*This post contains some affiliate links (refer a friend links) but at no cost to you. I also want to note this post is factual but is also based on my own personal experiences. I do not advocate making financial decisions that are not right for you.
I know what you’re thinking. Credit cards? Snore, bye. But before you click out of here and leave, here me out. Credit cards have so many benefits that people don’t utilize and too many people don’t know how to properly use them or understand them in their entirety. Credit cards offer so much more than what’s on the surface so I want to help you understand it all so you can then go and use them to travel more, see more things and go to places you never thought you’d be able to, because yes, that is possible.
I will be talking about the different credit cards towards the end of this post so feel free to skip ahead, but I encourage you to read the whole thing. In this post, I’m going to talk about all-around useful credit cards, and in part two on Monday I will be discussing specific credit cards for specific companies.
So many people view credit cards as inherently evil when this couldn’t be further from the truth. I understand that sometimes it’s a necessity, but for most people, they think credit cards are a way to make you go into debt and bankrupt you and ruin your life forever, but that’s only if you’re completely incompetent. The thing with credit cards is, as long as you’re smart about it, you will never have a problem. Keep track of what you’re spending, set yourself a budget, make sure you know exactly when all of your statements issue and when the payment is due and then pay it off in full. Never spend more money than you have or are willing to spend. These are obviously the basics.
The next misconception about credit cards is that you should really only ever have one or two, no more. We’ve all heard that you should never cancel a credit card or apply to multiple ones because it hurts your credit score. This is all false. Yes, canceling a credit card is not exactly advisable and yes, applying for a credit card does affect your credit score in a sense, but not in the way you think. Let me give you myself as an example. I have had so many credit cards I sometimes forget which ones I even used to have, I have canceled, I have nearly a dozen active ones, I churn them, I reap in the benefits and then I discard. People would look at me as a prime example of someone who doesn’t have their life together and has no clue what they’re doing when in reality I have acquired zero debt and I have an excellent credit score.
So, in this post, I want to talk about how to be smart with your credit cards to maintain a great credit score but also how to get the best credit cards that will give you the best rewards in order to travel more.
Managing Credit Cards
I’m only going to go into this a little bit, but I feel like it needs to be said since, unfortunately, there are so many people out there who have no clue what they’re doing. As I mentioned, credit cards are not to be used for spending money you don’t have. They are simply a way to delay your spending and can help with cash flow purposes, however, for me, the biggest benefit is the rewards you get for spending on them. I will get to that later.
The next thing about managing credit cards is to have each card for a purpose and to keep track of them. We have a spreadsheet of our credit cards, which one’s what, which one’s have annual fees, when the statements issue, when the payments are due, how much credit line there is, etc. Keeping organized is key to managing everything and you will be in total control.
Lastly, you must know what every card has to offer. I have heard from countless friends who just go, “Oh, guess what I found out? My card has rewards!” Or people don’t know that their card offers cashback on certain products or offers at stores. You get these simply for having the card so why not utilize them?
I am not a credit score guru and I won’t pretend to be, but I can give you a brief overview of how it works. Your credit score is essentially calculated by a few different factors, with some having more weight than others. So, what exactly is a credit score? It basically means how reliable you are and how likely you are to pay your bills on time. Essentially, if you’re in a good financial state and if you are responsible with your money. The higher the score, the better.
Your credit score is calculated by analyzing five different areas, each with a different percentage value.
I’m going to briefly go into what each of these mean and how different things can affect your score in different ways.
As the title states, this is based on whether you pay your bills on time and whether you pay them in full. It does take into account how many days your payment was late. If you pay a bill one day late it will affect your score far less than if you were to pay a bill an entire month late.
The best way to do this is to set yourself a reminder to pay your bill or to set up automatic payments. Paying your bills on time and in full is the best way to maintain a great credit score, which is why someone like me with so many and multiple canceled ones has such a high one, since this is weighted the most.
Going hand in hand with payment history, the second biggest factor in determining your credit score is how much debt you have. If you pay your bill off in full every month, you aren’t going to have debt and therefore this is going to increase your score significantly.
This also looks at how much of your credit lines you are actually using. Typically, you should be trying to spend around 9% of what you have available. Going above that is ok, but going over 50% will be detrimental to your score.
Between these first two factors you’re looking at 65% of your score, which hopefully now begins to explain why canceling and applying to more credit cards can have a smaller effect on your overall score than you may have thought.
This is another big one. It essentially looks at how long you have your accounts, the longer, the better. While I do churn credit cards, I have a few ones with no annual fees that I keep year after year to keep my credit card duration quite high.
Another thing I want to note that’s super important about duration is that it is not the duration of the credit card. It is, in fact, the duration of the credit line. As an example, I had a credit card with an annual fee with American Express and I wanted to cancel it, but I moved my credit line from that card to another American Express card with no annual fee, and as a result this didn’t affect my credit score at all because the credit line was still active.
With duration, it’s good to still be putting a bit of spending through it, even if it’s only $10 of Netflix.
This is where canceling credit cards can affect you, but the key thing to keep in mind is that it’s all relative. If you cancel one after a year, but you have one that you’ve had for three years and continue to have and use, then canceling this other card will have a very small effect on your score.
A common misconception is that this means the number of credit cards you have, when in reality it means how many times you’re applying for a credit card. When you apply for a credit card, the bank does a credit pull to view your score. The more pulls you have, the greater risk you seem to be.
However, there is a way to avoid this. If you were to apply for a credit card and then apply for another a week later and another next month and another two weeks later, this is going to affect your score. Instead, apply to all the cards you want at the same time, that way it will only count as one pull.
Types Of Credit
This basically just means that it looks more reputable if you have credit cards from banks such as Bank of America or Chase, rather than a credit card through Macy’s or Nordstrom. These credit cards directly with banks have more prestige, and therefore having those types of cards will increase your score.
Now that you understand what goes into determining a credit score and how different actions can affect it, hopefully, you understand that not all credit cards are bad as long as you are diligent and responsible.
Choosing Credit Cards
Now the fun part, choosing credit cards to help you get points and travel more. There are literally so many card options out there this post would take you hours to read if I tried to include them all. It also depends on your style of travel, where you go, how you get there and what companies you use. If you fly Delta, one card might be better for you over others, but if you fly American you’ll want to look into a whole slew of other cards.
Instead, I’m going to try and focus on some of my favorite all-around cards then in part two on Monday I’ll be talking about specific ones for specific hotel chains or airlines.
This is a selection of the various credit cards I own currently, full disclosure though, two of them are not American and I realize now I accidentally included my bank card! All of these cards have served me very well for one purpose or another. If you are in the Australian market, there are some other awesome options for you, like the American Express Explorer Credit Card.
Chase Sapphire Preferred
This has been my go-to card for a long time now and it has some really great benefits that I’ll briefly share with you. It’s the one on the far right-hand side of the photo above. Chase Sapphire Preferred does have an annual fee of $95, but like most cards, it’s waived for your first year. Here are a few reasons why I love this card so much:
- No foreign transaction fees. This means that when I travel I can use this card and I will get the product at the exact exchange rate rather than paying a fee to pay in another currency.
- 50,000 points after spending $4,000 in the first three months. This is usually the hardest part about these cards, but with some creativity, it’s very possible. These points are amazing because you can redeem them for airline tickets and hotels, as well as transfer the points to airline programs. You can read more about Chase Ultimate Rewards here. This number of signup points is equivalent to $625 towards travel.
- When redeeming rewards, you get 20% of the spent points back.
- 5,000 bonus points after adding an authorized user in the first three months. This is great for me because I can just add Michael.
- You earn 2x points on travel and dining purchases rather than just 1 point per dollar.
- Primary rental car insurance coverage. This is probably one of the most useful things I’ve gotten out of this card. I never have to purchase rental car insurance because this card covers it entirely. If you were to get in an accident, you submit a claim to Chase and they will reimburse you whatever the extra charges were.
These are just the highlights on why I love this card, and this card has given me so many opportunities and has saved me probably hundreds in additional rental car insurance as well. If you choose to keep it after the first year like I have, the $95 is a bit high, but, in my opinion, it is totally worth it. This has been my main card for years and I don’t regret having it for a second.
In case you can’t tell, I’m a big fan of Chase. The next card that is an all-around beneficial option is Chase Freedom. Rather than being solely based on points, this card works more as a cashback option. Here’s why I love this card.
- The usual signup bonus is to get $150 when you spend $500 in the first three months. This is such an easy amount to hit and it’s basically free money.
- When you spend you get 5% cashback on selected categories that change each quarter and 1% on everything else.
- No annual fee, so it makes for a great card to keep to increase your credit line duration.
There is another card for Chase Freedom that’s called Chase Freedom Unlimited and it also has no annual fee, but you earn 1.5% on everything, rather than the bonus on selected categories. It’s best to look into which one works best for you based on what you spend your money on.
American Express Everyday
This card by American Express is really unique and has a really interesting concept that I had never seen before. With Amex you earn Membership Rewards that you can redeem for travel, hotels, and also transfer to specific airline miles. You can read more about them here. So what makes this card so special?
- 10,000 points after spending $1,000 in the first three months.
- Use your card 20 times in a month and you get 20% more points than what you would have earned.
- Earn 2x points at grocery stores.
- No annual fee.
This is another card that’s great for keeping for duration and longevity purposes and also is great because it’s American Express so it comes with Amex offers. These are offers on your account for certain stores or restaurants. These are awesome because they’re usually something along the lines of “Spend $50 at Target and get $20 off” if you use that card. This is something only Amex does and is another awesome and unique benefit you get with this card.
Much like Chase Sapphire Preferred, Arrival+ is another one of my go-to cards for many reasons. This card has an annual fee of $85, but is again waived the first year. Arrival+ works a little bit differently than some of the other cards in that it’s not points redemption in the same way and it’s also not quite cashback. Essentially with this card you earn miles and each mile equals a certain amount of money and then you redeem those for a purchase after the fact.
As an example, you may hire a rental car and you put that charge on your Arrival+ card, then after it’s been approved you go into your transactions and click “redeem” and it will take that number of points out of your account and refund you the charge. So what else about Arrival+ is so great?
- 40,000 bonus miles after spending $3,000 in the first 90 days. (This is the equivalent of $400 to redeem on anything travel-related.)
- 2x miles on all purchases.
- 5% back off every redemption. So you save 5% on everything you redeem.
- Free access to your FICO score 24/7.
- No foreign transaction fees.
- Primary rental car insurance coverage.
- Barclay Travel Community is something unique to Barclays that’s totally awesome. You log into the travel page and then you can write travel stories, and these can be about literally anything you want. A restaurant you went to, a beach, an experience, some people you met, absolutely anything. You can post up to five stories for every city, state, or country. So you could only do five about Malaysia, but then 5 more about Kuala Lumpur. Each story has to be at least 100 words with one unique photo and for each story, you get 150 points, which is $1.50 towards redemption. This is some of the easiest money you’ll ever make.
Arrival+ is another card I would strongly recommend as an all-around card because you earn well and you can redeem so easily for stuff. I also love that you can redeem after the fact so you don’t have to decide prior to purchasing what you want to redeem on.
Signup bonuses are always changing slightly to offer you different things and this goes for the above cards, although these four are the most steady cards I know. Two other cards I won’t go into that have fluctuating signup bonuses are Venture by Capital One and Citi Thank You Premier.
I own both of these cards and in my experience Venture has a good signup bonus but I don’t love it because it hasn’t got as many benefits as the above cards, and I love my Thank You Premier card but at the moment it has no signup offer, so it’s not as great of an option right now.
The hardest part about achieving signup bonuses are the minimum spends, but it is possible. I linked to it above, but this post talks about various ways in which you can hit your targets, some of the ways without really spending any money at all.
Churning travel credit cards is a huge business and if you want more information about them there are blogs out there by people who have been doing it far longer than I have, such as The Points Guy. Credit cards are not something to shy away from and can give you so many opportunities you otherwise never would have had. Understanding how they work and being diligent about them are the keys to success. I hope this post was a great overview on travel credit cards and be sure to come back to the blog on Monday for part two on company-specific credit cards!