A Low-Risk Approach to Exploring Credit Card Points and Miles
Frank McBride • April 24, 2025
This nothing-to-lose approach just might introduce you to a new passion
When I tell people about my passion for turning points and miles from credit card spending into free travel, a significant minority of them tell me they seek some sort of return from their spending in the form of cash back cards. There are a variety of cash back credit cards available, but typically, they effectively rebate about two percent of a cardholder's credit card purchases.
These cards are popular with users for several reasons:
- Most cash back cards do not have an annual fee while the typical annual fee for credit cards with any noteworthy benefits is about $100 per year.
- They are straightforward in how they work. You can get two percent back on any purchase although some offer bonuses for spending in certain categories.
- The rebate is cash which offers the ultimate flexibility. You are not limited to using your rewards for gift cards, travel, etc. You are getting a cash rebate that you can use as you see fit.
For those who use cash back cards, the prospect of exploring the world of points and miles might seem like more trouble than it is worth. But, it is possible to give points and miles a trial with minimal risk. And, in fact, you might get more out of a points and miles card than you would get with cash back cards even if you ultimately use the points just as you would use cash.
I offer some scenarios to show how this might work.
Year One with a Cash Back Card
Let’s say your household has $2,500 in expenses per month ($30,000 annually) that can be put on a credit card, and you use a cash back credit card. The cash back feature will generate $50 per month or $600 annually. Considering that some cash back cards offer bonuses for select categories, let’s assume that you spend enough in those categories so that your actual cash return for the year is $800 (a 2.67% return). Furthermore, let’s assume that this is the first year of using the cash back card and they have offered a $200, one-time bonus to new cardholders for meeting some spending threshold.
You have accumulated $1000 cash back and there is no annual fee for the card so this scenario has netted $1,000.
Year One with a Flexible Points Credit Card
Flexible points credit cards tend to offer valuable sign-up bonuses for meeting spending thresholds but also come with annual fees. Currently, Chase is offering a 100,000-point sign-up bonus for its Sapphire Preferred card. To earn this bonus, you need to spend $5,000 with the card in the first three months of membership. Our hypothetical household that puts $2,500 per month on a credit card will have no problem doing this.
After one year of using this Chase card, this household has a minimum of 130,000 points (the 100,000-point bonus + 30,000 points from $30,000 spending). This is a minimum because this card actually gives bonus points for dining (3 points per $1 spent) and travel (2 points per $1 spent) so the point total after one year could be greater than 130,000.
These points can simply be used to pay your credit card bill at one cent per point so the 130,000 points would be worth, at a minimum, $1,300.
After subtracting the $95 annual fee, this scenario has netted at least $1205 in value.
While the approach of using the Chase points to pay your balance leaves you about $200 ahead of the scenario using a simple cash back card, there is even greater possible value. There is more value to be found by transferring the Chase points to its airline and hotel partners. Some examples:
- Chase points can be converted to World of Hyatt points at a 1:1 ratio. Ms. Optimizer and I routinely get at least two cents in value per point when using points for Hyatt stays. Even with a conservative estimate of 1.5 cents/point, the 130,000 Chase points would be worth almost $2,000 for staying at Hyatt hotels.
- Chase points convert to United Miles at a 1:1 ratio. United miles are worth about 1.3 cents per mile so the 130,000 Chase points would be worth around $1,700 if used for United flights.
Year One with a Hybrid Approach
Yet another approach would be to apply for a cash back card and the current Chase offer. For the household with $30,000 annual credit card spending, this could yield at least $1,650 in value after deducting the $95 annual fee for the Chase card as follows:
- Cash back card’s sign-up bonus - $200
- Chase card sign-up bonus (100k points) - $1,000
- Chase points from spending $5,000 to obtain sign-up bonus (5,000 points) - $50
- Cash back from $25,000 spending on cash back card - $500
Bottom Line
There are many cash back cards offered by banks as well as many flexible points cards that come with decent sign-up bonuses. I use the Chase Sapphire Preferred card in the examples above because Chase is currently offering an especially attractive sign-up bonus on that card. But, the usefulness of cards can vary depending on the spending habits and goals of cardholders.
Cash back cards are straightforward and satisfy my first rule of holding a credit card which is “Always get something back.” But, for anyone wondering if there is more to be had, you have an excellent opportunity to try out the points and miles game to see if you can get greater value. You will not be any worse off and, possibly, you might determine that it provides excellent value and new opportunities.
When we design a custom Travel Rewards Optimizer plan for you, we take your travel goals, travel habits, spending patterns, and preferences into account. We want to ensure that the cards we recommend for you can quickly generate free travel and provide relevant benefits while keeping your annual card fees under control.
We are ready to help you turn your routine credit card spending into the travel of your dreams.
In case you missed them, here is your "one-stop shopping" for posts from the past week. For some, recent changes with the Resy restaurant reservation platform might limit dining options when using the credit. Learn more here . Perhaps your next US domestic award flight should be booked through . . . Air France. Check out why . The Amex Platinum card might have the highest annual fee for mass marketed cards. Find out if the benefits are worth it for my household here . Hope you have a great Labor Day weekend!! We are ready to help you turn your routine credit card spending into the travel of your dreams.
A walk through one household's use of the Amex Platinum card
For some domestic flights, Air France might save transferable miles
Recent changes in the Resy reservations platform might limit use of the Amex dining credit
Changes are a mixed bag but Hyatt regulars won't be happy
Some good news in points and miles (and one warning)
A change in favor of airline passengers (for a change)
The Autograph Journey's transfer partner list grows slowly but steadily
Points and miles free up the travel budget for pilsner, paprika, and pastizzi*
As the summer travel season approaches, this is a friendly reminder to avoid "dynamic currency conversion" (DCC) when making credit card purchases outside of your home country. DCC gives you the option of selecting a payment amount in your home currency rather than in the local currency. Typically, when presented with a credit card reader at a shop or restaurant, the touch screen will show purchase amounts in the local currency and in US dollars (for those with American credit cards) and you have the opportunity to choose. I have been seeing these “offers” for several years now and have learned, after doing a little mental math, they are almost always a bad deal for the purchaser. When presented with a credit card reader, I always choose to pay the amount shown in local currency rather than the amount shown in US dollars. During a recent trip, I was making purchases in Euros, Hungarian Forints, and Czech Korunas. From what I could tell, the option of paying in dollars inflated the cost of the purchases around an average of five percent (5%). Once, a card reader screen acknowledged that making the purchase in dollars added an eight percent (8%) fee. Even a credit card with a foreign transaction fee (which you should avoid using when traveling abroad) would have added only three percent (3%) to the tab. Currency games aside, Visa and MasterCard offer reasonable exchange rates when you choose to pay in the local currency. Upon returning home, our credit card statements showed exchange rates that were quite close to market rates. It is reasonable and fair for the credit card issuers make a fraction of a percent here and there as they are performing a service and accepting currency risk (although very briefly). But, claiming to offer a “preferential” rate to pad their bottom line is disingenuous. Because exchange rates are reasonable, using credit cards while traveling abroad is still worthwhile for a points and miles program as long as you avoid cards with foreign transaction fees. Travel oriented cards can offer 2X and 3X spending bonuses for transportation and restaurants to give you a leg up on saving money and accumulating points or miles for your next vacation.
