|by Mr Credit Card|
This is a guest post from Aryn of Sound Money Matters and today she is going to share with us on how she makes use of her reward points. Consider subscribing to her blog for more tips. She has also written a holiday savings ebook which you might want to check out.
Even though I’m a lifelong annual fee opponent, I willingly accepted a Delta Skymiles card with a fee. I even upgraded to a higher-level card with a larger fee to get even better travel rewards. (http://www.soundmoneymatters.com/travel-rewards/) So how does a frugal person like justify paying an annual fee for a rewards card?
How We Maximize Our Rewards
We make almost all of our purchases on the Amex. We make small purchases here and there on our other two cards to keep them active, but day-to-day purchases are on the Amex. For a long time they offered double miles on grocery store, drug store, and gas station purchases, but eliminated that bonus around the time the credit crunch started. Instead, we get mileage boosts at certain purchase levels. That’s why we upgraded. Rather than a one-time 5000 mile boost, we earn several boosts totaling 15,000 miles a year in exchange for an extra $40. We could earn up to 25,000 miles, but we don’t spend enough to attain that extra 10,000 miles in boosts.
I also do my online shopping in a way that maximizes my rewards. The Delta Skymiles Shopping is available online and includes several stores where I like to do my Christmas shopping. Usually they’ll offer 2-5miles for every dollar spent. I can earn an extra 600 miles or so just for ing stuff I would have bought anyway.
How We Use Our Rewards
I’ve considered switching to a cash-back rewards card because we could easily make $300 a year back in cash. Then I calculated the potential cash against the potential cash saved by using miles to travel. So far we’ve used our miles twice. The first time was for our honeymoon to Ireland. My husband had 50,000 Delta miles accrued in his frequent flyer account. The minute my credit card miles topped 50,000, we called to book our trip. We booked in April for an August honeymoon, so we had to do some creative routing, but it was still much cheaper than two tickets to Ireland.
The second time we used miles, we went to Belize, which cost 70,000 miles for two people. We traveled in between Thanksgiving and Christmas, with enough leeway on either side to avoid holiday black-outs, so we had no trouble scoring seats even though we booked a mere five months ahead instead of the 330 days usually recommended. I also bought the resort package through Luxury Link to save more money, but it required some planning to make the two deals work together. I followed this order:
1: Review LL Belize packages to find one with an available date after I’ve accrued enough vacation time and in the shoulder season (not the wet season).
2. Check awards seat availability online to make sure our preferred dates are available.
3. Contact the resort to make sure our preferred dates are available.
4. Buy the package and immediately email the owner to confirm our dates.
5. After receiving confirmation, immediately book the awards tickets online.
At the time, tickets from LAX to Belize cost around $700, so using our miles saved us $1400. That’s $1400 that went toward our debt (http://www.soundmoneymatters.com/october-debt-reduction/) , which we paid off before the trip. Not bad for a $95 annual fee. It took us about two and a quarter years to earn 70,000 miles, bringing our total annual fee investment to $165 (we were only paying $55 a year at the time.)
Our next miles trip will be Australia. We’ll need 100,000-140,000 miles if we can reserve our trip 330 days out, but we’re already back over 75,000. I expect it will take us 9-18 months to earn enough miles for the trip, which will then have us visiting the country in 2-3 years. Tickets to Australia are currently $1300 each, so our $380 in annual fees will save us around $2200. That’s money we can spend once we’re actually in Australia.
Mileage rewards aren’t always good deals, especially if you don’t have the flexibility to travel at off times and book well in advance. Because we use our miles to save thousands of dollars on dream trips, the mileage reward is worth more to us than we’d get from a cash back card, and far more than the cost of the annual fee. If you choose a mileage rewards card, don’t be tempted to fritter away your miles on hotel stays, gift cards, or shopping discounts. Instead, maximize your rewards by building them toward a dream trip.
I’m Aryn from Sound Money Matters. I’m a thirty-something DINK living in high-cost California. My husband and I recently bought our first house after paying off $40,000 in debt in one year. My blog focuses on frugality, along with the occasional rant about personal finance issues.