How To Use Credit Card Bonus Points To Your Best Advantage

• IRON100
• February 19th, 2010

On my recent rather whirlwind trip to the International Trader Expo in New York last weekend, I decided that I would attempt to economize without sacrificing comfort given the location of this excellent event. How did I do that? With a little planning and bonus points from my primary credit card (in this case American Express). If you travel frequently or make lots of purchases over and over again (say, for gasoline), getting a credit card is a good way to build up those points toward a trip or perhaps a special stay-over location.

I will make some precautionary statements however:

1) You must have good credit AND pay off your credit cards ON TIME EVERY TIME. I have sufficient cash flow to do that every time. If you do not, then do not go into debt to build up points. That is really stupid because you are ultimately going to ruin your credit score.

2) I realize that credit card laws have changed, and for that reason one must be sure to pick a credit card that does not fee you to death or destroy you with insane interest rates (though that is simply a matter of degree still these days). That means you must research each one carefully before deciding to use one.

3) Study the reward points program in advance to see if it maximizes points for the repetitive payments that YOU usually make. If the card only gives you bonus points for buying a select few special purchases, you will likely grow old and die before ever benefiting from the points you earn. I definitely do not want you to suffer that frustration.

4) Expiration times for points need to be examined for each card. I have cards for which the points will not expire as long as I use the card.

5) Find a bonus program that gives you some flexibility as to how you may use those points.

Let's start with my example. Long ago I had what I seem to recall as Marriott Privilege points, but I had blown them out long ago when I used to travel quite a bit with a former employer. I knew that getting a discount for the Marquis would be next to impossible. I did, however, have a Hilton Rewards Points plan. Sad thing was, I had very few left. How did I turn that sadness into gladness (and a stay at a Hilton Hotel not but about a quarter-mile from that venue?). I had American Express points (and still do by the way) out the wazoo. Not only that, but American Express points are equal to about 1.3 Hilton Rewards points, meaning they would be stretched if I converted some of them. The point of this example is that many credit card companies have promotional or business relationships with other travel service vendors. Because of that, one has a multitude of ways to use the points to do what one really wants to do with them. Guess what, another savvy traveler, @aiki14 DID EXACTLY THE SAME THING to save bucks on his trip from Pennsylvania. There are plans out there that will allow you to use points for cruises, air travel, and countless other services.

Two cards that I have (one personal, one for business) will allow me one complimentary coach ticket for a second traveler upon renewal each year. I intend to use that for a special vacation next year.  A friend of mine may need a bit of help on a coach class ticket, so I will use that for the trip.

Now, the big question is, should one pay the extra amount for say an American Express Platinum Card, which offers special event preferences, entrance to certain airline airport lounges, and special travel services. The real question is will one be able to get the $500 it costs annually to use that card in benefits? If the answer is no, I would definitely NOT get it. A regular American Express card is good enough in most American venues, and in foreign venues where Visa is more acceptable, a regular Visa card is sufficient. If you do, however, wish to take advantage of special travel discounts (and can charge anything from property taxes (a nice point builder) or other larger ticket items through the card, the answer might actually be YES. If one travels enough on business to obtain at least $500 of benefit annually by using them, one would be foolish not to have one.

The key thing is, however, is that you have the cash flow to use them, your credit is virtually spotless, you pay the bills on time, and that you really can take advantage of $500 of travel benefits. For younger folks of more modest means, do NOT attempt to have such a card because of the perceived prestige of having one. The road to Debt Hell is paved with such foolish notions. If one does not need the benefits of it, do not waste the money. Stick that cash in an IRA or some other tax-deferred vehicle.

What if you have a bunch of bonus points or frequent flier miles that are about to expire ? One can give them to charity. There are charity programs by most major cards for which points may be donated to military veterans so that they can afford to travel on leave or need medical treatment. Other charities can take such donations as well. If the new tax legislation passes that eliminates the charitable deduction, as has been proposed, here is a way to donate without cash.

I will do my best in the coming weeks to see if I find some unique bonus point programs that add some real discounting to travel. Again, your credit better be good and your payment history better be spotless before trying this. If you can't handle credit, you can't handle bonus rewards. Let's just face that right up front. But if you can, there are really nice benefits to be had.

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