 points on Choice Privileges points/gift cards and 2:1 points on everything else. You also get a 32,000-point intro bonus if you spend a modest $1,000. On top of that, you get a 10 percent bonus on redeemed points and Gold loyalty status. The clincher? There are more than 1,500 hotels that can be booked with 8,000 points.
Based on conservative spending numbers from the Bureau of Labor Statistics, you can hit more than 50,000 points on this card per year—that’s six free nights. Will those Comfort Inn stays make the headlines of popular rewards-chaser sites? Never. But, for the average American, it’s a pretty sweet deal, especially considering that between the Hilton Honors and SPG programs there are only four Category 1 hotels in the entire United States.
4. Formulate your own strategy
As rewards chasers, we tend to fixate on the trends and the cards that everyone else is talking about. But take a moment to think about who “everyone else” is.
Are they single Millennials without kids who love to travel, or are they battle-tested moms and dads with kids and not a lot of free time on their hands?
If you fall into the first group, then a card like the Sapphire Reserve suits you well. You can travel often and take advantage of travel credits, Global Entry and Priority Pass lounges.
If you’re like many Americans and you don’t travel much (and explore the United States when you do), branch out. Take a look at the Choice Privileges Visa or the Southwest Rapid Rewards Premier. Both of these cards offer tremendous value for the average person.
If you want to take the more traditional route, pair up a Chase Freedom and Chase Sapphire Preferred. The mix of up-front bonus points (50K with the Preferred) and quarterly bonuses can add up quickly.
J.R. Duren is a personal finance reporter for Highya.com, where he writes articles about credit scores, credit cards and other personal finance topics. He also reviews credit cards, robo-advisors and lenders.