Your Ticket to Travel: Maximizing Credit Card Points for the Savvy Spender

Maximizing the Sign-Up Bonus

First things first, let’s talk about the bonus. Both cash back and travel cards often tout enticing bonus offers for new cardholders if they reach a certain spending minimum within a specific amount of time. For travel cards, the points value of these bonuses can be quite lucrative. Don’t believe the impact is meaningful? When JPMorgan Chase released its highest-tier Sapphire Reserve card in 2016, attaching to it a 100,000-point bonus for new users, the Company reported a reduction in profits of over $200 million as a result of cardholders taking advantage of that sign-up bonus and associated perks[1]. The dollar value of a “point” or a “mile” will differ depending on the card program, but redeeming them for travel will typically allow you to extract maximum value out of these programs. Let’s look at an example:

JPMorgan Chase’s lower-tier Sapphire Preferred card is offering a limited time bonus offer of 80,000 (typically 60,000) points for new cardholders who spend $4,000 in the first three months after the card is opened (May 2023).[2] For reference, if you chose to redeem these for cash back, each point would be worth 1 cent, yielding you $800. While that’s a nice deal, when they’re redeemed for travel using Chase’s Ultimate Rewards portal (think: Expedia, but Chase’s version), the points become worth 1.25 cents apiece, bumping the total bonus value up to $1,000. Even better, Chase allows points to be transferred directly to certain travel partners, which right now includes 11 airline mileage programs and three hotel loyalty programs. Doing so can often make points even more valuable depending on the program. Let’s say you and your spouse want to fly from Boston Logan Airport to Madrid, Spain in September. Using cash, two tickets would set your travel budget back by nearly $2,100. However, if you transferred your 80,000 bonus points directly to Iberia Plus (a popular Spanish airline), you’d need to shell out just $410 in cash, making your bonus offer worth $1,690 – more than double the cash redemption value. For comparison, you would need to spend $169,000 on a 1% cash back card to rack up the same amount of value as that provided by Chase’s current welcome bonus.

Annual Fees: Are They Worth the Investment?

So what’s the catch? Many people who have never used a points-based card before can be scared away by the fees these cards bring. Staying with the Chase Sapphire example, the Preferred card comes with a $95 annual fee, which, assuming you’re earning a conservative 1 point/dollar spent, means you’d have to charge just $7,600/year to the card to realize $95 in travel value[3]. But what about those “premium” travel cards, such as the American Express Platinum, which comes with a whopping $695 annual fee? While this might sound outrageous, there are a range of benefits that can easily offset this fee, such as airport lounge access, yearly travel credits, upgraded hotel status, and a variety of credits for entertainment streaming, shopping, Uber, Equinox, Saks Fifth Avenue, and more. While attractive, it can be tough to keep track of all these perks, so cardholders must be organized and ensure they’re taking advantage of them all to make the annual fee worthwhile for their wallet. If you’d prefer to keep things simple, there are lots of cards that come with a $95 annual fee but still pack a punch when it comes to helping you travel for less.

Final Thoughts

For many people, travel is their largest budget category and often one of the most important. While only a few cards were mentioned in this article, there are many great options unique to certain airlines, hotel brands, and card companies that come with differing annual fees and associated perks, so it’s important to compare your options to choose what fits your needs best. And while it’s clear there’s value to be unlocked, it’s crucial to always keep healthy spending habits in mind, such as paying your balance off in full (every month), maintaining a strong credit score, checking your credit report at least once a year, and never overspending just to reach a bonus or perk that you otherwise can’t afford. There’s a lot to check out, so next time you’re planning a big trip, it’s worth looking into how credit card points can help foot the bill.