Picking the right credit card can seriously build up your
miles. But there are rules and tips to follow if you want your miles to be really
free:
These cards are a good deal, if you know how to work them properly.
You won't ever get a free trip if you only use the card. Not unless you're a big spender. You
may get it, but it won't be "free" by the time you earn all the
miles. These typically have a $40 to $90 annual fee, so if it takes you
several years to earn enough miles on the card only, you will have already
paid for the ticket from the fees. You need to work a card that is also on
an airline you fly. View the card
as a supplement to a frequent
flyer program on an airline you are already using. Assume that you
can earn a few thousand miles yearly from the card, and several thousand
every year or two from actual airline and partner travel. In combination,
you can get a free trip for US/Canada travel within a couple of years.
You need to use discipline on the air card (as with all
cards). Don't overspend just to get a free trip!
NEVER CARRY A BALANCE
on the mileage card. The interest, even if at a low promotional rate, will
eat up the free travel savings. Pay the card 100% in full, on time (which
may only be 15-20 days after the bill arrives) every month. That way your
miles earned are truly free.
NEVER DO A BALANCE
TRANSFER to a mileage card, no matter how sweet the rate (even
0%). You don't earn miles for balance transfers (there are some rare
exceptions – read the offer carefully.) Once you have a balance transfer
on the card, you cannot pay off your purchases in full every month,
because the fine print says that payments are applied to lower interest
rates first. Essentially they create separate "buckets" for each
balance, such as $5000 in the bucket for your 0% balance transfer, and
whatever your current month spending is in a "Purchases" bucket
at a higher rate. Let's say you buy a $250 worth of stuff this month, so you
have a "New Purchases" balance of $250. You send in a payment
for $350. You think that you've paid your current New Purchases balance in
full, and thus have no interest due on it next month. You also think
you've paid off $100 of your $5000 balance transfer 0% bucket. Thus you
think your new balance is $4900 on the transfer (at 0%) and $0 on
purchases (at perhaps 14%, but you think your balance is zero so no finance
charge.) WRONG. The bank applies all $350 to the
makes-no-money-for-them 0% bucket, so your new balance for Balance
Transfers is $4650 (at zero %) and New Purchases is $250 (at 14%). On
next month's bill you WILL have a Finance Charge of $2.91 for the
$250 balance on purchases which wasn't paid down at all ($250 x 0.14 APR /
12 for one month's rate).
Pay for EVERYTHING on the
card as long as you pay it in full. Put your home phone bill on the
card, same for Cable TV, Cellular, Internet, Electric and Gas if they
take it. Buy all your groceries, drugs, and cosmetics and household stuff
on the card. Since you're paying in full every month, you're not paying
anything for it. Figure that groceries, household spending, utilities, and
the like can give you a few hundred miles per month. This helps "top off" your
account with a few thousand miles per year from what you'd spend anyway.