Why Credit Cards Are The Tools To Get Free Travel

Most people have a negative opinion about credit cards. 

They believe credit cards get people in debt. 

Many people think you should not use credit cards at all.

This is popularized by gurus like Dave Ramsey.

I love Dave Ramsey, but I don’t agree with this one.

In today’s market, credit cards can be powerful tools when used correctly.

No need for you to fear a credit card when you can just be a responsible user.

Today credit card companies offer lucrative sign up bonuses that can easily equal a free $650 ticket.

No need for you to live in the dark ages instead of using this powerful tool.

That is if you can use credit cards responsibly and payoff your bill in full each month.

If you can’t do that, you need to stop reading.

This blog is not for you.

I think most people can use credit cards responsibly though, so keep reading.

Why Credit Cards Are The Best Way To Get Free Travel

Credit card sign up bonuses are the easiest way to get free travel.

A card like the Chase Sapphire Preferred could get you $650 in free travel just for signing up. 

Why would a credit card company give you $650 free?

I don’t have a finance degree, but personally I think without rewards most people who have any financial sense would use a debit card.

They need rewards to get people to use credit cards instead of debit cards. .

Second, credit card companies make money two ways: transactions fees and interest.

With the first, transaction fees, businesses have to pay a fee anytime someone uses a credit card, usually around 3%.

One of my other businesses uses credit cards.

I have to cover this fee every time someone swipes.

So whenever you swipe a card, credit card companies make money.

Next, credit card companies make money off interest – and lots of it.

If you are reading this blog, you won’t pay this one on any of your rewards cards.

Interest would negate your rewards, and your trip would no longer be free.

It would probably cost more than if you had not used a rewards card.

How You Can Beat The System

The credit card system assumes you will carry a balance on your rewards card and pay interest.

Again, if you were to pay interest on your credit card that $650 free ticket would be negated.

It would not be a free ticket anymore again.

Again, you would probably pay more for it than if you had just bought a ticket.

So, the number one rule is to never carry a balance on any of your reward credit cards.

The easy way to do this and make your money work for you is to use your normal expenses that you pay cash for like groceries, gas, car insurance, cable, phone, and even mortgage.

There is a company that will let you pay your mortgage or rent with a credit card. They charge a fee, so do the math and see if it is worth it. For sign up bonuses, the 3% fee is usually worth it.

Again, you use your normal expenses that you pay cash for.

For instance, if you spend $500 per month on groceries, you would put this on your credit card.

You can immediately pay it after it hits your statement with the cash you were going to use anyway.

Not all expenses can be put on a credit card though.

So Using Credit Cards Makes Your Money Work For You

Basically, any expense you have gets put on a credit card again.

Here is an example:

Person A’s monthly expenses

Mortgage $1300

Car payment (can’t use a credit card)

Car insurance $120

Cable/phone $250

Cell Phone $100

Dining out $300

Gas $250

Total: $2320 per month

If this person were to use the Chase Freedom Unlimited at 1.5 %, they would get 3480 points per month or 41,760 Chase points per year.

That is enough each year for about 2 domestic plane tickets or almost a free international flight to Europe.

Wouldn’t you like 2 free plane tickets every year?

It gets better.

Most cards have a sign up bonus like the Chase Sapphire Preferred. This card offers 60,000 points or about $750 in flights using the Chase Ultimate Rewards portal.

If you are not familiar with spending requirements on cards, you usually have to spend $3000-$4000 in three months.

From our earlier example of Person A’s expenses, at $2300, you can see why this is easy in three months.

While meeting this spending requirement, you will get whatever bonus points the card offers. With the Chase Freedom Unlimited, that would be 1.5% on all purchases again.

More On Credit Card Reward Bonus Categories

You can make your cards work even more for you, by using credit card categories to your advantage.

For instance, the American Express Platinum would offer 5% on flights.

The American Express Gold offers 4% on groceries and dining out.

The Chase Sapphire Preferred offers 2% on travel.

The Chase Freedom Unlimited offers 1.5% on all categories not covered by those cards.

So to get your money’s worth, when you fly you could use the Platinum card; the Gold card for groceries and dining out; the Chase Sapphire for all travel except flights; and the Freedom Unlimited for all other things.

This is just an example. Not everyone will like a $450 Platinum card or a $250 Gold card.

There are several cards that have these categories though.

Transferable Currencies

Just keep in mind the transferable currencies are more valuable.

Transferable currencies are credit card currencies that transfer directly to airlines, hotel, etc.

They give you more value for your money.

The following are transferable currencies:

Chase Ultimate Rewards

Amex Membership Rewards

Capital One Points

Citi Thank You Points

Marriott Bonvoy Points

Conclusion

As you can see, not using credit cards to your advantage is leaving free money on the table. If you can pay your balance on rewards cards in full each month, you should have a rewards credit card.

As nice as cash back cards are, travel rewards cards actually get you more bang for your buck. So, if you like travel these are best.

As you can see, credit cards are a powerful tool to get you free travel and put money back in your pocket.

In the example we used, you would get two free plane tickets a year for your normal spending.

Most people can do better than that too.

So, if you were scared of credit cards before; get over your fears.

If you are a responsible user who can pay your rewards cards balance off in full each month; this is simply free money on the table again.

Most people who use travel rewards cards have their credit score go up too.

Paying your balance in full each month in the long term does nothing but increase your score.