The Cheapskate's Guide to Maxing Out Credit Card Rewards
Credit card companies are quietly lowering signup bonuses and eliminating perks. Here’s everything you need to know about the changes so you can keep the freebies coming without spending a fortune.
Illustration by Hunter French
News broke at the start of 2019 that sent a cold shiver down the spines of credit card enthusiasts everywhere: banks were pulling back on rewards points. In reality, this has been going on for a while, most notably in 2017 when Chase cut the signup bonus for its Sapphire Reserve card in half. But as the number of people learning how to game the system to score free travel and other perks has grown, card issuers have become even more desperate to stem their losses and figure out a way to curb credit card churning—which involves opening a new account just for the signup bonus, then moving onto the next card with a big bonus offer.
The newly updated American Express Gold Card is the latest example of shrinking signup bonuses. “Instead of giving a 100,000 point signup bonus like the Chase Sapphire Reserve did, they're doing a 25,000 point signup bonus with four points per dollar on everyday dining,” Brian Kelly, founder and CEO of the Points Guy, says.
As someone who churns more than a milkmaid, I’ve been worried about what this means for those of us who rely on rewards points to travel affordably. Signup bonuses of as much as 75,000 points for the Starwood Preferred Guest card for example, are the easiest to collect. So the threat of their decline—or worse, elimination—could have a catastrophic effect on budget travelers like me.
Thankfully, it’s not looking that dire. “Banks are not going to get rid of rewards points,” assures Matt Schulz, the chief industry analyst at CompareCards. “If they do, there will be folks who say, ‘Well why am I even getting a credit card?’ and banks don’t want that.”
Nonetheless, it is going to become harder to earn points upfront and then bounce. “What we're going to see is credit card issuers trying to give people more reasons to stick around, and give their current customers more bang for their rewards buck,” Schulz says.
That could mean an increase in points earned per dollar spent, as well as loyalty bonuses. “Instead of the big, flashy signup bonuses, we're seeing offers that are more sustainable over time,” says Kimberly Palmer, a credit card expert at NerdWallet.
Despite the changes, “Overall, there are more points than ever before,” Kelly says. You just have to get a bit more creative with how you earn them. So instead of giving up on credit card rewards, it’s time to buckle down and figure out how to squeeze more value out of them. Here are the best strategies:
Keep an eye out for the biggest bonuses
Even if the number of cards with epic signup bonuses does go down, they are not going away. We will now just need to keep a closer eye on the industry to make sure we nab the best deals while they’re hot. Sites like CreditCards.com, NerdWallet, CompareCards, and the Points Guy all track the changes religiously, and you’ll also see ads for them if you pay attention. Many of the best bonuses only run for a few months—the current offer for Southwest's Rapid Rewards Plus ends February 11, for example—so timing is everything.
One big catch is that you may not be eligible for signup bonuses even if you get approved for a card. For example, Citi won’t give you a signup bonus if you’ve opened or closed any card from their family in the preceding 24 months. The Points Guy has a great guide to restrictions here that explains the ins and outs for all major card issuers.
Make sure you'll get approved
Even though I have an excellent credit score, I was denied one of the last cards I applied for. Why? I’d opened too many other accounts in the past year. “Be sure to find out if the issuer has a specific policy that limits how many new cards you can open in a period of time, how many cards you can have with them, or if you’re ineligible for the signup bonus because you have a similar card,” Greg McBride, the chief financial analyst at Bankrate.
Chase will deny your application for a new card if you’ve opened more than five accounts from any company or bank in the past 24 months. You may also get denied if your credit score is too low. (CompareCards has a handy list of average credit scores needed to get popular cards.) Getting denied for a card doesn’t hurt your score in and of itself, but applying for any card lowers your score temporarily, so you only want to apply for cards you are sure you will qualify for and pace out your applications.
Pick cards that reward your spending habits
Once you get beyond the signup bonuses, look for cards that earn the most points for your everyday purchases. Spend a ton on groceries and gas? The American Express Blue Cash Preferred gives a whopping six percent cash back at grocery stores and three percent back at gas stations. “Depending on your spending, that’s hundreds, if not thousands of dollars in value a year through rewards points,” says NerdWallet's Palmer. The $200 welcome offer will cover the card’s $95 annual fee for two years too.
Love to travel? The Southwest Rapid Rewards Plus card gives you both a wicked signup bonus of 30,000 miles, plus an unlimited companion pass on Southwest Airlines for the rest of the year after you spend $4,000 in the first three months. You can also extend the free Companion pass through the end of 2020 if you earn 110,000 points in 2019. That sounds like a lot, but the Points Guy has a clever hack for racking those points up relatively cheaply.
Step up to a multi-card strategy
Say you want to book a flight on Delta that costs 30,000 points, but you only have 20,000 points remaining in your SkyMiles account. Should you shell out cash for the remaining amount? No way. Instead, transfer their points to your airline accounts from a card you already have like Citi, Chase, Capital One, and American Express.
It can be confusing have more than three cards, so try to stick to that for starters. Palmer recommends a flat-rate, cash back card for everyday expenses, such as the Citi Double Cash that gives you two percent cash back on everything. Then use a targeted card for categories you spend a lot on, such as groceries or travel. Lastly, if you find shop at one particular store a lot, apply for their store card. You’ll often find deals like five percent cash back or ten percent off all purchases.
The Points Guy’s Kelly recommends what he calls the “Chase trifecta,” which may only make sense if you need a card for business expenses, too. But by holding more than one Chase card, you can enjoy multiple signup bonuses, then transfer points from one card to another to get more value for them when it comes time to redeem them.
Pay attention to disappearing perks
While new perks pop up all the time, others are disappearing. For example, Discover eliminated extended its product warranty, purchase protection, return guarantee, auto rental coverage, and flight accident insurance in 2018. Chase nixed price protection, and starting this summer, the United Explorer Card will lose both price and return protection, and its trip cancellation coverage will be lowered from up to $10,000 per trip to just $1,500 per trip.
The losses are often offset by new offerings. “I’m seeing a trend of hotels and airlines offering the ability to not just redeem points for travel, but for experiences,” says Kelly. “Hilton just allowed their members to redeem tickets to the Grammys, which you can’t even buy.”
Spend points as soon as you can
“Over the years, we've seen points and miles become less valuable,” says CompareCards' Schulz. Flights that once cost 10,000 points now often require 40,000 points or more to book. “The best thing for people who have a lot of points is to use them and not hold on to them, because they're not going to get more valuable over time.”
Adds BankRate's McBride, “Do not hoard your miles and points. This is not a bank account. This is not an asset that appreciates in value.” Many credit cards will only honor your points for as long as your account is open. So if you’re hoping to avoid paying the annual fee to keep the card for another year, start shopping for reward redemptions. That isn’t a problem with airline cards, though, since your points come in the form of frequent flyer miles that last as long as you are part of their loyalty program.
Make every point count
Aside from letting your points expire, the worst thing you can do is spend them on insignificant purchases. “Don’t squander your points right away and use them on nonsense,” suggests Kelly. “Plan an amazing trip that's going to change your life. It may seem daunting and expensive, but when you break it down and focus on each step—the flight, the hotel—it’s a lot easier. Put together a dream trip and work backwards from there.”