How To Start Credit Card Point Hacking

 

I’m all about maximizing the utility of my money, the bang for my buck so to speak.  I started out trying to cut every little expense I could find, then I worked on buying the right house with 20% down, increasing my income and savings rate, and maximizing my tax advantaged accounts.  Now that I’m firing on all cylinders, I’m comfortable looking into other areas to gain an edge on my finances. One of these areas is points programs, specifically points programs that can give me a hefty bonus for signing up for a credit card that I am never going to pay a dime of interest on.

Choosing What Programs To Start Credit Card Point Hacking:

The vast majority of rewards credit cards are tied to air travel or hotel stays.  For the most part these are optional expenses surrounding vacations, which is an area of our budgets that I personally feel a bit of guilt when I spend money on it.  It’s a completely unnecessary expense and when its over I have no physical value to show for it, “just” a few good memories.  It’s only natural then to try to limit the expenses in these areas as much as possible, and I think that’s why many people are drawn to using credit card points for travel.  I’m currently participating in 4 rewards programs, Delta Skymiles, Hilton Honors, IHG Rewards, and Choice Privileges. I chose the first 3 of these because I utilize these services through one of my employers, which allows me to earn a bunch of points with no cost to me.  I added in the Choice privileges account because the associated card comes with a decent sign up bonus, no annual fees, and there are many convenient hotels for our family to stay at in their network.

Delta Skymiles:

Skymiles is the first reward program I ever signed up for.  I signed up for Skymiles back in 2009 when I started travelling for work.  About 75% of the flights I am on are Delta flights.  Many of the flights I take are relatively short flights but are often high cost due to last minute one way tickets (all paid for by my boss). Up until last year the Skymiles didn’t add up to much, but recently they switched how people earn Skymiles on flights from being based on total miles flown to being based on the ticket price.  I now earn 5 miles per dollar spent.  This means on an average $500 flight I will earn 2,500 miles, where in the past that same flight may have only earned me 500 miles.

In addition to flights I picked up the Gold Delta Skymiles Card 2 years ago and received a 50,000 Skymiles bonus.  In addition to the bonus I receive 1 mile per dollar spent.  I also get 1 free checked bag per person per flight on all Delta flights and priority boarding.  The free checked bags is a wash for me, but it does save my employer a few hundred dollars a year (we get re-reimbursed for our baggage costs).  I really like having priority boarding.  I always get window seats and I hate getting to my seat when others have already sat down in that row, especially if its a 3 seat row.  This card comes with a $95 yearly fee, which I justify on the priority boarding alone.

What Are Skymiles Worth?

Skymiles have a wide range of redemption vs. dollars.  For people who fly business class internationally Skymiles can have a redemption value of well over 2 cents a piece.  For domestic flights they are generally around 1 cent a piece.  I personally don’t fly when it isn’t for work because with a family of 6 flying is always more expensive than driving and Mrs. C. has absolutely no desire to ever step foot on an airplane.   Using the Skymiles marketplace there are other options, but the redemption value isn’t that great.  For hotel and housing rentals, it seems to be around 0.75 cents per mile.

What Will I Use My Skymiles On?

I’ve thought about saving up my miles and spending them when the kids are grown, but I’d rather not save them for that long.  I do enough saving and I would much rather enjoy the miles now than in 10 – 15 years.  Since flights don’t make sense for us now,  hotel stays is the best option.  We are planning to rent a house in the Orlando Disney World area for roughly 8 nights next August. We will be renting a 4 bedroom house with a pool within a 10 minute drive of the parks.  These houses normally rent out for around $100 to $150 a night.  The Skymiles redemptions on these vary wildly on the time of year you book, which I am really glad I figured out.  When I first started looking into these in February these houses would be around 14,000 points per night.  Booking in the May/ June time frame the cost increases to 20,000 to 25,000 points per night.  That’s a huge difference especially staying for over a week!  If it costs us 15,000 points per night we will spend about 120,000 Skymiles on this trip.  Currently I have over 160,000 Skymiles, so I have some room if we end up having to pay more points per night or if we want to book a few extra days.

I have been using my Delta AMEX credit card exclusively for the past year and a half, but recently realized that this card is highly inefficient at building value for rewards.  I’m getting 0.75 cents of value per Skymile and only receiving 1 Skymile per dollar spent.  That’s not very good.

I looked into the Hilton Honors system and their points are valued at .5 cents, but with the Hilton Honors AMEX card I get 5 points per dollar spent on gas, grocery, and restaurants, which is about half of our card spending, and 3 points per dollar on everything else.  Even at a .5 cent valuation this gives me an average of 2 cents value per dollar spent,  which is 2.6X better than the Skymiles card.

This isn’t to say that the Skymiles card is bad, it’s just not super efficient at building up value if your goal is to redeem for hotel stays.  I’m keeping this card around solely for the priority boarding.

 

Hilton Honors:

I’ve worked for one of my employers since 2009 who typically books us in Hampton Inn’s when we are travelling.  I didn’t even think about using points until a coupe years ago when I signed up for their rewards program, then I didn’t travel for 12 months and my points expired.  This past spring I traveled a lot and made sure that I always used my Hilton Honors reward number when checking in.  I also looked on their website and they were running a special deal for a good chunk of the season that gave me an extra 2,000 points per night.  At then end of the season I had 77,000 points amassed.  I figured this wouldn’t amount to much, but decided to look into the redemption values available.

It turns out that hotel redemptions start at only 10,000 points.  There aren’t many of these, but for us two of them are in fairly good strategic locations.  There is one in Seymour, IN about an hour south of Indianapolis.  It gives us a nice stopping point on the way to visit my parents in Bowling Green, KY.  The other location is in Bowling Green, OH.  Bowling Green, OH is 30 minutes south of the Toledo Zoo, which we get in for 1/2 price thanks to our local zoo membership.  It is also only 1 hour and 15 minutes away from Cedar Point.  It’s a bit of a drive, but for the low point redemption it will be worth a trip someday, especially since Cedar Point regularly gives 1/2 off admission tickets to Michigan residents in August.

These two hotels are typically only 10,000 points, which gives an amazing 1 cent to 1.5 cent valuation on hotel stays. For a hotel giving 1.5 cents valuation, using my Hilton Honors card for gas, groceries, and restaurants gives me an effective 7.5 cents per dollar spent.  Overall Hilton uses a dynamic system for point redemption which changes with the price of the hotel, so depending on the night redemption could be 20,000 points or 40,000 points.  Most redemptions are roughly 0.4 cents to 0.5 cents in point value.

The Hilton Honors AMEX Cards:

Hilton Honors offers two AMEX Cards, the Hilton honors AMEX card and the Hilton Honors Surpass Card:

Hilton Honors Card: I just signed up for this card which gives a 50,000 point sign up bonus for spending $1,000 in the first 3 months.  I have read that the bonus occasionally jumps to 80,000 points. It has the following features:

  • 7X points for Hilton Hotel Charges
  • 5X Points for gas, grocery, an restaurants
  • 3X points for everything else
  • Automatic Silver Status which gives a 15% point bonus on Hilton stays
  • Upgrade to Gold Status if $20,000 of card spend per calendar year
  • No Annual Fee

The Hilton Honors Suprass Card comes with 75,000 bonus points for spending $3,000 in 3 months and has the following features:

  • 12X points on Hilton hotel charges
  • 6X points on gas, grocery, and restaurants
  • 3X points on everything else
  • Automatic Gold Status, which gives a 25% point bonus on Hilton stays
  • Upgrade to Diamond Status if $40,000 in card spend per calendar year
  • $75 annual fee

I’m not a big fan of annual fees, so for me pulling the trigger on the Surpass card will be difficult to do.  Obviously the higher sign up bonus is attractive, but the only truly valuable difference is earning 12X points on Hilton expenses rather than 7X with the no fee Hilton Honors card.  Since my boss books our rooms for us and pays for them directly,  I have no direct Hilton hotel charges, which takes away this benefit.  At 0.5 cents per point,  you would need to gain 15,000 points from the difference in bonus points to validate the yearly $75 fee,  this would mean spending $3,000 per year on Hilton hotels.  The other difference is the 1X point bonus on gas, grocery, and restaurants.  You would need to charge $15,000 per year in these categories to make up for the yearly fee without any direct Hilton hotel charges.

For me this card may be worth getting at some point for the bonus points, but I would have to cancel it within the first year because the no fee Hilton Honors card makes much more sense for me personally.   Mrs. C. will also be signing up for a no fee Hilton Honors card, but we are going to wait a bit to see if the bonus goes back up on it.

Between the card sign up bonuses, the points I get from stays while working, and the points I will get from using my Hilton Honors card as my main card, I will build up points very quickly, so what am I going to use them on?

What I’m Using My Hilton Honors Points On:

1.  Trips to Bowling Green, KY:

As I mentioned above my parents live in Bowling Green and there is a hotel on the way that is only 10,000 points per night.  We are going to try out how well we can do piling into 1 hotel room, but it is possible in the future we will get 2 rooms.  I think 1 room is fine for a night or 2, but any longer we will certainly want more space.  The location of the Seymour Indiana hotel is a great stopping point.  It allows us to go do something in Indianapolis, like the Children’s Museum or Zoo on our way down, then drive for an hour and get some good rest before heading to my parents house.  This also allows us to arrive in the mid morning instead of the late evening.

2. Trips to Toledo and Cedar Point:

The hotel in Bowling Green, OH is 30 minutes south of Toledo and 1 hour and 15 minutes from Cedar Point.  We will probably do a Toledo only trip where we drive to Toledo and visit the Imagination Station science museum (which is free thanks to our Museum of Science and Industry membership), then drive to Bowling Green, OH and wake up the next morning to visit the zoo and drive back that night.

Going to Cedar Point is a bit iffy on our schedule, probably 2019 is the most likely time we will go.  Cedar point has given half off admissions to Michigan residents for part of August for 2 years in a row.  I would like to take the kids in August some time and 2019 is our next opportunity.  This year I go back to work in early August and next year we are planning a trip to Disney World for August.  Waiting til 2019 also gives the kids some time to grow. We would probably spend 3 nights in the hotel and 2 days at the park.  Once again, we may double up on the rooms giving us a lot more space.  Still, 20,000 points a night isn’t bad, especially if we are only paying half price for tickets.

3. 2 day trips to Chicago:

When it comes to trips to Chicago staying in a hotel is purely a convenience.  We can drive back and forth to our home, which is roughly a 2 hour drive.  During the summer we won’t use any Hilton points for hotel rooms because the redemptions are so high, generally 30,000 – 40,000 points per room.  In the Fall these rates drop quite a bit and rooms not far from the Magnificent Mile area can be had for around 20,000 points.  With our membership to the Museum of Science and Industry giving us free admission there,  the Lincoln park zoo being a free attraction, and getting half price admission to the Children’s museum at Navy pier thanks to our membership to our local Curious Kids Museum,  we have a lot of relatively cheap activities we can do in the Chicago area.

4. Trips to Orlando

Finally we have the heavy hitter.  We have been saving up our Skymiles for years between my flights and our Delta Skymiles card for housing stays in Orlando.  Since the Skymiles card spend of 1 point per dollar is not attractive for redemptions, we are looking into using our Hilton points for rooms down there for future visits.

Homewood Suites has a 2 room suite with 2 queen beds in the bedroom and a queen sofabed in the living room.  There is plenty of square footage to add an inflatable mattress or two and the rooms come with a full kitchen.  These suites are 20,000 points per night and when you redeem stays as a silver member or above you get a 5th night free with every 4 nights of point redemption.  We plan on doing 1 large trip which would likely be 15 days, and multiple smaller trips that would be 4 – 5 days in the not too distant future (2020 – 2022 time frame).  This is where we will spend a lot of our points.

 

IHG Rewards

It’s rare that I stay at IHG Hotels, which are primarily Holiday Inn’s for work.  There is one job that we are always at an IHG Property, but other than that it is fairly uncommon.  Currently I have just under 15,000 points. Points with IHG properties vary a lot, but Candlewood Suites are fairly consistent at between .75 cents and 1.30 cents per night.  The worst deal I found was for the former Nickelodeon water park in Orlando Florida.  The rooms are 2 Bedroom suites which is really nice, but they require 35,000 points and the rooms can sell for as little as $86.  That gives a redemption of only .25 cents per point, certainly not ideal.  It may be a great hotel to pay for 1 or 2 nights, but not to use with points.

The IHG Mastercard:

The IHG Mastercard currently has a 60,000 point sign up bonus and gives 5,000 points for adding another user.  This card has had sign up bonuses of up to 100,000 points, so I’m going to wait to pick one up to see if we can get a bigger bonus. The card offers:

  • 5X points for hotel stays
  • 2X points for gas, grocery, and restaurants
  • 1X point for everything else
  • Complementary Platinum status (50% bonus points on stays and 10% point rebate on redemptions)
  • 1 free night at any IHG property on Anniversary of card date each year
  • $49 annual fee

Value wise, this card doesn’t make as much sense to use as the Hilton Honors card as a daily card because the points are much lower.  It does make sense to keep this card though because the $49 annual fee is MUCH cheaper than any hotel room.  My understanding is that they don’t limit the rooms either for this, meaning you can redeem your free anniversary room at any property that you could redeem your points for.  Here are a list of a few examples I found:

  •  Las Vegas – Palazzo Intercontinental Bella Suite normally $430 or 60,000 points
  • Washington D.C. – The Willard Interconitinental normally $234 or 60,000 points
  • Chicago – Magnificent Mile Intercontinental normally $250 or 40,000 points
  • New York City – Times Square Holiday Inn normally $254 or $40,000 points

Once the bonus goes back up I will certainly snag a card for myself and Mrs. C, which will allow us to get 2 nights free per year. Well, 2 nights for $50 each, but when the normal cost per night is $250 it’s an amazing deal.

What Will I Spend My Points On?

For the most part, the points I earn from the credit card bonuses and from staying at IHG hotels I will use for stays at Candlewood Suites.  Most of these are lower tier properties offering redemption at 15,000 points per night.  Since we have a larger family the larger rooms Candlewood Suites provides are ideal. If we get the cards with 100,000 sign on bonuses, this will give us 13 nights at Candlewood Suites, worth roughly $2,000.  We will then stay at a couple nights per year at a nice hotel, giving us roughly $400 in value over the annual card fee.

Choice Privileges:

Choice Hotels is typically a less expensive brand than Hilton and IHG.  When I’ve stayed at Choice Hotels I’ve typically had good experiences, but I’m also not that picky, I just need a place to crash.  For me the difficulty with this program is that I don’t stay at these hotels for work, so I’m not earning any points from stays. For vacations when I am paying for a hotel, the rates and availability of Choice hotels are way better than Hilton, IHG, or other competitors. Choice also has a “Lowest Price Guarantee” when booking on Choicehotels.com. I’ve done a bit of searching and have yet to find lower prices on sites like Hotels.com. It’s nice to know that if I did, they would reimburse for the entire price of the room.

The Choice Privileges Visa Card is a no fee card and comes with 32,000 bonus points. It has the following features:

  • 5X points on Hotel stays
  • 2X points on everything else
  • 8,000 bonus points for every $10,000 in card spend per year.
  • Automatic Gold Status = 10% extra points per stay
  • No Fee

Redemptions start at 6,000 points, however most hotels are in the 8,000 – 12,000 range.  Choice has a really weird way of determining redemption value and I can’t make heads or tails of it, despite spending several hours researching it.  What I mean by this is that the value per point has drastic variations.  Hilton Honors for example is very consistent with most of it’s properties being around 0.5 cents per point, with a few outliers.  When I was checking on Choice redemptions I found variations from as low as .35 cents per point to a high of 1.5 cents per night. It is really important with this program to compare these when booking.

Does It Make Sense To Use The Card?

Of course it makes sense to get the 32,000 bonus points, but beyond that does this card make sense to use?  For me to determine this I looked at both the point redemption value and the opportunity cost of using these points vs. another card.  Getting 2X points is fairly run of the mill,  but it can have an advantage over other cards, especially if you can hit 10,000 in spending. Here’s my comparison to the Hilton Honors Card.

With Hilton Honors I get 5X points for gas, grocery, and restaurants.  If I spend $10,000 in this category I earn 50,000 points which is worth $250 at a .50 cent valuation.  If I spend $10,000 in other categories I earn 30,000 points which is worth $150 at a .50 cent valuation.  If I spend $10,000 with the Choice card I earn 20,000 points, plus 8,000 bonus points for 28,000 points total.  With a .50 cent valuation this is only $140, which is less than the Hilton card, which I don’t have to spend $10,000 to get bonus points.

On the surface Hilton looks like the winner, but I need to also look at the utility of the points.  One of the main things we want to use points for is stays in Chicago for 2 day trips, which would eliminate 4 hours of drive time.  For Hilton points I have to spend 30,000 miles for a 1 night stay in Chicago, and usually that includes a 30 minute drive to the area we want to be in (Museum of Science and Industry/Shedd Aquarium/Navy Pier).

For Choice Privileges I can stay in a really nice hotel, in the loop for 16,000 points. (Cambria Hotel and Suites on Randolph St.).  I can also stay within a 30 minute drive at the Sleep Inn by Midway airport for 12,000 points, or at the Quality Inn by O’Hare for 10,000 points.  The best value is staying at the Rodeway Inn in Lyons, IL for 6,000 points, but the reviews there are not very good.  Bottom line is that I have several options in the Chicagoland area for Choice hotels that require much lower point redemptions.  30,000 points with Choice can almost get me 2 nights in the Loop, or 3 nights within a half hour drive, as opposed to 1 night within a half hour drive or half a night in the loop.

Likewise, the Clarion Suites Maingate in Orlando is just minutes from Walt Disney World and a suite with 2 queen beds and a Queen fold out sofa is only 8,000 points, compared to a similar suite a bit further away from Hilton, which costs 20,000 points.

So if you can charge $10,000 per year to the Choice card, I think it makes sense to use, provided you use your Hilton Card for the 5X deal on Gas, Grocery, and Restaurants first.

 

Credit Card Point Hacking Tips And Tricks:

Watch For Special Deals: Over the last several months I have kept an eye on the rewards program pages and most hotel reward programs have specials from time to time.  For Hilton Honors, they were offering 2,000 bonus points per night.  For a hotel with rooms selling at $100 per night, this was like getting 3X the normal point amount.

IHG is currently offering a bonus program where you get 2,500 bonus points for your first stay and then 3,000 bonus points for every 3 nights you stay. This can add up to a lot if you have a month long job or vacation.

Don’t Let Your Points Expire:  Most Hotel programs have their points expire if you go a year without activity.  Keep track of when your points are scheduled to expire to make sure you don’t lose your points.  If you aren’t ready for a hotel stay, many programs offer a way for you to shop with points for other items.  As an example, with IHG you can get a magazine subscription for as little as 1,100 points.  This will reset your expiration date to 12 months in the future!

Start With No Fee Cards:  No fee yearly cards can still come with decent bonuses and card spend points, like the Hilton Honors Card.  If you start with no fee cards, you have nothing to lose, the math always works in your favor.  The second reason to start with these cards is your credit score.  About 15% of your credit score is determined by the average length of accounts.  By opening cards that you intend to keep forever first you are giving yourself a leg up down the road in this category of your credit score.

Don’t Open Too Many Cards At Once:   Chase has a rule called the 5/24 rule.  Basically if you have applied for 5 cards in the last 24 months you will be automatically denied.  You also don’t want to lose track of hitting your minimum spending thresholds for getting your bonus points.  If you open several cards at the same time, it may be easy to miss this on one or more cards.

Pay Off Your Balance In Full Every Month: This is probably the most important part of the whole game.  If you pay 16% in interest it kind of negates gaining 2% in points….by a lot!  Using credit cards for points ONLY makes sense if you never pay a dime in interest.  Stay on top of your cards and keep them paid off.

Know The Bonus Rules:  Some card issuers, like AMEX will only allow you to get 1 bonus per card once in your lifetime.  Other issuers are much more lenient and require a 1 year or 2 year break after geting a card bonus to get the same bonus again.

Don’t Think You Will Get Rich: Credit card points won’t make you rich.  They are a supplement to an area of your budget that you would like to save some money on.  As such far more time, effort, and planning  should be put into increasing your savings rate and managing your investments than into credit card point hacking.

Always Be Learning:  There are people who live and breathe credit card rewards programs, I am not one of them.  Check out The Points Guy and Million Mile Secrets.  Reading some of their articles will certainly give you a leg up when looking to maximize your points.

Keep Track Of Your Cards Using Personal Capital: I love using Personal Capital to track my net worth and to combine all my investment accounts in one place.  It also works great for combining all your bank accounts and credit card accounts together.  By using Personal Capital I can keep an eye on the balance on all of my accounts without logging in to 3 or 4 different credit card accounts, and best of all, Personal Capital is free.

Overall its a lot of work to figure out what cards do what, what point redemptions are the best to go for, etc, but it is amazing the total amount of value that can be extracted from these programs.  It’s especially valuable for me because I do so much travelling for work, so I gain points both from credit cards and from actually travelling using these hotels and airlines. I’m looking forward to having many trips with the kids without having to pay for hotel stays.

 

What are your favorite rewards programs?  Do you use credit cards to maximize these programs? If you are interested in Credit Card point hacking, sign up for CreditCards.com to get personalized travel credit card offers based on your credit profile

 

John C. started Action Economics in 2013 as a way to gain more knowledge on personal financial planning and to share that knowledge with others. Action Economics focuses on paying off the house, reducing taxes, and building wealth. Check out the Action Economics archives section for all past posts.

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