Credit card rewards are a great way to travel the world at a discount or earn cash back from your normal spending habits. While it’s nice to earn points or miles as you spend, the largest benefit comes from card sign up bonuses. My wife and I both met our bonuses on our Chase Sapphire cards earlier this year and now I am on the hunt for a new card. Read along if you are interested in getting inside my head while I evaluate the options.
First a Disclaimer
If you have even the slightest risk of not paying your credit card bill, in full, each month, then read no further. Credit cards aren’t for you. Having a good handle on your monthly expenses should not be taken lightly.
With that out of the way we can get start to look at the options. And let me tell you… there. are. a. lot.
Lions and Tigers and Bears… Oh My!
The types of rewards can be dizzying. Here are the main types:
- Cash Back – you earn cash back on your purchases (usually 1-2% of the purchase price. This is usually redeemable as a statement credit (they reduce your credit card bill by the amount of the credit).
- Airline and Hotel – redeemable through specific airlines and hotels and their partners. Think of these like customer loyalty programs.
- Flexible (or Transferable) Points – can be redeemed through transfer partners, such as airlines, car rentals, and hotels, or exchanged for cash back.
To add to options, the rewards points can either be fixed value or not. Fixed value means each point (or mile) is worth a defined value, often 1 cent per point. Variable value points do just that, vary, depending on how they are used. Redemption values with these points can range from 1.5 to over 2 cents per point; however, there may be more limitations on what they can be redeemed for.
Further, the amount of points earned will vary depending on what items are being purchased. Often each credit card will have one or two categories that earn multiple points per dollar spent, while the remaining categories will earn 1 point per dollar spent. Others will rotate spending categories monthly, such as gas, travel, groceries and dining.
As I start to weigh the options, I need to also consider the travel partners affiliated with each card. If I can only redeem points with some obscure Asian airline, and I only plan domestic flights, then I probably won’t get much use from the points. Likewise with hotel chains.
How Do We Plan To Use the Rewards?
The first thing I need to get a handle on is what exactly I want to use the reward points for? And what’s my timeline?
Traveling is where we’ve seen the best reward redemption value and travel is also something we love. So we prefer travel rewards over cash back. Generally, we travel domestically, with some occasional trips outside the US. We like to fly Southwest Airlines, almost exclusively.
As far as lodging goes, we seem to gravitate to AirBnb rentals and VRBO properties as well as bed and breakfasts. We (looking at myself mostly) are not big hotel people.
Looking ahead to 2020 we’ve been discussing trips to the Smoky Mountains, Chicago, and I imagine we will try to find a beach somewhere. We will likely drive to Chicago and the Smokies so I don’t see a lot of flights in our future next year. I envision maybe one hotel stay in Chicago.
Now that I know what I am looking for, let’s get into the meat of which card meets our needs the best.
Chase Ultimate Rewards or the Southwest Companion Pass?
These are a couple of the most popular travel rewards and a great place to start if you are looking to get into travel rewards. Chase Ultimate Rewards are extremely flexible points that, when transferred to Chases’s travel partners can result in redemption values of 2 cents per point or higher. Chase has some good travel partners, including Southwest Airlines and Hyatt hotels, and many others. They offer a couple cards with great signup bonuses including the Sapphire Preferred and the Sapphire Reserve.
However, my wife and I both picked up the Sapphire Preferred this year. Additionally, the Reserve has a $450 annual fee. It is true that you can get a travel credit of $300 after having the card for 12 months. But that fee is steep.
Southwest Companion Pass?
Southwest Airlines has a few travel rewards credit cards and they often have signup bonuses of at least 40,000 points and currently they offer another 20,000 bonus once you’ve spent $12,000 within a year. So within a year it is feasible to earn 60,000 points per card. This is very appealing.
Additionally, Southwest offers their Companion Pass which is earned when you’ve obtained 110,000 points within a year (not including points transferred in). The Companion Pass allows you to take someone with you when you fly… for free. Even better, the pass is good for the remainder of the year you earn it in and the entire following year.
Whenever we do fly, we try to fly Southwest. So this seems like a match made in heaven right?
Ordinarily, I would say yes. However, my wife and I received the sign up bonus from their Rapid Rewards card in 2018 in preparation for our Disney trip, which eliminates one of the cards. Side Note: As rookies, we signed up with both our names on one card. To maximize rewards, it is typically best to apply individually. We could still go after another personal Southwest card, but we would need to open up a business card as well to get the Companion Pass. I haven’t yet established this blog as a business so this doesn’t look like an option right now. However, if I was convinced this was the best route to go, I would look into it further.
Most importantly, we don’t have much flying planned for 2020. It seems like it would be a waste to earn the Companion Pass and not be able take full advantage of it. We will keep this strategy on the back burner for another year (maybe early 2021).
So What Card Is It?
In summary:
- We love flexible rewards points.
- We like staying at AirBnb, VRBOs and bed and breakfasts.
- We don’t have many flights anticipated for 2020.
With that in mind, I started looking at cards with versatile redemptions, namely, the Capital One Venture. It is offering a 50,000 point signup bonus with $3,000 in spending in the first 3 months. It also earns 2x miles for all purchases and can be redeemed 1 cent per mile for travel (including AirBnb, rental cars, etc.). Capital One’s rewards are transferable to several travel partners, but none that we typically use. These points would most likely be used as “purchase erasers” (statement credits to wipe out charges) to cover travel expenses that don’t often qualify for travel redemptions with other points. Based on an anticipated annual spending of $20,000 I would expect to earn the 50,000-mile bonus plus and an additional $400 in cash back, resulting in $900 in potential travel credits.
I am also considering the Chase Freedom Unlimited which offers 3% cash back on everything purchased, up to $20,000 in spending in the first year then 1.5% on everything after that. Based on our monthly credit card spending we would likely be able to max out the 3% earning us $600 in cash back.
At first blush this don’t stack up against the Venture card; however, we could transfer the points to our existing Chase Sapphire card and get more bang for the buck. Using these points to book travel through the Chase portal increases their value by 25% making $600 in rewards swell to $750. We could go one step further and transfer those points to one of Chase’s partners and look for redemptions closer to 2 cents per point giving us up to $1,200 in value. The downside is that based on our current plans we anticipate we will have travel fees that will not offer the best redemptions with Chase Rewards. In effect, we will not likely be able to maximize the points earned as I described above.
In the end, based on our anticipated travel in 2020, flexible points will be the most beneficial. As such, we are going with the Capital One Venture.
