2. 5 Beginner Credit Card Points Mistakes and How to Avoid Them

Welcome to Point Me to First Class, the only show for employed professionals, entrepreneurs, and business owners who are looking to optimize their higher-than-average expenses to travel the world. I'm your host, Devon Gimbel, and I believe that your expenses are your greatest untapped asset if you know how to leverage them. Ready to dive into the world of credit card points and miles so you can travel more, travel better, and travel often? Let's get started.

Hello everybody and welcome to today’s episode. Today I want to share with you the top five mistakes that I made as a beginner in the world of credit card points and travel, and what you can do to avoid doing the same things. When I say these were the top mistakes I made as a beginner, what I mean is that these were mistakes that I made for about the first four years that I dabbled in points travel.

I want to make sure that if you're currently doing any of these things, you stop immediately and don’t spend years doing them like I did. Not repeating even one of these mistakes will put your lightyears ahead of where I was. If you can skip all of these altogether, you're going to be earning points so much faster and using them so much better than I did for years. So here are my top five points mistakes as a beginner in no particular order.

Points mistake number one, not paying your rewards credit card statement off in full every single month. Now, I'm lying a little bit because this is a mistake that I actually have never made personally, but I wanted to include it and highlight it first because it’s probably one of the biggest, if not the biggest mistakes, that someone can make when it comes to using rewards credit cards.

The reason that this is such a big mistake that you never want to make is because rewards credit cards, these wonderful little cards that allow you to earn points and miles when you use them to pay for expenses, tend to have incredibly high interest rates if you carry a balance on them. It is not unusual to see interest rates on the most highly coveted and used rewards cards in the teens or 20s.

One of my personal favorite rewards cards that I use all the time, the Chase Sapphire Reserve card, has a variable APR between 21 and 28%, which is outrageous. That is why it is so, so important to never, ever carry a balance on a rewards credit card, and to make sure that you always pay off your rewards card balances in full every single month. Because if you don’t, the cost of what you'll pay in interest will more than negative the value that you will get from the points that you earn using that credit card. No matter what, always pay your rewards credit card statements off in full every single month.

All right, beginner points mistake number two. Now, this is a mistake that I definitely did make for years that cost me tons of easy points. That is not putting as many of my purchases and expenses as possible on a points earning credit card. Now, I got my first points earning credit card in 2011 when I was at the end of my training and fellowship, and it was my one and only points earning credit card for years. Even after getting that card, I did not use it all that regularly to pay for things.

At the time, I actually thought that using credit cards was kind of a hassle. So I paid for most things using cash. To be honest, I barely had any money at that point. So I wasn’t buying that many things, but I definitely wasn’t taking advantage of being able to earn as many points as possible by putting all of my expenses on my one points earning credit card.

Especially compared to using cash where there was no payoff at all beyond being able to get whatever the thing was that I was buying. Leveraging every dollar of expenses by putting everything that you can on a points earning credit card ensures that you're not leaving money on the table in the form of points that you could be earning.

Now, not only was I still using for a lot of my purchases, but I also had one or two store specific credit cards that I would use when I shopped at those particular stores, which I’d gotten probably because they gave me some perk like 20% off my first purchase at that store when I had the credit card or maybe getting some coupons every once in a while.

The reason that it was a mistake to not put as much of my spend as possible on my points earning card is because I earned a lot fewer points than I could have by splitting up my purchases between using cash, using store cards that didn’t earn me any points, and using my rewards credit card only occasionally. Compared to the perks that I got for using my store specific credit cards, the points earned on my rewards credit card would have been so much more valuable.

So here is my second tip for anyone who wants to maximize the number of points they can earn. Preferentially use points earning credit cards instead of store specific cards, and put as many of your expenses and purchases as possible on rewards cards that will earn you points or miles. You might be surprised as to how many things you can actually pay for with a credit card.

Now, for the most part, you cannot pay a mortgage or make loan payments like a car payment or a student loan payment by credit card, but you can put so many other expenses on a points earning credit card including things like your everyday expenses like groceries, gas, parking or transit fees, eating out, travel. You can also put things like utilities, charitable contributions or donations, medical expenses, rent. There's actually now a points earning credit card that you can use to pay your rent and earn points for doing so.

Now, if you're a business owner, expenses like dues, subscriptions for software or programs that you need to run your business, paying for services to independent contractors, enrollment in professional development programs, cell phone, internet services, supplies you need for your business, the list goes on and on in terms of your expenses as a business owner that you can use a credit card to pay for.

So in a nutshell, any expense that you can pay for using a credit card, especially if you don’t incur any fee to put the experience on a credit card, should be put on a points earning card to maximize the number of points that you can earn. There are certain circumstances where it can actually make sense to use your credit card to pay for an expense even when doing so means that you have to pay a fee. Including things like paying your taxes or making tuition or daycare payments. We’re going to dive into that much more in depth in a future episode, but for now just know that there are tons of expenses that you can put on a points earning credit card.

But for now, just know that there are tons of expenses that you can put on a point earning credit card. This is a really good time for you to take a minute to think about whether you are currently maximizing the number of expenses that you're using a rewards credit card to pay for, or if you're also leaving some points on the table by paying certain expenses with a debit card or straight from a bank account when you could be using a credit card instead. Especially if there's no additional fee to do so.

Let's jump in to points mistake number three. Now this is another mistake that I made for years, which is the mistake of only having one single points earning credit card. Now, I know many, many people who prior to getting into points travel only have one or maybe two credit cards at most. They use that one or two credit cards for everything, for all of their expenses. I think outside of the points travel world, this makes perfect sense. It is very simple and easy to have your one main stay credit card and to use that for all of your expenses.

I don't think there are really compelling reasons to have a lot of different credit cards before you enter the world of points travel. But here is why it's actually a mistake in the world of points and miles to only have one points earning credit card and to use that for all of your purchases or expenses. Different rewards credit cards offer incentives for you to use that specific credit card for a certain category of your expenses by giving you increased bonus points when you pay for things in that specific category.

For example, one rewards credit card might offer you four points for every dollar you spend when you use that credit card to pay for groceries, but otherwise will only offer you one point for every dollar you spend on any other category of expenses. Or another rewards credit card will reward you with two points for every dollar you spend at gas stations, but otherwise will only offer you one point for every dollar that you spend on any other category of expenses.

So most of us have several categories of expenses over a monthly or annual basis where we tend to spend the most money. One of the quickest ways that you can optimize the number of points that you earn for the money that you are already spending is by strategically using credit cards that offer increased points earning on the things that you spend the most money on.

While there are many cards that offer great bonus points earning in one or two spending categories, there's no one single points earning card that offers you the ability to earn high rates of points on all spending categories. So it actually makes sense to have more than one points earning card because you might have one that offers you increased bonus points for your grocery and dining spend, and you might have another app that offers you increased bonus points when you use it to pay for travel.

Depending on your spending habits, including what categories of things you tend to spend the most amount of money on as well as how much money you spend in those categories over time, you could be losing out on tons of points if you only have one point earning card that you use for all of your expenses.

Now, please don't get me wrong. You definitely do not need to go out and get 10 different rewards credit cards immediately in order to optimize these different bonus categories, but you absolutely should be familiar with your top three or four categories of spend and consider getting rewards credit cards that specifically offer increased points earning in those categories.

Okay. Let's move on now to beginner points mistake number four, which is another thing that makes perfect sense outside of the points world, but will actually cost you the opportunity to earn a lots of points inside the points world. That is, by default, always adding your partner or spouse as an authorized user on your credit card accounts, or you're always being added as an authorized user on your partner or spouses credit cards.

Now, again, outside of the points world, I completely understand why people do this, especially if you share finances with your partner or spouse. You get a credit card, and you add your partner or spouse as an authorized user or vice versa so that you can each have a physical copy of that credit card to have in your wallet and to use.

Now, the reason why this is a mistake in the points world is twofold. First of all, when you first sign up for a new rewards credit card and add your partner or spouse as an authorized user, you're missing out on the opportunity for them to also earn the initial sign on bonus for that credit card themselves by having them apply for their own card as the primary user.

So sign on bonuses are one time bonuses, usually a high amount of points or miles that you get rewarded with when you get approved for a new rewards credit card as long as you put a specified amount of spend on that new card within a certain timeframe of being approved for the card. Sign on bonuses are one of the easiest ways to earn a lot of points fast. If both you and your partner apply for your own credit card, you can each earn a sign on bonus, which is great.

Even better is that you can often earn bonus points from your credit card issuer when you refer someone else to apply for rewards credit card that you have, including your spouse or partner. So rather than making your partner an authorized user on your card, it can make much more sense for you to send them a referral for that same card, which will earn you bonus points for making the referral. Then they will earn their own bonus points in the form of the sign on bonus when they get the rewards credit card for themselves.

The other reason why you shouldn't automatically add your partner or spouse as an authorized user on your rewards credit cards or vice versa is because when you do that, the new credit card account will show up on the authorized users credit report and count as a new credit card account. The reason this really matters is because one of the most popular rewards credit card issuers, Chase Bank, has some specific and strict rules around being eligible to be approved for their points earning credit cards.

If you've been added as an authorized user to a bunch of your partner or spouse's credit cards, it could actually prevent you from getting approved for your own credit cards in the Chase ecosystem. So to avoid this mistake, do not automatically add your partner or spouse as an authorized user on your new rewards credit card accounts and vice versa. If you decide that you really do want to add them as an authorized user at some point, you can always do that in the future.

All right, this brings us to beginner points mistake number five. To be honest, this is one of the biggest mistakes that I see people making all the time and points. So it's actually not just beginners who fall into this trap, but it is one that I want to make sure that you know about so that you don't make this mistake like I did because doing this will significantly diminish the value that you can get from your points.

This mistake has to do with how you use your points once you've done the hard work of earning and saving them. That is the mistake of redeeming your points through your credit card issuers website or portal. Now, if you already have a point earning credit card, you might be familiar with logging onto your account and seeing your points balance in big, beautiful numbers on your credit card account page.

Sometimes displayed right below your points balance or if you click on your points balance, it will say something like this amount of points is worth X dollars towards travel. Or you might see that you can exchange your points for X dollars’ worth of gift cards through your credit card account. Or you can redeem your points and get x dollars’ worth of charges removed from your credit card statement.

Please hear me when I say that one of the biggest mistakes that you can make is to redeem your points through your credit card issuer whether you are trading them for gift cards, for statement credit, or even to book travel through your credit cards travel portal or platform. This is the reason why this is such a mistake. Because when you redeem your points through your credit card issuer, there's a cap on how much value you can get from your points.

That is because each credit card issuer assigns the points that you earn with their rewards card a certain value that is fixed. So your points might each be worth one cent, or they might be worth one and a half cents, but their value will not change as long as you redeem them through your credit card account.

So when you see a message on your credit card account that tells you that your 100,000 points are worth $1,000 towards travel, that's because your credit card issuer has assigned your points a value of one cent per point. So whether you have 100 points or 1 million points, each point is worth one cent when you use it to book travel or exchange for gift cards or otherwise redeem your points through your credit card account.

This is often why people think that they are going to need hundreds of thousands of points in order to book even one flight for free. Because if your points are worth one cent, you are going to need 200,000 points to book a $2,000 flight. Or if you want to fly your mom business class on a flight that would otherwise cost $6,500, you would need 650,000 points for that one flight as long as you're using your points through your credit card account.

Avoiding this mistake is truly the secret to getting tons and tons of value from your points and needing exponentially fewer points for those really expensive flights or hotel stays. So here is my final tip of today's episode. When you go to redeem your points, never use them through your credit card issuer or your credit card account.

Instead, the key to getting way more value from your points is to utilize one of the airline or hotel transfer partners of your credit card points currency by transferring your credit card points out of your credit card account and into your airline frequent flyer account or hotel loyalty account of one of your points transfer partners, and then book your travel directly through the airline or hotel.

That is how you can book a $3,500 round trip business class flight for 110,000 points instead of 350,000 points. Or how you can book a $10,000 hotel suite for 340,000 points instead of 1 million points. Not making this one mistake will allow you to get hundreds, thousands, or tens of thousands of dollars more in value from your points than if you only ever redeem them through your credit card account.

So there you have it everyone the top five mistakes that I made as a beginner in the world of credit card points and travel, and what you can do to avoid making those same mistakes yourself. Now if you have a friend, a partner, colleague, or family member who's just learning about points travel, and you think they could benefit from hearing this episode, be sure to share it so other people who love this podcast can find it as well.

Hey there. I hope you enjoyed this episode. Do you know someone who would benefit from hearing this podcast? Do you have someone in your life who loves to travel but doesn't love how expensive it can be? Or someone in your life a solopreneur, entrepreneur, or business owner who wants to turn their business expenses into an amazing trip somewhere? Sharing is caring, and I would love for you to share the Point Me to First Class podcast.

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The 100 prizes for 100 podcast reviews giveaway ends on Monday, April 3. So submit your review today for your chance to win one of my favorite travel items. For all the details about the amazing travel-inspired gifts you can win and to learn more about how to rate and review the podcast so you can enter our great podcast giveaway, visit pointmetofirstclass.com/podcastlaunch.

Thank you for joining me for this week's episode of Point Me to First Class. If you want more tips on turning your expenses into travel, visit pointmetofirstclass.com to learn more. See you next week.