Getting Started in the Points & Miles Game…P&M 101

We’ve been playing the Points & Miles (P&M) game for several years, averaging about $10,000 a year in travel savings over the last six years, including 2020, when we weren’t able to travel much at all.  In 2021, we saved $18,000.  Many of our followers want to know how to get started, so we’re sharing our approach to playing the P&M game.  Welcome to the introductory course!

There are three essential principles that need to be followed in order to unlock the value of P&M.  First, a good to great credit score is a must in order to be approved for the most valuable credit cards. . .a score over 700 should be adequate.  Second, in order to maintain and improve that score, all players have to commit to paying their balance in full, on time, every month, without exception.  Interest charges will totally negate any P&M earnings and reduce your credit score.  Third, in order to maximize P&M earnings, all possible expenses should be charged to a credit card, including groceries, gasoline, dining out, and, if applicable, even rent.

There are three primary ways to earn P&M:  by flying, by staying at a hotel, and by using a P&M credit card to pay your expenses.  Using a credit card that earns P&M at a multiple of dollars spent will leverage your earnings significantly.  Finding a card that pays a signup bonus for spending in the first few months can boost your P&M balances even more dramatically.  Here’s a realistic example of how to use signup bonuses and category multiples to leverage P&M earnings.

Terri Traveler decides that she wants to try her hand at the P&M game in order to reduce her travel costs.  She applies for the Chase Sapphire Preferred card (a great way to start) and, thanks to her good credit history, is approved.  This card currently offers a 60,000 point startup bonus after spending $4,000 in the first three months.  The card also features several category multiples:

• 5x total points on travel purchased through Chase Ultimate Rewards, excluding hotel purchases that qualify for the $50 Anniversary Hotel Credit.
• 3x points on dining, including eligible delivery services, takeout and dining out.
• 3x points on online grocery purchases (excluding Target, Walmart and wholesale clubs).
• 3x points on select streaming services.
• 2x on other travel purchases.
• 1 point per dollar spent on all other purchases.

Terri charges about $2,000 per month to her new Sapphire Preferred card, plus a nice long weekend trip costing $1000.  In her first three months, her spend is as follows:

• $1000 for airfare and hotel (through the Chase Ultimate Rewards portal) for that long weekend trip to the beach at 5x = 5000 points!
• $1500 for groceries at 3x = 4500 points.
• $500 for dining at 3x = 1500 points.
• $300 for streaming services at 3x = 900 points.
• $200 for other travel purchases at 2x = 400 points.
• $3500 for all other purchases = 3500 points.
• Total points earned = 15,800.

Since she satisfied the 60k signup bonus spending requirement, Terri’s total points balance after three months is 75,800.  Chase allows Sapphire Preferred cardholders to use their points to pay for travel expenses at 1.25 cents per point, so those points have a minimum value of $947.50.  Those points can be worth as much as 2-4 cents per point if transferred to one of Chase’s numerous transfer partners, but for this example, let’s use the more conservative 1.25 cent valuation.  Terri’s net earnings, after deducting the card’s $95 annual fee (more about this later), is $852.50.  Had she just used her old 2% cashback card, she would have earned just $140 for the same spending pattern.

Photo courtesy of CreditCards.com

Lastly, let’s talk about fees.  Most of the cards that yield the most P&M value carry an annual fee that can range as high as $695.  That’s a lot of money, but each of these cards also includes credits and benefits that can offset or exceed the annual fee.  The Chase Sapphire card currently offers a $50 annual credit for hotels booked through the Chase travel portal; Terri would have earned that credit when she booked her weekend trip to the beach.  The Sapphire card also pays bonus points on the cardholder’s anniversary date equal to 10% of total purchases made the previous year. That means that Terri’s $25,000 spend over 12 months would add 2,500 bonus points to her account, conservatively valued at $31.25.  Those two credits add up to about $81, nearly offsetting the $95 annual fee.  The card also offers several other benefits, including trip cancellation and interruption insurance, auto rental collision damage waiver, baggage and trip delay insurance and purchase and extended warranty protections.

The way we like to approach the annual fee issue is to analyze whether the card’s benefits and credits yield value equal to or greater than the fee.  Each cardholder will view this analysis differently because they may or may not be able to take advantage of the credits and benefits offered.  For example, the American Express Platinum card is one of the most expensive cards available, with an annual fee of $695.  That’s a lot of money, but the card also offers credits and benefits of at least $1500 per year, so there are plenty of ways to take advantage of these offers to offset the steep annual fee.

Ready to start playing the P&M game?  You’ve just finished the introductory course.  Next up will be P&M 201, where we’ll discuss the many types of cards available, transfer partners and the potential value of points and miles.

The Hotel Villa Franca in Positano, Italy.  We stayed three nights in 2021 for 120k Hyatt points, transferrable from Chase Ultimate Rewards. . .a $4,000 value!