70. From Bills to Boarding Passes: Mastering Expense Buckets for Maximum Points

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 back to another episode of the Point Me to First Class podcast. Now, this probably won't surprise you to hear, but I think about points a lot. Not just points themselves, of course, but the entire landscape of award travel, from all the different points ecosystems and rewards credit cards, to unique and perhaps obscure ways to earn points, to, of course, using those points to dramatically offset the cost of travel.

Not only do I love points so much that I spend an inordinate and probably unhealthy amount of time thinking about them, but I also genuinely love teaching other people how to leverage their expenses and turn their points into their wish list travel experiences. So I have a lot of conversations about points with people every day. Conversations with people brand new to points, conversations with people who know nothing about points but should, conversations with friends who are also points experts about points minutia and nuances of award programs that would likely bore the vast majority of you straight to death.

But one of the things that often stands out to me from all of these conversations is how can we talk about points or think about points in a way that breaks down what can be complex topics into easy to understand frameworks that make it accessible and fun even for beginners or casual points enthusiasts to get a lot out of this hobby without necessarily having to become devoted to it. 

Because I fully recognize that most people probably don't want to think about points as much as I do, and you shouldn't have to in order to still get a lot out of this hobby. At the end of the day getting a significant amount of value out of this whole points travel hobby really comes down to two things. Earning points, ideally as many points as possible for the money that you're already spending,  and using points, ideally as few points as possible for any given award so that you can take more trips, save more money and have more travel options available to you. 

Today I want to spend some time talking about the first part of that points travel cycle, earning points. Specifically I want to offer you all a framework for thinking about your expenses from a high-level perspective so that you can quickly and easily identify where opportunities exist for you to earn points or to earn more points on your expenses. 

I think that this framework is going to be particularly helpful for anyone who's newer to this hobby and trying to make sense out of which expenses you can earn points on and how to go about earning as many points as possible for those expenses. But I'm also going to include some more advanced considerations to help those of you with a bit more points earning experience. So I hope that there's going to be something for everyone in this episode regardless of whether you consider yourself a beginner or more of a points pro. So let's get into it.

When I think about expenses, whether they're personal expenses or business expenses, all of the things that you could possibly spend money on, whether it's a daily, weekly, monthly, annual or a single-time expense, I think that there are three main categories or buckets that all expenses fall into. Understanding what these buckets are and what expenses fall into each of them is going to help you identify where to spend your time and energy in creating or optimizing your personal points earning strategy.

So all of your expenses are going to fall into one of these three buckets. Bucket number one are expenses that you cannot pay for directly using a rewards credit card in order to earn points. In other words, these are the expenses that can only be paid by check, bank transfer, or cash equivalent. 

Bucket number two are expenses that you can pay for directly using a rewards credit card in order to earn points and that don't incur any processing fee or additional fee in order for you to be able to pay them by a credit card. Bucket number three, these are expenses that you can pay for directly using a rewards credit card in order to earn points, but that you have to pay a processing fee in order to do so. 

Now we're going to talk much more about each of these three expense buckets including what types of expenses fall into each, straightforward strategies or approaches to earning points for each bucket of expenses that are best for beginners, as well as some advanced points earning strategies for each bucket of expenses for those of you who are ready to elevate your points earning beyond the basics or those looking for somewhat more challenging points earning methods that offer the advantage of higher points earning rates than you might otherwise get with a more beginner level points approach.

Now if you happened to listen to podcast episode number 45 where I was joined by my friend and fellow points expert Kelly to break down and compare our entire year of points earning from 2023, you will have heard that last year I earned a little over 4.1 million points total but only about 19% of that total points earning for the year came from welcome bonuses on new credit cards that I opened. 

While that number does fluctuate somewhat from year to year, what doesn't really change for me is that a significant amount of my points earning comes from understanding what buckets all of my different expenses fall into and maximizing earning points for those expenses beyond just opening new credit cards, and that's what I want to share with you all today.

As you will learn in this episode there are both straightforward as well as some more creative ways to ensure that you are always earning more than one point per dollar spent on as many of your expenses as possible. 

So understanding what buckets your expenses fall into and identifying the most high yield points earning strategies for each type of expense is going to ensure that those expenses are doing the heavy lifting for you in terms of increasing your points balances sustainably month after month, year after year. Because the goal, of course, is not to spend more money just to earn more points. It's to earn more points for the money that you're already spending. 

As we dive more into the three main buckets of expenses, here's how to use this episode and what to consider whether you're a points beginner or a more experienced points earner. First, use the three bucket framework to mentally categorize your biggest or most frequent expenses. 

For beginners, identify one or two of the highest yield opportunities to earn points for your expenses or increase your points earning for expenses based on the bucket that they fall into. For more advanced folks, use this episode to gauge where you are in terms of points earning efficiency or optimization and identify if there are expenses that you currently don't earn points for that you could or expenses where you can increase your points earning using different approaches based on the expense bucket that they fall into. 

As always whenever I talk about earning points using rewards credit cards, I assume that you will only consider these approaches if you are paying off your credit card statements in full every single month. Please do not ever carry a balance on rewards credit cards as they often have astronomical interest rates, and the value of any points that you would earn would be negated by the interest you'd pay by carrying a balance. 

With that being said, let's take a closer look at each of the three main buckets that expenses fall into. Starting with expenses that you cannot pay for directly using a rewards credit card in order to earn points. 

So these are the expenses that can only be paid by check, bank transfer, or cash equivalent and include things likely like your mortgage, car loans, property taxes if they're in escrow, student loan payments or 529 educational savings plan contributions, daycare or certain school tuition payments, person-to-person payments like Venmo or PayPal, payments to contractors or vendors who just don't accept credit card, or contributions to traditional retirement savings accounts like 401k contributions or 457 contributions through your employer just to name a few. 

Depending on your specific expenses you might find additional bills fall into this bucket that you simply don't have the option to pay for directly using a points earning credit card, including some insurance policy payments like disability insurance or certain professional expenses like licensing or credentialing expenses just to name a few. 

Every single one of us has expenses or bills that do not accept credit card as payment. So the first thing to understand about expenses that fall into this bucket is that you shouldn't be surprised to have a few, and these may even be some of your largest expenses like a mortgage payment, daycare or school tuition, or student loan payments. 

For beginners, since you cannot pay for these types of expenses directly using a rewards credit card, I recommend that you essentially ignore this bucket of expenses initially. You're going to want to prioritize earning points for any of your expenses that fall into the second and third buckets of expenses that we're going to explore next. So for now don't focus on earning points for any expenses that fall into this first bucket.

Now for more advanced folks, there are indirect methods for earning points on some of the expenses that fall in the first bucket, but I want you to hold that thought for now. Because before we dive too deep into that we're going to take a look at the second and third buckets of expenses.

The second bucket of expenses are the expenses that you can pay for directly using a rewards credit card in order to earn points and that otherwise are free for you to do so, meaning that there's no additional processing fee in order for you to pay for that expense with your points earning credit cards. These are likely the expenses that you're already very familiar with using your rewards credit cards to pay for in order to earn points. 

Expenses like your groceries, gas, travel expenses like car rentals or flights or hotel stays that you are not using your points to book, eating out, online shopping, or just paying bills that do accept payment by credit card. If you rent and have a Bilt credit card that you use to earn points for paying your rent, that expense would fall into this category too. 

These are also the expenses that you should always be using rewards credit cards to pay for so that you can earn points and ideally earn more than one point for every dollar you spend here. The expenses that fall into bucket two are the easiest ones to earn points for because you can pay for them directly using a rewards credit card, and there's no added cost to you to earn points since they don't charge any additional fee when you use a credit card to pay for them. 

As a beginner, there are three basic approaches that you can leverage to earn points for any of your expenses that fall into bucket two. The first and most high yield approach to earn points here in terms of just the sheer number of points that you can earn per dollar spent is to use a new rewards credit card for these expenses in order to meet the minimum spend requirement to earn a new card welcome bonus or signup bonus. 

Depending on the specific rewards card you use and the welcome bonus on that card, you can usually earn anywhere between 15 to 25 points per dollar spent for the spend required to earn a welcome bonus, and that's pretty fantastic. 

But let's say that you are not currently working on a new card welcome bonus offer or you anticipate there being periods of time where you're not interested in applying for new rewards credit cards, but you still want to maximize your ability to earn points for any expense that you can pay using a points earning card. In that case, the second basic approach to earning points for these expenses is to strategically hold rewards credit cards that bonus your most common categories of spend.

I know that I've joked before about the scenario where someone pulls out a personal Amex Platinum card to pay for their bill at a restaurant and why that's a terrible idea, but it's just because it's such a classic example of what not to do if you're being strategic about earning points for expenses that fall into bucket two. 

Now quick side note here, I am not talking here about special promotions on specific cards that sometimes come and go, like if you qualified for the recent Amex dining promotion that gives you 10 times points on dining spend that you might have activated on a personal Amex Platinum card. In this episode, I'm talking about standard bonus categories on standard rewards credit cards. All right back to the episode. 

The reason that a card like the personal Amex Platinum card usually is not a great one for some expenses, like restaurant or dining spend, is because that card only earns one point per dollar spent on that specific expense category. If you want to take advantage of your bucket two expenses beyond always working on a new card welcome bonus, an easy way to do that is to make sure that you have rewards credit cards that give you bonus points on the categories of expenses that you have most commonly or that are the highest for you.

Have a monthly rent payment? That's the perfect scenario to get the Bilt credit card. While it does only earn one point per dollar spent on rent, it's currently the single only points earning credit card where you can earn points at all for paying rent and with no added processing fee for you. Earning one point per dollar spent on an expense category like rent that can be significant is miles better than earning no points per dollar spent on rent.

In the case of other expense categories like dining spend, there are so many great rewards credit cards that will let you earn much more than one point per dollar spent so it would be wise for you to consider one of those like the personal Amex Gold card that earns four points per dollar spent on dining, or the Citi Premiere Strata card that earns three points per dollar spent on dining, or the Capital One Saver rewards card that earns four points per dollar spent on dining just to name a few. You're getting the picture. 

In addition to getting rewards credit cards that offer strong welcome bonuses, it's also smart to deliberately get rewards credit cards that have strong bonus points categories for the things that you tend to spend the most money on.

Now the third basic approach that beginners can use to take advantage of points earning on any expenses that fall into bucket two is to make sure that you have at least one rewards credit card that offers increased points earning on all spend regardless of expense category. The reason that this is so important is because there are a lot of expenses and for some of us a significant amount of our annual expenses that don't fall into any of the defined bonus categories of current personal or business rewards credit cards. 

Chances are that if you track all of your spend throughout the year, you would cumulatively have more spend that falls outside of your credit card bonus categories than spend that earns bonus points even on the most premium points earning credit cards. This is what we refer to as non-category or non-bonused spend. You don't want to miss the opportunity to turn your non-category spend into as many points as possible. 

By default, most rewards credit cards will only earn one point per dollar spent on any expenses that don't fall into their designated bonus categories. So, you don't want to use those rewards credit cards for your non-category spend. Instead, I recommend that everybody consider getting at least one rewards credit card that allows you to earn 1.5 or two points per dollar spent on all spend. There are both personal and business rewards credit cards that offer increased points for non-category spend, and having at least one of these in addition to rewards cards with strong bonus categories for the things that you tend to spend money on is a simple way to ensure that you are capitalizing on turning expenses in bucket two into lots and lots of points. 

So what are some examples of points earning credit cards that earn increased points for non-category spend? So first of all, I just want to say that this is not an exhaustive list. 

But some of the personal credit cards that earn 1.5 to two points per dollar spent on all expenses include the Chase Freedom Unlimited card, the Citi Double Cash card, and the Capital One Venture Rewards and Venture X Rewards cards. Business cards that offer increased points for non-category spend include but are not limited to the Chase Ink Unlimited card, the Amex Blue Business Plus card, and the Capital One Venture X Business card just to name a few.

As you're building your foundational credit card portfolio the easiest way to maximize your points earning for your bucket two expenses is to hold rewards credit card combos that bonus both your category spend as well as your non-category spend, but that doesn't mean that you need a million different credit cards. I can think of literally at least 20 different combinations of rewards credit cards that could be fantastic as foundational points earning credit cards to take advantage of earning points on bucket two expenses. 

I'm not going to detail every single one of them here because that would be tedious and boring for you all, but I do want to highlight three potential reward card combos that can be powerful points earners, especially for beginners who aren't ready yet for a more complex credit card portfolio. So here are just three examples of credit card duos that would potentially allow you to optimize bucket two expenses. 

First up from American Express, if you had both the personal Green card and the personal Gold card, you would be able to earn three times points on all travel and transit and four times points on all dining and grocery spend. American Express does not currently have a personal rewards credit card that offers increased points earning on all non-category or non-bonus spend but they do have a business credit card, the Amex Blue Business Plus card, that offers two times points on all spend regardless of category up to $50,000 spent annually.

For fans of the Chase points ecosystem, I don't think that you can beat the duo of a Chase Sapphire card plus the Chase Freedom Unlimited card to give you good coverage of bonus categories and solid 1.5 times points earning on all non-category spend. Within the Citi points ecosystem, I think the combo of pairing a Citi Premier Strata card to earn three times points on dining, gas, groceries, flights, hotels and electrical vehicle charging with a Citi Double Cash card to earn two times points on all non-category spend is one of the most underrated points earning duos available. 

Like I said these are just three suggestions of credit card pairs that offer the benefit of strong bonus categories and increased points earning on non-category spend. There are also great card combos in the Capital One ecosystem as well as great card combos that are business credit cards that can be paired with personal credit cards. 

What I want to show you is that even if you're new to points or are reluctant to consider getting what feels like a lot of credit cards, there are great opportunities to optimize your points earning with fairly simple credit card approaches. Of course you can always add complexity to any credit card portfolio as your interest and skill levels increase, but please don't think that you have to have 10 or 20 rewards credit cards in order to earn a solid amount of points.

There are infinite variations of points earning credit cards that will allow you to optimize points earning. The key isn't that you get all possible credit cards, but rather that you're deliberate about choosing a few that will give you the biggest return for your type and amount of expenses. 

Now for those of you who are more experienced in points earning and already feel really comfortable leveraging your bucket two expenses to earn new card welcome bonuses, take advantage of bonus categories on one or more credit cards, and are optimizing non-category spend with a foundational credit card that earns increased points for that non bonus spend, here are two ideas for how you can increase your points earning beyond these initial strategies.

First, earning more points for bucket two expenses can be as simple as shifting where you purchase certain material items in order to take advantage of different card bonus categories. So here's what I mean. Think about physical products that you buy and how you could potentially earn more points for those things if you just bought them somewhere else that has a higher bonus category on one of your rewards cards. 

Take for example if you tend to buy vitamins from a specialty shop online that falls into non-category spend because of the way that it codes on your credit card statement. You could make that purchase with a credit card that offers 1.5 or two times points on non-category spend or you could instead buy those vitamins from a different vendor like an online grocery store using a rewards card that offers three times points or four times points for online grocery spend. 

Another example are paper or cleaning products like paper towels, dish soap, hand soap that you might regularly buy someplace like Target or a grocery store. So at most, you're going to earn three or four times points for that spend, which is great but you could also buy those things from an office supply store with a card like the Chase Ink Business cash card that earns five times points on office supply store spend.

Now I know that these are small examples, and I don't want you to get caught up on the specifics as much as I want to illustrate the principle that oftentimes there are products that you're spending money on that you buy from a particular place out of habit. But if you just purchase those from somewhere else using a rewards credit card that offers a higher category bonus at a different type of store, you can earn more points. 

The other approach that you can take to earn more points on bucket two expenses is to turn non-category spend into category spend by buying gift cards. Here is what that looks like. 

You may not be buying a particularly large amount of vitamins or paper products like the previous examples. But if you're anything like my family, you spend a small fortune on Amazon. It's fast, it's convenient, you can buy pretty much anything there but currently there are no rewards credit cards that bonus Amazon spend as a standard year-round bonus category.

The Chase Freedom Flex card does often have Amazon as one of its quarterly bonus categories but that five times bonus points earning caps out at $1,500 spent per Chase Freedom Flex card, and it's only valid one quarter of the year. Honestly that doesn't do me, personally, a whole lot of good.

So for the most part, your Amazon spend is going to be non-category spent. For beginners, using a card that bonuses non-category spend for your Amazon purchases is a great first step because it can allow you to earn 1.5 times points or two times points for your Amazon spend instead of using a card that only earns one point per dollar on non-category spend. So you're already doing great if you've taken the step to put that non-bonus spend on a card that earns more than one point per dollar.

But you can take it another step forward and turn your Amazon spend into category spend by purchasing Amazon gift cards at locations that will code as bonus categories on various points earning credit cards and then loading those gift cards onto your Amazon account and making all of your purchases from that balance. 

So here are a couple of ways to do this. You can buy Amazon gift cards from drugstores using a card that bonuses drugstore spend like the Chase Freedom Unlimited card that earns three times chase points at drugstores. You can purchase Amazon gift cards at a grocery store using a credit card that bonuses grocery spend, like the Citi Premiere Strata card that earns three times points at grocery stores.

You can purchase Amazon gift cards at a gas station with a card that bonuses gas station spend like the Wyndham Rewards Earner Business card that earns eight times points at gas stations. In this way you can earn three times points, four times points, eight times points for all of your Amazon spend instead of just 1.5 or two times points simply by taking something that isn't ordinarily a bonus category on rewards credit cards and turning it into bonus category spend. 

This is just one of many, many examples of bucket two expenses that you can turn from non-category spend into bonus category spend by strategically shifting your purchasing to take advantage of strong bonus categories on your rewards credit cards. 

Now if you're a beginner and this sounds at all confusing or overwhelming to figure out right now, don't. This is a strategy to explore once you’ve gotten very comfortable and confident with the more straightforward points earning approaches that I discussed earlier for maximizing bucket two expenses. 

Once you've got a handle on earning points for your bucket two expenses, you can start exploring whether it makes sense for you to incorporate earning points on your bucket three expenses to your points earning plan. As a reminder, the expenses that fall into bucket three are any expenses that accept credit card as payment but that will charge you a processing fee in order to pay by credit card. 

In this scenario, you would earn points by paying for those expenses with a rewards credit card but you will incur a fee in order to do so. So it's not cost neutral like the expenses that fall into bucket two. Examples of expenses that fall into bucket three include things like paying your federal or state taxes by credit card, which currently is possible if you pay a processing fee of anywhere between around 1.85 and 3%.

For folks with daycare or school tuition expenses, if these accept credit cards at all, they commonly charge a processing fee in order for you to make your payments using a credit card. Some contractors or service providers may also only accept payment by credit card for their services if you, as the customer, pay the credit card processing fee. Examples of this are things like home repair or home renovation services, some small businesses, or contractors for business services.

Listen, I'm not here to debate whether small business owners or large business owners for that matter should shoulder the cost of credit card processing fees or whether consumers should pay these in order to have the option to use credit cards as payment methods. I'm just here to discuss this scenario as a potential points earning method and equip you with the information that you need in order to determine if, when, and how you want to turn bucket three expenses into points earning opportunities. 

That being said, some of you may never want to use a credit card to pay for certain expenses if it's going to require that you pay an additional fee regardless of the number of points that you could earn by doing so. That, of course, is totally fine. But some of you will want to consider this option because of the simple fact that many of the expenses that fall into bucket three can be significant ones in terms of the total amount of money they cost and therefore the potential amount of points that you could earn for them if you pay them using a rewards credit card. 

Take a second right now and mentally estimate how much spend in a given year you have on expenses that fall into bucket three, including things like tax payments, tuition, daycare or childcare costs that would allow you to pay by credit card with an associated fee, or contractor services if you anticipate a large upcoming renovation or home or business repair. 

What percentage of your total expected personal or business expenses this year are accounted for by bucket three expenses? If it's a large amount then choosing if, when, and how many of these expenses you want to pay using a credit card could make a huge difference in your points earning ability.

No matter what, I always recommend that anytime you're considering whether to pay a bucket three expense by credit card in order to earn points that is going to require that you pay a fee on top of the regular expense amount that you should do the math to determine whether the monetary value of the points you expect to earn justifies paying the processing fee in order to earn them. 

Now I'm not going to walk step by step through that process on this episode because I have already described it in detail in podcast episode number six where I talk about earning points by paying your taxes using a credit card. So the same process that I described in that episode can be applied to any bucket three expense to determine if paying a fee to use a points earning credit card will be worthwhile for you. So go ahead and check out episode number six to learn what that process is and to see exactly how you can apply it to your own bucket three expenses. 

What I do want to talk about on this episode is how to approach potentially using rewards credit cards for your bucket three expenses if you're a beginner to points versus if you have more experience. So this might surprise you to hear, but my recommendation for points beginners when it comes to bucket three expenses is usually one of two things.

One, don't do it. Don't stress out trying to figure out if it's worth it to use a credit card to pay for an expense when you are going to have to pay an additional fee. The reason that I say this is because I think that there are higher yield areas for you to focus on first where you can increase your points earning that are not going to require that you pay a fee, like optimizing all of your bucket two expenses. That is inherently lower risk than paying a fee in order to earn points for a bucket three expense that's also going to require that you have some skill in redeeming points for higher value in order to come out ahead. 

If you have only ever redeemed points straight through your credit card account for things like a statement credit or to book travel through your credit cards travel portal, if you don't yet understand how to calculate the redemption value of a potential award booking, or if you don't have a high level of confidence that you know how to find and book awards where you can get at least two cents per point in value from your points then it could be a mistake to try to earn points on a bucket three expense using a rewards credit card. 

Just because you can earn points by paying for an expense using a rewards credit card doesn't always mean that you should. I want to make sure that anytime you're earning points you're either not incurring any additional cost, or fee to do so or the value that you're going to derive from those points more than outweighs the cash cost of the fee that you have to pay in order to earn them. For a lot of beginners to points, that value proposition doesn't exist with bucket three expenses yet. 

Now the one exception to my just don't do it recommendation for beginners when it comes to using credit cards to earn points for bucket three expenses is the scenario where you can use that expense to earn the welcome bonus on a new rewards credit card. That's because if you're earning 75,000, 100,000, 150,000 or more points as a welcome bonus on top of the points that you're earning for paying the cost of the expense itself then you're almost always going to make up and more than make up the cost of the processing fee in the value of the points that you earn.

But overall if you're still working to maximize your points earning for your bucket two expenses, if you're not sure how to walk through the math to determine if paying a fee to use your credit card for a bucket three expense makes sense, or if you're just at all nervous about the redemption skills required to get more value from your points earned from paying a bucket three expense than the cost of the processing fee that you have to pay, that's a good indication to wait to pursue this particular points earning strategy.

If however you do have a bit more experience earning and using points then adding bucket three expenses to your points earning plan can be tremendously beneficial. Here's how to make the most of them. 

First of all consider earning points for bucket three expenses on a case-by-case basis. Just because you pay one quarter of estimated taxes by credit card or you pay some portion of a home renovation project by credit card doesn't mean that you always have to pay bucket three expenses by credit card to earn points. 

I think that it always makes sense to run the math of how many points that you would potentially earn for a given bucket three expense based on the specific rewards credit card that you plan on using, the exact out-of-pocket cash cost of the fee that you would have to pay in order to use that credit card, and how many and what type of points you would earn as a result of paying with a credit card.

For those of you ready to take the leap to pay for a bucket three expense with a points earning credit card, here's how to put yourself in the best position to come out ahead considering, again, that you are going to be paying a fee to earn points on these expenses. 

First, make sure that the card that you're using to pay for a bucket three expense is going to earn you more than one point per dollar spent. Now most of the expenses that fall into bucket three are probably going to code as non-category or non-bonused spend on most rewards credit cards and therefore only earn one point per dollar spent. 

But if you're going to be paying a fee in order to use a credit card to earn points for paying a bucket three expense, you want to drive that points earning up as much as possible. One way to do that is to prioritize using a credit card that offers increased points earning for all non-category spend for these types of expenses. Examples of this again are the personal or business credit cards that earn 1.5 or two points per dollar spent on all spend regardless of category. 

Just like I mentioned in the beginner's approach to earning points for bucket three expenses, using a new credit card where you can earn the initial welcome or signup bonus for paying a bucket three expense will also help maximize the points that you earn and help offset the cost of the fee that you're going to have to pay in order to use a credit card.

Finally, it could be worthwhile to use a credit card that only earns one point per dollar spent on a bucket three expense if it's a credit card that earns you a specific type of points or miles that otherwise is very, very hard to earn a lot of and that you know how to redeem for high value. So here I'm thinking about things like airline co-branded credit cards that will earn miles in more niche points currencies that you otherwise can't access as transfer partners of the transferable points but whose programs have great potential award redemptions. 

So one example of this is the Miles and More credit card that's issued by Barclays Bank and that earns miles that you can redeem for award flights in the Lufthansa Miles and More frequent flyer program. Now this credit card only earns one point per dollar spent on most expenses, but it's very hard to earn a lot of Miles and More miles unless you're frequently taking paid cash flights on their partner airlines. 

Back on episode number 59 of the podcast I talked a lot about this specific frequent flyer program, the Miles and More program, and why it's one of my favorite programs especially for booking multiple business class award flights to Europe or beyond. But it is a hard program to accrue a lot of miles in because it's not a transfer partner of any of the major transferable points currencies.

But if you do earn miles in the program either through outright purchasing them, like I discussed in that podcast episode, or by having a Miles and More credit card and putting a decent amount of spend on it then you can turn those miles into very valuable award bookings.

Another example of a co-branded credit card that could be useful for paying for bucket three expenses even though it would likely only earn one point or mile per dollar spent is one of the American Airlines credit cards. So as of when this podcast episode airs, American Airlines has lost its only transferable points currency transfer partner when their agreement with Bilt ended. So if you want to accrue a significant amount of American Airlines miles, putting spend on a co-branded credit card is going to be one way to do that.

But let me reiterate that when it comes to paying for a bucket three expense with a points earning credit card, the key is that you have to have a high level of confidence that you're going to get significantly more value from the points that you earn paying for that expense than the equivalent cash value of the cost of the fee that you're going to have to pay in order to use a credit card. That is why this is an approach that I only recommend for folks who feel very comfortable redeeming points for high value. 

All right. I know that I said that there are three main buckets that all of your expenses will fall into, but there's actually a pseudo fourth and final bucket that I reserve for advanced points earners because it requires a little more effort than directly paying for an expense with a points earning credit card. You will often have to pay an additional processing fee for this type of expense as well.

So if you're in the more beginning stages of earning points, and you already know that you're not yet interested in leveraging your bucket three expenses to earn points then this final bucket is not going to be for you right now. Definitely stick around and listen though because I want you to be aware of this option for if and when you might be ready to give it a try, whether that's a few months or even a year or two down the road.

But for those of you who are already dialed in on your points earning, especially if you feel like you're already comfortably maximizing your points earning on bucket two and bucket three expenses, this part is for you. That's because the final bucket of expenses is not an entirely new type of expense that we haven't mentioned yet. It's just an advanced approach to earning points on expenses that earlier I told you to ignore, which are some of your bucket one expenses. So let me explain. 

Bucket one expenses are the expenses that you do not have an option for you to pay directly using a credit card. So these might look a little different for different people based on your specific bills or expenses. But for many folks, you don't have the option to pay your mortgage directly using a credit card. Or the option to pay a car loan or student loans directly using a credit card. Or there may be specific bills that only allow you to pay by non-credit card options like check or bank transfer. 

So this is not going to be true for all bucket one expenses. But sometimes you can turn a bucket one expense into a bucket three expense. Again this is not true for every single bucket one expense, but there are definitely opportunities to take some of them and turn them from expenses where you don't have the option to earn any points at all because they don't accept credit card as a form of payment and turn them into expenses where you can pay for them using a credit card to earn points, but you will have to pay a fee of some sort in order to do so. 

That's because in order to turn some bucket one expenses into ones where you can earn points by paying with a rewards credit card, you have to utilize an intermediate vendor or platform. These always incur some sort of fee. So I want to give you some examples of what this looks like and then break down who this points earning strategy can benefit and who's just better off avoiding it. 

One example of turning a bucket one expense into a bucket three expense is paying student loans or contributing to 529 college savings plans. So right now, there is no option to take a points earning credit card and directly make a student loan payment or directly contribute to a 529 plan. 

But you can turn these expenses into points earning opportunities by leveraging an intermediate step. In this case, that's using a rewards credit card to purchase a Gift of College gift card then using that Gift of College gift card to make a student loan payment or add funds to a 529 plan. 

So I discussed Gift of College gift cards in depth on podcast episode number 65 with Dr. Andrea Mabry. So for details about that, you can head over there to hear all about it if you haven't happened to listen to that podcast episode yet. But the point here is that you can take an expense that you cannot pay directly with a credit card and turn it into one where you can earn points through an intermediate step. 

The benefit of doing this is that it opens up the opportunity to earn points for what can be a significant expense. But remember, as with all bucket three expenses, it's not cost neutral. There is an activation fee that you have to pay in order to purchase Gift of College gift cards. But ultimately, it can be a strategic and worthwhile approach to increasing your points earning. 

So let's look at another example of bucket one expenses that you can turn into bucket three expenses. These are situations where a vendor or business does not have an option for you to submit payment using a credit card of any kind. So this can be something like a daycare or school that doesn't accept payment or tuition by credit card. It could be a contractor or service provider, again, who doesn't accept payment by credit card. Or it could be something like a utility bill or an insurance bill where paying by credit card is just not an option.

The way that you can turn some of these bucket one expenses into bucket three expenses when the vendor or the company or the business owner that you're trying to pay doesn't accept credit cards is to utilize an intermediate platform that you pay using a credit card and then that platform issues a check or payment to the vendor on your behalf. So the vendor gets paid a cash equivalent, but you get to submit payment using a rewards credit card and you get to earn points. 

So two online platforms that can serve as this type of intermediate are called Plastiq and Melio. Plastiq is a service that you can utilize to pay for personal expenses and Melio is a bill-paying service for businesses. Both of these platforms operate in a similar way. You create an online account with them and then you can designate the business or vendor that you want to pay.

Using a rewards credit card, you submit payment to Plastiq or Melio in the amount of your expense and then they issue payment to the business or vendor on your behalf. So you get to earn points for your expense by paying with a rewards credit card, and the vendor gets paid. 

Now unfortunately Plastiq and Melio don't provide this service just out of the goodness of their hearts. Both platforms charge a 2.9% fee in order to serve as the payment intermediary. So if you have a $10,000 bill that you cannot pay directly using a credit card, you could potentially use Plastiq or Melio to facilitate that payment. But you're going to have to pay a 2.9% fee or $290 processing fee in order to do so.

So earlier this year I actually used Plastiq to pay a contractor when we needed to have our entire roof replaced after a hailstorm damaged it. Now, luckily, the cost of the roof replacement itself was covered by our homeowner's insurance but our contractor did not accept payment by credit card, and I was not going to miss out on the opportunity to earn points on what was over a six-figure expense. 

So, instead, I was able to submit payment to Plastiq using a rewards credit card, pay the associated 2.9% fee, and they sent my contractor payment by direct bank transfer. He got paid and I got to earn points. Now the reason that this was worth it to me is because I was able to pay using a credit card that earned three times points for the cost of that expense, and I have a very high level of confidence that I'm going to be able to turn the points that I earned for that payment into much higher value than the cost of the processing fee even though it was relatively high at 2.9%. 

Now for those of you interested in learning more about Plastiq and Milo, I'm going to dedicate a future podcast episode to talking entirely about these payment platforms. So I'm not going to get into the granular detail or special considerations that you need to keep in mind before utilizing one or both of them right now. But I do want you to be aware that this is just one of several approaches available to take expenses that do not accept credit cards for payment and turn them into opportunities to earn points. 

All right last example of another expense that usually falls into bucket one that you can turn into a bucket three expense in order to earn points are some types of person-to-person payments. So one of the most common questions I get from folks looking to earn points for their expenses is how can I use a rewards credit card to pay someone through Venmo and earn points or Zelle or PayPal?

Whether it's your kids piano teacher, the landscaping service that you love, or the amazing lady named Peggy who takes great care of your cat when you travel. Thank You Peggy, you're fantastic. Those person-to-person payments can feel like a lost opportunity to earn points. 

To my knowledge, there is no option currently to directly pay someone through Venmo or Zelle or PayPal using a rewards credit card to earn points either at no fee or even for a processing fee. Some card issuers like Amex have an option where you can send person-to-person payments on these platforms using one of your rewards credit cards, but they don't actually issue points for that payment. 

Now I love to be proven wrong, especially if it means that I learn a new or a better way to earn or use points. So if one of you out there listening this podcast knows of a way to use your rewards credit card to directly pay someone through Venmo, Zelle, or PayPal and earn points even if it costs a processing fee to do so, please tell me all about it. Email me at podcast at PointMeToFirstClass.com and let me know. I would love for one of you to have figured this out.

So I don't currently know a way right now to earn points for person-to-person payments by using a rewards credit card directly on these payment platforms. But I do know of a way to earn credit card points for person-to-person payments utilizing an intermediate step that includes a three to 3.1 percent processing fee. 

Now, again, the only reason that this makes sense for me or potentially for any of you listening to consider is because that processing fee is offset by being able to earn three, four, five points per dollar spent on person-to-person payments. If I was limited to earning one to two points per dollar spent on person-to-person payments, I don't know that the math would justify paying up to a 3.1 processing fee, which I fully admit is high. But at three or four points per dollar spent, the math starts to math a bit more to make this option feasible. 

All right everybody, there you have it. Those are the three main buckets of expenses and a bonus bucket for the advanced and points adventurous folks. Here's a quick recap of how to categorize your expenses and what to do next if you're a points beginner or if you're ready to elevate your points earning potential. 

Bucket number one expenses are any of your expenses that you do not have the option to pay directly using a rewards credit card. Bucket two expenses are any of your expenses that you can pay for directly using a rewards credit card so that you can earn points and without having to pay any additional fee on top of the cost of the expense itself. Bucket three expenses are any of your expenses that you can pay for using a rewards credit card but that will charge you a processing fee in order to do so. So you can still earn points, but you have to factor in the cost of the fee you have to pay to decide if it's worth it for you.

Finally for the more advanced, more points enthusiastic folks, remember that there are some bucket one expenses that you can actually push into bucket three using an intermediate step or online platform. If you are a points beginner, here are four ways to use the information in this episode to help you. 

First, the easiest bucket of expenses to earn points on is starting with your bucket two expenses. Use these to meet minimum spend requirements to earn welcome bonuses on new rewards credit cards and then get new credit cards that will allow you to maximize your points earning by offering strong bonus categories for the things that you tend to spend the most money on. Stay here and stay here as long as you need. 

Second, once you feel confident about earning points for your bucket two expenses, consider whether it makes sense or is worth it for you to use rewards credit cards for any of your bucket three expenses in order to increase your points earning. Third, don't feel like you need to be any farther along than you are right now. Save this episode for later and come back to it when you're ready to add another step to your points earning plan. 

Fourth, whatever you do, don't use the information in this episode against yourself. You never have to earn points using any of the methods that I talk about if you don't want to or if they don't fit the way that you like to run your finances. I offer these suggestions for education and entertainment purposes, not to suggest that this is the one right way to do points. Take what is useful or interesting for you and leave the rest.

For the more advanced points earners in the audience, here are three suggestions for what you can take away from this episode. First, I assume that you already feel comfortable optimizing card bonus categories for your bucket number two expenses. So next, consider opportunities for increasing your points earning for bucket number two expenses like purchasing store specific gift cards with rewards cards with elevated points earning for bonus categories like drug stores, grocery stores, gas stations, or office supply stores.

Second, if you don't already earn points for your bucket three expenses, evaluate if that makes sense for you. Finally, consider whether you could benefit from moving bucket one expenses to bucket number three expenses in order to earn points for some of those expenses that you are currently not taking advantage of at all. 

No matter where you are in your points earning journey, I hope that you heard something in today's episode that will help you think about your expenses in a new way and give you ideas for how you can continue to leverage those expenses as assets and turn them into beautiful, beautiful points.

If you love what you're learning on this podcast but are confused or overwhelmed about how to actually put it into practice, or if you want personalized hands-on help to show you exactly how to maximize your points earning for your expenses, no matter what bucket those expenses fall into, I want to invite you to join me inside Points Made Easy, my online program to teach you how to turn your expenses into points to save tens of thousands of dollars a year on your wishlist travel. 

I open this course to new students usually just once or twice a year, and this will be the first time that it's enrolling in 2024. Points Made Easy will open for enrollment from July 13th through 20th, 2024. So now is the time to add your name to the waitlist so that you can join when doors open.

The Points Made Easy course is where I do my most in-depth teaching of points earning methods, show you exactly how to run high-yield award searches so that you can turn your points into travel, and offer personalized advice to take the guesswork out of points. You can add your name to the waitlist by going to www.pointmetofirstclass.com/pointsmadeeasy. Have a great week everybody, and I will see you again next time.

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.