Beginner’s Guide Part 1: Earning Miles and Points with Credit Cards

Earning Miles and Points with Credit Cards is Part 1 of 4 in the Just Carrying On Miles and Points Beginner’s Guide is an introduction to the world of earning and using miles and points to help you travel the world and spend less money doing it. This Beginner’s Guide is meant to be short and sweet. It isn’t comprehensive. But throughout the guide I will point you to additional resources if you’d like to dive deeper. To read the rest of the Miles and Points Beginner’s Guide, follow the links below:

Part 1 – Earning Miles and Points with Credit Cards

The fastest way to earn miles and points is with credit card sign-up bonuses. Of course, earning miles is just the first step. You’ve seen banks offering 25,000 or 50,000 bonus miles when you sign up for their credit card, right? Leveraging these sign-up bonuses on as many cards as possible is the key to earning millions of miles and traveling the world on the cheap.

Wait, how does this work?

Credit card sign-up bonuses are by far the fastest way to earn miles and points. The other methods (flying on paid-fare tickets and earning points by using your credit card to buy stuff) are much slower. If you have a points earning credit card already, think about the number of points you’ve earned in the past year. Say you spent $20,000 on your card that earns 2 points per dollar. You would have 40,000 points at the end of the year. Now imagine I told you that you could sign up for 3 new credit cards every 3 months, and each card had a 50,000 point bonus. The total number of points you’d have at the end of the year? 600,000. For credit card recommendations, visit our Top 5 Credit Cards for Travel list.

But doesn’t signing up for credit cards hurt your credit score?

No. This is a commonly held belief that just isn’t true. Personally, our credit scores have actually increased. It turns out that having a lot of credit available and not using much of it (what would be a low credit-utilization-ratio) is actually helpful to your credit. It is true that closing credit cards (which you will need to do on a regular basis as part of this hobby) and having a shorter-term credit history (which also happens as a result of frequent credit card turnover) does lower your credit score some, but this is more than offset by the benefits described above.

Don’t credit cards have requirements to earn the sign-up bonuses?

Yes. These are called minimum spend requirements. Typically they range between $1,000 to $5,000 of required spending in the first 3 or 4 months after signing up for a card (not from the time the card arrives at your home but from the date you sign up). This means you must plan ahead. Think about how much you’re likely to spend over the coming 3 or 4 months and sign up for cards with total minimum spending requirements that fit your budget.

What about the annual fees?

Good question. Most of the good points-earning cards do have annual fees and remember, the goal of miles and points chasing is Coming Out on Top in the end.  This means the fees can’t exceed the benefits. Luckily, most credit cards offer the first year with no annual fee. So the strategy is to sign up, meet the minimum spending requirement to get the bonus, and then cancel the card before the first annual fee comes due at the 12 month anniversary. This means you need to be organized and willing to call banks to cancel cards on time, important considerations when deciding if miles chasing is right for you.

How can I sign-up for more cards if I don’t spend that much money?

You’ve now opened pandora’s box to the hobby of points and miles chasing. If you’re open to going deeper, visit our Miles and Points Favorite Sites and Resources page for more information about what is called Manufactured Spending. This is the phrase used to describe various ways to spend money on your credit card without actually buying things you don’t need. This includes strategies like paying your rent with your credit card, buying Visa gift cards for using later, or even funding Kiva loans that are then (nearly always) repaid. This last option is a nice way to support entrepreneurs while pursuing the hobby.

Can I get in trouble by signing up for a lot of credit cards?

This isn’t a legal opinion, but the answer is not really. There is nothing wrong with signing up for credit cards. In recent years some banks have instituted rules against frequent card sign-ups, in a likely effort to prevent really aggressive credit card churning (the name given to signing up and canceling cards regularly). This is their right, of course, and probably smart business. But so is signing up for cards, within the boundaries of what banks will allow. Ultimately the final decision is with the bank (and they can block you as a customer or more often just deny you new cards).

How can I increase the chances my credit card application will be accepted?

First, pay attention to your credit score and take care of it. If your score is ok, you only sign up for one or two cards at a time, and you sign up for no more than 3-4 per year, you likely have nothing to worry about. But most in the hobby apply for many more than that. They do this by spreading their credit card sign-ups across bank issuers and sign-up for new cards no more often than every 3 months. In other words, apply for a batch of new cards (one per bank issuer) in 3 month cycles. If your application is declined, be sure to call the bank to see if they will reconsider.

I’m interested but I’m still not sure it’s right for me

That’s great! I think one of the most important things when earning and using miles and points is to do so within the boundaries of what you are comfortable with and what works for you. If you’re still interested, move on to Part 2 – Is Miles Chasing Right for Me?

Still have a question about the basics? Leave a comment below!

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