Getting started with rewards cards

The options can seem daunting, but a little bit of research can be valuable


Cashing In
Cashing In columnist Tony Mecia
Tony Mecia is a business journalist who writes for a number of trade and general-interest publications. He writes "Cashing In," a weekly column about credit card rewards programs, for

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Question Dear Cashing In,
A friend who doesn't fly that much keeps telling me about trips she takes using frequent flier miles that she and her husband have accumulated with credit cards. That idea sounds good to me but it seems daunting. I have had the same two cards for the last 10 years -- my main one and then one I use as a backup. How do I get started? -- Donna

Answer Dear Donna,
If you haven't examined credit card offers in the past few years, you should. The number of rewards cards has proliferated and many of the rewards being offered can be quite lucrative. They can allow you to travel cheaply, earn cash back, receive perks on flights and at hotels, and so on. 

Now, you might decide that applying for new cards is not for you, and that you're comfortable with your existing cards. That's fine. But I would say at least take a look.

That said, applying for new cards is a poor idea if you fail to pay off your balance every month, have trouble remembering when payments are due or tend to ramp up your spending when you receive a new card to the point that it causes financial stress. 

If you start researching reward cards, you will find that things can turn complicated very quickly. To get the most value out of a card, you often have to understand how to earn points or miles in the most efficient way, know what kinds of points transfer to which programs and, if you're talking about airlines, comprehend award travel rules and award charts that vary by airline. Some people have mastered those topics, but it takes time.

If you're just getting started, a good place to begin is airline and hotel cards. Many people are familiar with how those programs work, and industry consolidations mean that there aren't an overwhelming number of cards to compare. In addition, the programs are relatively easy to understand, and the number of miles or points you can get by signing up for these credit cards has increased over the years. 

Sign-up bonuses on airline cards typically range between 30,000 and 50,000 miles -- enough for one or two round-trip domestic tickets. Sign-up bonuses on hotel cards can be higher, enough for a free night or more -- depending on how luxurious the hotel is -- and these cards often come with coupons for a free night or two. Annual fees are typically waived for the first year.

One step up on the complexity scale from airline and hotel cards are cards that earn points in the issuing bank's own rewards program. Here, there are more cards to choose from. Earning points is more complex, often with bonuses for spending at certain kinds of merchants (known as "category bonuses"). Redeeming typically means transferring points to an airline or hotel or using the bank's portal to book travel, buy merchandise or request cash back. These cards also tend to have generous sign-up bonuses and often waive the annual fees for the first year.

Once you've got your rewards card, you can get fancier -- and boost your points earning -- by increasing the amount of spending you put on your cards, often by buying gift cards or other prepaid cards. This technique, known as "manufactured spending," can help you meet the sign-up bonus spending requirements on a new card and earn more points on everyday spending by shifting spending to particular merchants that qualify for category bonuses.

For instance, if you have a card that offers bonuses for spending at supermarkets, it can make sense to shift some of your spending to supermarkets. This is a complicated topic, which I covered in more detail in an earlier column, "Using prepaid cards to boost rewards," and there are many blogs out there that explore it extensively.

Finding the best rewards card boils down to your comfort level: How much time do you have to research what cards best meet your needs? How many cards are you comfortable signing up for?

It might not make sense to make a switch. But at least start poking around to see if there are better options out there.

See related: 6 rules for 'card flipping, Are sign-up rewards bonuses seasonal?, When you can, can't transfer rewards points 

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Published: September 30, 2014

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