Updated: Mar 2, 2022
Free travel is amazing; but free cash is impossible to ignore. After all, who wouldn’t want to chart the globe, experiencing different cultures and landscapes across the world; and earn money while doing it??
In this post you're going to learn the basics behind earning free cash and free travel by maximizing credit card rewards, including:
Which credit cards offer the best rewards
Creative ways of acquiring airline miles through loyalty programs
How to redeem your credit card points for maximum gain
Table of Contents
‘Travel is expensive,’ you may say. But what if we told you that there’s a way to travel for free and actually earn money while you're on the road?
You might be wondering whether or not this is even possible. However, it might surprise you to learn that you can plan the trip of your dreams by cleverly using of travel credit cards that earn discounts and rewards.
With the right card, you can use the points to travel at a considerable discount. In some instances, it might even be possible to secure free nights at top-rated hotels or free airline tickets. Here’s a look at how to earn free travel.
What are Reward Points?
Banks have initiated the concept of credit card reward points to attract more customers and encourage them to use their credit cards for purchases. While some cards simply charge interest for using their card, others issue incentives in the form of rewards.
These days, some credit cards issued by banks come with reward points, enabling customers to earn discounts on purchases made with these credit cards.
Once a customer accumulates a specified number of points in the reward program, he or she can redeem those points for various benefits, including air miles, hotel vouchers, and cashback on future purchases. Typically, higher-value purchases yield more points than smaller value ones.
For instance, if you buy a new TV on your credit card, you’ll earn more points than if you use the same card for grocery payments. You can redeem the points later or exchange them for rewards.
Credit Card Rewards
Generally, rewards fall into one of three groups: points, cash, or miles. While cash rewards can help decrease your credit card balance, points and miles can earn you free trips.
Point rewards depend on the amount you spend. For instance, you might earn a point for each dollar spent with that credit card. Some cards offer double or triple points when you use their card to make travel-related purchases like hotels and rental cars. Depending on the card, it might also be possible to redeem your reward points for cash or gift cards.
Redeeming points for gift cards might give you more for your money since numerous merchant partners give between 10% and 20% off the gift card cost. Examples of these reward cards include hotel and auto reward cards.
These are the easiest to use and most straightforward. However, they don’t automatically result in cash. Keep in mind that some programs permit you to redeem cash rewards only as a credit to a user’s account. The rewards that are paid out as a statement credit decrease your balance. However, the redemption doesn’t count as an account payment.
Other credit cards give users the option to cash in their rewards for a direct bank deposit or a check. It might also be possible to convert cash rewards to gift cards. Just know that a minimum redemption amount, or a prerequisite to redeem rewards in some increments, may exist.
Travel reward cards earn card users miles, which they can transfer into airline tickets. The number of miles users earn differs by credit cards and the number of miles needed to buy a flight differs from airline to airline. It might even be possible to exchange miles between two airline's frequent flyer programs. However, you might lose some points in the process.
When comparing travel reward programs, it's important to take business alliances into account. For example, American Airlines is a member of the OneWorld alliance, which includes other airlines such as Quanta, British Airways, Alaska Airlines, and 10 others. Delta and United also are part of similar alliances.
These alliances allow you to accumulate air miles with one airline and redeem them with another.
Flat versus Tiered Rewards
Generally, the structure of reward programs can be flat or tiered. The former structure means that you’ll earn a flat reward rate on all purchases. For example, your credit card might pay a 3% cashback reward or three points for every dollar spent.
The latter structure implies that you might earn rewards in various amounts depending on different spending categories. For instance, some travel cards earn users greater rewards on travel expenses and smaller rewards on other forms of spending.
Benefits of Credit Card Reward Points
You can redeem credit card points for various things, including:
Cashback cards offer rewards on a portion of your purchase cost on eligible purchases. For instance, you might own a card that offers cash back on grocery and gas purchases. If your card offers 3% cashback on grocery purchases, this means if your annual bill is $3,000, you’ll earn $90 in cashback rewards. While some cards issue this benefit as an introductory offer, for others, it’s simply one of the choices through which you can redeem points.
Some cards will permit you to redeem rewards in the form of a statement credit. In this case, the card issuer will deposit the cash value of the converted points into your account balance directly.
It’s worth noting that not every issuer gives this option, so if you know that’s how you intend to convert your rewards, you might want to confirm it’s offered before applying.
Numerous credit cards collaborate with particular airlines and issue generous travel miles if you use their airline. Numerous airline cards exist from which to choose, with some allowing consumers to earn points that they can apply against travel-related purchases like vehicle rentals or lodging. Remember that some cards issue more points during introductory periods or to consumers using self-service tools online to redeem their points.
This is a common way of redeeming rewards. Typically, you can select from a range of options from restaurants to entertainment. Every issuer offers varied gift card choices, so if you own numerous cards from various issuers, you might have a wider range of brands to select from.
A reward card also comes with other perks, for instance, a concierge service that helps users to book event tickets or restaurants. You could even earn exclusive shopping deals or access to VIP lounges at airports.
Some card issuers permit consumers to redeem their points at online retailers like Amazon. Just note that this benefit varies across card issuers and not all reward cards offer it. Although this might seem like a convenient means of using your rewards, you’ll discover it might not be all that lucrative because of issuer limitations.
Reward cards often come with insurance coverage that offers some type of spending protection, including protracted warranty, purchase security, and price protection. That means that your purchases are secure, during and after spending.
Some issuers allow card users to donate their points to a nonprofit or charity organization. You can determine whether or not your issuer gives this option by accessing the website’s redemption portal.
Numerous credit cards issue a low introductory rate, frequently 0%. Keep in mind that cards differ in terms of the rate charges on balance transfers and whether or not introductory rates cover balance transfers.
Insurance on Rental Vehicles
Numerous credit cards issue insurance on rental vehicles if a consumer uses that card to book the rental car. Some cards even offer varying insurance levels. It’s advisable to contact a company and ensure that the card issues insurance before renting a vehicle.
Some credit cards also provide insurance that makes payments on the cardholder’s behalf in case they can’t make their own payments due to income loss.
Which Credit Cards Offer the Best Rewards?
The top five credit cards for travel rewards, according to NerdWallet.com are:
A high rewards rate and flexible redemption options make this card our #1 pick. It has a hefty signup bonus of 100,000 miles when you spend $20,000 in the first 12 months, but even if you miss that goal you'll still be able to walk away with 50,000 miles if you spend $3,000 in your first 3 months. Members earn 2 miles for every dollar they spend on all purchases, all the time; plus an additional $100 credit toward Global Entry and TSA Pre-check fees. The drawbacks of this card include a $95 annual fee. It's also worth mentioning that the redemption value for cash is half of the redemption value for travel.
2. United Explorer
This card comes with perhaps some of the best travel benefits of any other credit card in its class. Cardholders get a free checked bag and priority boarding on United flights or any of its Star Alliance partners; plus members also receive two United Club passes every year and rental car coverage. You can earn 2 miles for every dollar spent at restaurants and hotels. There's no annual fee for the first year ($95/year after that) and this card also includes a $100 credit toward Global Entry or TSA Pre-check fees.
3. Chase Sapphire Reserve
This card has some of the best rewards of any card we reviewed. Members receive a 60,000-mile bonus just for spending $4,000 in 3 months, and those miles translate into a whopping $900 in travel when you redeem through Chase Ultimate Rewards. Your first $300 in travel expenses (include gas and groceries) is returned to you in the form of a credit at the end of the year. Plus, having this card in your wallet grants you access to over 1,300 airport lounges all over the world (after you apply for a Priority Pass,) and also includes insurance benefits that cover trip cancellation, car rental collision, lost luggage, and more. Like the previous two cards, this one also includes a $100 credit toward Global Entry or TSA Pre-check. The one major sticking point about this card is the astronomical annual fee of $550 and its extremely high credit requirements.
4. Chase Sapphire Preferred
This card has an even high bonus than the Chase Sapphire Reserve card, 80,000 bonus miles after you spend $4,000 in 3 months; which translates into a very cool $1,000 when you redeem your points through Chase Ultimate Rewards. This card also offers a 25% bonus incentive for redeeming your points as statement credits. You get the same insurance benefits as the Chase Sapphire Reserve card, plus the added benefit of $60 toward a Peloton membership. This card does come with a $95 annual fee.
5. Bank of America Travel Rewards
We love this card for its generous flat rewards rate. Earn an unlimited 1.5 points for every dollar spent on all purchases, plus 25,000 in bonus points for spending just $1,000 in your first 90 days. Preferred Rewards members can earn even more points (25%-75%) on all purchases. This card has no annual fee and is ideal for people who don't spend that much every month.
How Do I Earn Reward Points?
We recommend implementing these tactics when it comes to earning reward points in order to maximize your payout:
Exploit Specific Spending
In most instances, you’ll earn reward points through particular purchases on your card. Simply using the right card for the right transaction can help you accumulate reward points without any additional effort. Card issuers offer different point rates based on the purchase type so it's important to familiarize yourself with the details of your reward programs.
Even if you don't have a travel rewards card, you can still accumulate airline miles by joining that airline's loyalty program and then shopping online at select retailers. Purchases made online through these select retailers can earn you between 1 and 30 miles for every dollar spent. It just depends on the merchant and the loyalty program.
Certain apps, like RocketMiles, allow you to earn airline miles with the loyalty program of your choice every time you book a hotel. No airline credit card required!
Some issuers provide referral bonuses to existing cardholders who refer someone to apply for the card. Typically, you’ll refer someone through a link and obtain a specified number of points for the referral. The points will vary depending on the issuer’s determined bonus.
Numerous card issuers provide a sign-up bonus that permits users to earn a huge number of points. You’ll probably need to meet specific spending goals within the initial few months of the card opening before you can claim the bonus, so be sure that the spending threshold is feasible for your budget.
Ways to Exploit Credit Card Rewards
Credit cards offer excellent tools to help users maximize their rewards and capitalize on their standard daily expenditures.
Consider these tips if you’re looking to maximize rewards and the benefits associated with reward cards:
Join every Loyalty program that you can
Most airlines and hotel chains offer some type of loyalty program with the intention of retaining you as a customer in the long run. They incentivize you to join these programs by partnering with travel-oriented credit cards so that you can 'spend' your points with them.
You'll also be able to earn additional rewards just by staying at a particular hotel or flying on a particular airline.
These programs are usually free to join so there's no point in not joining every last one.
Several loyalty programs will even let you transfer points between them; so for instance - you could accumulate air miles by flying on a United flight, but redeem those miles for points and use them toward a Southwest flight, or a Hilton Hotel room.
The loyalty programs that let you transfer points between them are:
Recognize your spending patterns
Since different cards reward different kinds of spending, you need a clear understanding of your expenses in order to maximize earnings. For instance, if you’re a frequent traveler, you might want to choose a card that rewards cardholders with cash back or extra points for travel costs.
On the same note, if you spend considerable money on gas and groceries, you’ll want to select a card with higher earning potential in those categories. On the other hand, if you exhibit mixed spending and typically don’t spend considerably in any one group, you’ll find a straightforward cashback card suitable.
Maximize your credit card’s benefits
Besides earning rewards such as miles, cash back, or points; most cards come with a broad range of perks. For instance, travel cards commonly include insurance for delayed or lost luggage or access to an airport lounge.
Numerous cards come with entertainment and shopping benefits, included protracted warranties on items bought with your card and discounts when you shop at particular retailers. Furthermore, these cards typically come with perks like purchase protection and fraud protection.
Read the Fine Print
Reward earning with a credit card can be as simple as completing purchases in the appropriate category, but stipulations do often exist. This means that earnings in a high-rewards group might be restricted to a specific amount in annual purchases, obstructing a card’s value.
You should equally beware of how your card issuer delineates their bonus groups. Otherwise, you might end up making purchases that you probably expected to meet the eligibility requirements for a reward only to find out that your issuer ruled it out.
Along with rewards categories and spending caps, there’s value in recognizing your card’s redemption process. Note that some issuers can offer extra value to your points when redemption occurs in a certain way.
At the same time, some cards have complex processes for reward redemptions or limits on the number of points or cash back you can accumulate. Recognizing how your spending becomes a reward is therefore important and a flexible, easy-to-understand structure can go a long way.
Recognize the Expiry of the Rewards Points
Make sure you examine the fine print in your card agreement or the card’s website to determine the expiry of the rewards. Typically, rewards earned from major card issuers don’t expire.
Nonetheless, you could lose them if account closure occurs or if your card isn’t in good standing.
Don’t carry a revolving balance
Using a credit card for all your purchases can help maximize rewards. However, the potential of a reward card is usually negated if you have a revolving monthly balance. This is because cards with such a balance accumulate interest, which you must pay off besides paying off existing purchases.
Over time, spending beyond your means with a credit card can lead to accumulated debt, which can be difficult to eliminate. Although numerous people turn to credit cards under the right circumstances, experts recommend you pay your balance at the end of the month when possible.
If you avoid revolving balances, you can exploit credit card benefits and rewards without paying needless interest.
Plan Huge Purchases Strategically
Although it might be intimidating to have a huge purchase on your credit card, you’re missing instant savings by not exploiting available rewards. To capitalize on the rewards chance before a huge purchase, you should strategize beforehand and sign up for a new card.
A card associated with a profitable sign-up bonus that offers generous rewards in your spend category will give you considerable value.
Request a Retention Offer
After performing inventory, you might find a card you’re uncertain about. Instead of getting rid of it, consider seeking a retention offer; an issuer might grant you this incentive to maintain you as a client. If you contact your card issuer, they’ll probably offer bonus points, a statement credit, or an annual fee waiver or reduction.
Just listen to the terms carefully because minimum spending prerequisites might exist to qualify you for the bonus. Remember, if you accept the offer, you’ll have an obligation to maintain an open card for a year.
Activate Rotating Rewards
If your card’s rotating rewards occur quarterly, you must pay attention to the bonus group schedule. These can comprise common spending groups like gas and niche groups such as streaming services. Regardless of the category, you must activate the rewards quarterly to maximize rewards.
Depending on your credit card, some flexibility might exist in category selection. You can capitalize on the bonus rewards by using the card on the revolving categories and watch for any spending limits that apply to rewards rates.
If you own numerous cards from the same issuer, it’s possible to combine rewards. This allows you to pool points and exchange them for a larger reward. Typically, it’s possible to combine or transfer rewards with cards from one issuer and between similar card types.
Claim Sign-up Bonus
Numerous cards come with profitable sign-up bonuses that can earn you hundreds of dollars if you meet specific prerequisites after card opening. In most instances, card issuers need cardholders to spend a specific amount throughout the initial months after card opening to meet eligibility for the sign-up bonus.
To ensure you qualify, you should read the bonus’ terms thoroughly and subsequently structure your spending. While it’s sensible to adopt responsible borrowing and cease spending beyond your means, the end of the qualifying bonus period is an excellent time to make any considerable purchases you’ve dreamt of.
If there’s a hotel chain, airline, or retail store you’re devoted to, it can be sensible to have the co-branded card because of the associated benefits. However, those cards typically lock you into their reward systems, implying that you can’t use your miles or points past that brand’s boundaries.
Generally, however, reward cards are more flexible. For instance, some cards make it possible to redeem points in various ways. Travelers, in particular, prize such types of points because they can serve to book directly with a card issuer or transferred to various hotel and airline loyalty programs, frequently resulting in outsize value.
Align Rewards with Interests
Reward programs come in various forms, permitting users to accrue points toward gift cards, cash back, merchandise, or points, so it only makes sense to align rewards with your goals and interests. If you’re in the process of re-budgeting your income, you might be better off with a card that provides cash back toward basics, for instance shopping at your preferred grocery store or filling the gas tank.
On the other hand, if you’re an avid traveler, an airline miles card might be ideal. Just make sure you don’t choose a rewards program you won’t use. Also, beware of rewards that force you to spend more than you can afford in return for a sign-up bonus.
Target your expenditure
While you don’t want to spend money you don’t have just to secure rewards, if you direct particular expenses to the appropriate credit card, you can ensure that those rewards are redeemed at the maximum value. This way, you’ll capitalize on your spending.
To maintain your budget and keep your card balance under control, it might be necessary to make weekly payments online to avoid a surprise at the end of a billing cycle. But that's up to you.
Factors Affecting Reward Points
The points earned from reward cards will vary depending on your transaction’s value, the card type you own, and the card issuer. At times, the venue where the transaction has taken place matters as well. Other aspects that influence the points you earn include:
Card companies and banks initiate co-branded cards in collaboration with major brands, stores, airlines, fuel providers, etc. These cards are increasingly becoming popular as credit card firms and stores seek creative ways of appealing to customers.
These cards depend on an association between the issuing card company like American Express and the marketing partner, which is typically a retailer, for instance, Costco.
A consumer typically signs up for a card because they obtain it from where they frequently shop. These cards merge the best features of store credit with conventional reward cards. They usually offer flexible payment terms and you can obtain reward points for using them everywhere.
The biggest attraction of co-branded cards is that they amplify reward points; sometimes as much as 5-10 times higher than other cards.
Cardholders can obtain rewards including hotel points, cashback, and credit card miles. These cards offer the following benefits:
Rewards for daily spending - Before airline and hotel credit cards, the only means of earning airline miles and hotel points was to spend cash with that particular brand. Nowadays, co-branded cards allow you to earn miles or points without stepping into a hotel, airport, or shopping online.
Reward value might offset cash back - Accumulating miles and points over time particularly with hotels and airlines can translate into free hotel nights or discounted airline tickets. Smart spending with your card means your overall return could offset the annual fee.
Bonuses at preferred brands - A co-branded card gives you a chance to get miles, bonus points, or cash back for purchases at preferred stores.
Special event spending
If you swipe your credit card for purchases throughout festive or special occasions, you can obtain bonus points. For instance, swiping your card during Christmas will earn you additional bonus points. Some banks even issue bonus points to premium cardholders upon joining.
If you typically spend more throughout the holidays, it’s advisable that you plan your spending with reward cards so you can secure as much cashback or as many travel points as possible. It’s worth noting that the holidays provide a distinct opportunity to direct considerable spending on one card within a month. The additional spending on food and gifts could easily earn you a huge bonus for traveling in the future.
You might be tempted to cash in your current reward points to make direct purchases, and numerous programs offer this choice, however, such redemptions are typically at a much lower cent-per-point value than using the points to transfer to travel companions or book travel.
Location of Spending
The value or number of points you earn also varies depending on the location where card swiping takes place. Just note that card swiping for payments such as the electricity bill will attract lesser points than it would when you swipe it at a restaurant for meal payments. The reason is that the restaurant might be issuing a higher interchange fee to the card company to enhance sales, unlike the utility services.
If you own a card featuring a basic variant, you’ll earn approximately one or two points for all transactions. On the other hand, a higher-variant card (super-premium or premium) will easily attract more purchase points.
Although entry-level cards attract a nominal fee, super-premium and premium cards carry considerably higher joining and annual fees.
What to Remember about Reward Points
While they’re somewhat easy to accumulate, you must keep some things in mind when it comes to reward points.
Reward points usually have an expiry date. Ensure you identify the date and redeem your points in good time
Make sure you make timely payments towards your credit card bill to avoid delayed payment charges or card interest.
If you have an outstanding balance on your credit card that needs payment, you should convert your points to cash. Cash conversion is an excellent option because it permits you to save money that you would have otherwise spent towards your credit card bill.
Frequently, you’ll discover that vouchers prompt you to spend more than they’re worth, just to redeem them. Also, remember that vouchers have an expiry date as well.
Reward points are merely a bonus perk on your card, so avoid making purchases just to collect points.
Co-branded cards typically have a limitation on the accelerated points they allow you to earn. The points you accumulate on these cards can only be redeemed against services and products provided by a partner establishment. That means you’ll amass points against purchases, not cash withdrawals.
How Can I Redeem Reward Points?
You can use your points in the following ways:
Various cards issue vouchers as a means of redeeming reward points. You can redeem them at various stores with which your bank might be associated.
Rather than receive purchase points, you’ll obtain a certain portion of your purchase amount as cashback.
Miles are ideal for traveling enthusiasts. Numerous banks partner with airlines to offer cardholders travel-related rewards.
Some banks issue customers a catalog comprising products, which they can purchase with their accumulated points.
How to Travel for Free using Rewards
Flights can put a serious dent in your travel budget, especially if you're traveling internationally. Fortunately, it’s possible to earn free flights if you sign up for the appropriate card. You just need to meet the minimum spending prerequisites, claim the bonus, and redeem points.
Hotel accommodations can be costly, however; it’s possible to decrease expenses with hotel points and reward cards.
Choosing the Best Reward Cards
The best card typically depends on your specific circumstance, including your spending patterns. Consider these factors when selecting a reward card:
Fees and Rates
Consider the fees and rates that accompany a rewards card before opening an account. Some cards offset high annual fees by the card’s considerable reward-earning potential. However, this isn’t always the case, particularly if you aren’t a huge spender.
Before you settle on a specific card, make sure you understand how the redemption process works. Redemption options differ from card to card and can comprise statement credits, cash deposits, and gift cards.
Some cards impose limits on annual or monthly earnings in bonus groups. Make sure you read the fine print and approximate the amount you’ll earn from the card.
Using Online Portals to Get the Best Discount
Online portals offer a great way of finding discounts on various things from travel to shopping. In numerous cases, they could stretch your points considerably. Most card issuers have travel or shopping portals, which members can access for booking airline tickets, rental cars, and hotel rooms. Nonetheless, perks might be restricted depending on the card you own.
Transferring Points to Loyalty Program
Depending on the kind of card you own, it might be possible to save thousands of dollars by transferring points to loyalty programs. Numerous cards have this option, which can be a great way of earning travel perks. Just recognize the worth of your points and make sure you obtain maximum value.
When thinking about a rewards card, the most significant issue is to consider it carefully. There’s no point in applying for a card that doesn’t meet your needs. For this reason, you must select the best reward card to maximize the associated benefits.