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Collecting credit card points might not be right for you – Questions to ask yourself before getting started

  • Erin Lizzo

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    At MMS, one thing is abundantly clear – we love the challenge of figuring out how to travel for free by collecting credit card points.

    The concept is pretty straightforward — we’re looking at credit cards that offer something amazing when you open them and then continue to offer valuable benefits every time you use them. You’re spending money, so you deserve something back (that’s my philosophy, at least).

    For example, my top three very favorite credit card perks include:

    1. Priority Pass airport lounge access – This might be my favorite travel secret ever. It’s kind of changed my whole thought process around delayed flights and layovers. I earned Priority Pass when I signed up for the Chase Sapphire Reserve® last year
    2. Southwest Companion Pass – This is almost too good to be true. With the Southwest Companion Pass, every time you book a flight you can bring a companion with you for just the cost of taxes & fees! Many of us on the team have or have had the Companion Pass
    3. Big welcome bonuses – Most credit cards will attempt to catch your eye with an initial welcome bonus. Typically, you’ll need to spend a certain amount of money within a set period of time after you open the card to earn these points

    Before using credit cards to accumulate rewards, it’s important to make sure that you’re in a good position to do so. This hobby definitely isn’t for everyone, and you could actually get in a bit of financial trouble if you don’t carefully consider your strategy when opening a new credit card.

    Ask yourself these questions before you dive in!

    Earning credit card points is so satisfying – you can do things you never dreamed!  But it’s not for everyone. (Photo by WDG Photo/Shutterstock)

    Collecting credit card points isn’t for everyone

    Just a few years ago I had a totally different mentality around using a credit card. The thought of charging anything that wasn’t immediately reflected on my bank statement was terrifying. The fact that I could actually owe more than I paid for something if I wasn’t able to pay off my monthly statement on time totally stressed me out. This fear never totally went away, which is why I trust myself to use a credit card now.

    Hit pause if you fall into any of these categories

    There are several important things to consider before opening a new credit card. Banks and credit card companies are not benevolent institutions that survive by giving away free airline miles. They are here to make money. Always keep that in mind as your #1 rule.

    Here are a few things to consider before opening a new card.

    Is this your first travel card?

    It’s important to really understand what you’re getting into when you open your first travel credit card. This is a time to read the fine print. What is the interest rate? What happens if you don’t pay off your balance when or before it’s due? Are there any other hidden fees or charges? What are you receiving for the annual fee (if there is one)?

    Do You Have a Low Credit Score?

    To open a travel credit card, you’ll need to have a credit score. That usually means you’ve already got a credit card (or have received some form of loan). Many folks open a secured credit card through their bank to first begin their journey toward good credit.

    This is a big one. Having a high credit score will help you to save lots of money in a variety of ways. You’ll be eligible for a better interest rate when buying a new car, you’ll be able to borrow money at a lower rate when purchasing a home, etc.

    Your credit score comes into play when opening a new credit card, too. We always tell readers not to dive into this hobby if your credit score is below 700. If this is you, don’t be discouraged. You’ll get there eventually!

    Do you pay off your monthly balances?

    Don’t open a new card until you’re:

    Come up with a plan. This could be a simple matter of figuring out the max you can spend on each card every month and sticking to it.

    A smart credit card strategy takes a bit of work – You’ll be glad you put in the effort early

    To be successful in this hobby means you’re not paying unnecessary fees, such as interest for carrying a balance each month. This is where the credit card companies make a lot of their money. When you’ve got a $3,000 balance on a card with 9% APR and you’re only paying the monthly minimum due, guess what? You’d pay thousands in interest (and the balance would take years and YEARS to pay off). Ouch.

    Can you meet spending requirements to receive valuable welcome bonuses?

    One thing we love is the initial sign-up bonus that most credit cards these days will offer.

    Often you’ll need to spend a certain amount of money in a certain amount of time to get the intro offer rewards. Typically, this is some variation of “spend $3,000 on purchases in the first three months of opening your card to receive 50,000 miles”. Those of us in the miles & points hobby are careful with our money (that’s why we put all this effort into learning how to travel for free!). A big spending requirement can be a little daunting. If you know you won’t spend enough to earn a certain bonus, don’t apply.

    Not ready to collect miles and points? You’ll get there!

    The great thing about this hobby is that even if you’re currently in a spot where it doesn’t make sense to open a new credit card, there are steps you can take to get in the right position. Nothing is forever, even cold November rain (or your credit score).

    When you know your financial health is strong and you’re ready to start accumulating miles and points, start by opening one credit card. If you’re able to pay off the balance every month (or every week, as paranoid people like me will do), that’s a great sign you’re in a spot to think about your next card. But proceed slowly.

    It’s also important to make sure you will have enough income to cover the minimum spending. If not, wait until you have saved up the full amount, then and can feel confident you’ll get your award miles and won’t have to worry about carrying a balance on the card.

    Have you debated whether or not collecting points is the right choice for you? What are your thoughts around this? I’d love to hear what you think in the comments section below.

    And to stay up to date on all things miles & points, subscribe to our newsletter.

    Editorial Note: We're the Million Mile Secrets team. And we're proud of our content, opinions and analysis, and of our reader's comments. These haven’t been reviewed, approved or endorsed by any of the airlines, hotels, or credit card issuers which we often write about. And that’s just how we like it! :)