Money + The Holidays Part II: Playing the Credit Card Points Game

About the Episode

Who’s ready to play the credit card points game? Learn all about maximizing your reward points and cash back this holiday season from returning guest Heidi Pauley and special guest Kevin Wright, the CIO at Addition Financial. They share tips on making the most of your holiday shopping using rewards credit cards on the latest episode of Making it Count.


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Cristina asks Question 1:“What should our listeners look for when they're evaluating reward cards?”

Kevin responds: “When people ask me about using rewards cards the very first thing I say to them is I need you to look in the mirror. I need you to ask yourself a question and be honest, and that is, can I not overspend by using a credit card? Because ultimately the smartest way to do this, to optimize your points, is to not use a debit card. Replace all those debit card purchases with credit card purchases and be paying it off on a regular basis.”

“So all you're doing is replacing one piece of plastic with the other. Debit cards aren't going to give you those rewards the credit card side is. The next step that I tell them to do is if they're not using some kind of PFM tool, something like a Mint or a Quicken, is to look at using one of those, or even your own bank or credit union’s online banking software. It may have a tool that will categorize your spend.”

“And that's your first step: look at the categorization of your spend overall and see what you spend the most money on. When you're looking at these different card programs, you'll be able to better identify the ones that will be most profitable to you. Whether it be just a simple, flat cash back rewards card, or if it's a points card that rewards you at various different levels depending on the type of spending that you do.”

Will responds: “That's a really good first point. To me the key is looking at yourself in the mirror. So let me ask you, Cristina, can you look in the mirror and say that you can safely spend with a credit card and replace your debit card purchases?”

Cristina responds: “I have done that recently. I looked at myself in the mirror and I have stopped using our debit card unless it's like $5 here, $5 there, which you're probably going to tell me even my little mini purchases should be on my credit card.”

Kevin adds: “So here's the thing. It's not only that you're getting points by using the credit card, but from a security standpoint, you're safer, right? The whole reason for a debit card was essentially to help make checks go away and convenience for that member or customer, but that's access directly to your cash. With the amount of fraud that goes on these days, if somebody gets that debit card number and starts using it, they're siphoning away your cash – your liquid money – that is in your account. When you file a claim on that cash, some financial institutions need 10 days to do research before they can give you a credit or refund you for that potential fraud. If you're using a credit card, which is essentially a temporary loan, then your liquid cash is still available to you.”

“Therefore, if you get into a bind, you're not truly stuck. So from a security standpoint, it just makes more sense. But again, you have to be very diligent in how you're using it. If you're not the type of person who is tracking your spending and making sure you don't overspending and you're not collecting payments or balances then you're not going to be able to pay off because these kinds of cards generally carry a higher interest rate. They are not designed for people to carry balances on. Now don't get me wrong. If you're carrying balances, that bank is very happy to collect that extra interest, but we're not here to have you collect extra interest. We're here to tell you how to maximize your payback for using those cards. And you can make it very valuable.”

Learn more: How to Evaluate Holiday Credit Card Offers Quickly & Easily



Cristina asks a follow-up question: “Heidi, how do you walk the members you talked to on the phone, through that process?”

Heidi responds: “The most important thing is budgeting. You have to look at what you have before you use that card. And again, using the credit card, if you have it, instead of that debit card. It's the safest route. The average household carries a credit card debt in the amount of $8,300. Just like Kevin said, you can swipe and swipe and swipe, but then that adds up and then you've got to pay it back.”

Will also responds: “Then you make that mental concession, right? That, well, it's my credit card and I'll just treat myself for this one. Even though I know that it's not in my budget or I have been diligent up to this point, I'll make that concession. One little concession after the other builds up and creates that problem.”

Heidi responds: “Yeah. It's having the mindset of what you're doing. When we're talking about the rewards, it's fantastic, but unless you are using the rewards, paying it off, then it's really not beneficial because you're paying all that extra money in interest and fees.”



Will asks Question 2: “So with holiday shopping coming up, which is a huge spending time, is there a way that shoppers can benefit by getting new points cards or similar rewards cards for holiday shopping in 2020? Or is it too late at this point in mid November?”

Heidi responds: “It's never too late. Because if you can't maximize on those rewards points now there's always next year. So it's planning accordingly. Most importantly, take a look at the terms of what the rewards are. You want to look at the interest rate. You want to look at annual fees because at the end of the day, having to pay annually for your card it's not really worth it.”

Kevin responds: “I would actually tell you that's not always true. That's why you have to analyze how you use that card. Sometimes the annual fee cards rewards are good enough or better that it'll pay for itself in a short period of time. That's why you really need to analyze how you currently spend. Then look at those cards to determine whether or not it's worth it.”

“If I was looking at a cash rewards card that was giving me two and a half percent back on every dollar that I spent, but I had to pay an annual fee of a hundred dollars, and I spent enough on a regular basis to earn that hundred dollars back and then some all the rest is purely profit. If I compare that against a card that was only offering me one and a half percent back, and I'm getting more on that two and a half, then it's definitely worth it.”

“So again, there's a level of effort that you would have to put in to identify whether that's worth it. On things like points or rewards cards that do have an annual fee they'll have higher instant bonuses from the start, which can often help pay off. They also offer various different gifts. There are cards out there that you will get a hundred thousand points if you spend $3,000 within the first 90 days. If you spend that normally then that's a great deal. If you don't, don't put yourself in that position.”

“There's other cards that will give you free airfare or reimbursable airfare up to say $400. If it did that and that card only costs you a hundred dollars, then that's an instant payback if you're going to use that service. It's key to always do the research and look. And if you're the kind that really doesn't want to spend that much time identifying exactly how you spend it, then my recommendation is always to go with a flat rate cash back card because it's pretty simple. Every dollar that you spend, you're going to get X back.”

Will responds: “Actually he makes a good point because Zach and I, when we were looking for our first credit card that we were going to be on together, we actually laid out all the benefits because to his point, there's some rewards cards where it’s not just the rewards, you're getting other little things. You're getting airline reimbursements, P credit reimbursements. Mine just added one that gives me $200 with any travel that I'm booking right now because they're so desperate to keep customers at the moment. Because of the pandemic travel has been so down that I think they're trying to get people spending that money again.”

Kevin responds: “And now is a great time because of COVID. And I hate to say ‘great’ and ‘COVID’ in the same sentence, but let's try and take advantage of negative things that are happening. When COVID first started happening, credit card spend overall decreased significantly. It's the exact opposite of what happened during the last recession where people started putting things on credit cards and increasing those balances, which took a lot longer for them to dig out after the fact.”

“When COVID hit people stopped spending on credit cards, started paying down balances and actually started saving more money. Credit card companies are hurting as a result of that because they depend on that transaction income as well as the interest income that comes across. So the deals that they're offering are actually higher now than they've ever been historically. And when you apply for a card it's to their advantage to get you that card as fast as possible. You'll probably have it within 48 hours to maybe five days after you apply for it. And many of them are now giving you an instant delivery of a digital card, so you could start shopping online immediately, and then you'll get a physical card after.”

Learn more: Cash Back, Rewards & Low Interest Credit Card Comparison Chart



Cristina asks Question 3: “So now's the time to start working on points. How do we even get started? Like how would you suggest somebody to start working on points?”

Kevin responds: “So again, my first step is to look at my spend so I identify the type of cards I'm looking at. After I've identified the areas that I'm highest in spend, whether it's points or cash back, then I'm going to look at some of the comparison sites. So you could use websites like The Points Guy or NerdWallet, where they bring together a list of many of the cards that are available and they will list out all of the different features and functions of the cards. You always want to make sure that you're looking at all the fine print, because you'll see some things like some cards' points expire. So if you don't think that you're going to use those points, other cards, those points are transferable.”

“That's an important one. If you're using something like an airline card, I'll use Delta, for example. We used to call the Delta SkyMiles "sky pesos" because they were worth a fraction of what a lot of the other miles were worth on Delta. The trick is, a lot of times you can fly with a partner airline and they're no longer partners. Alaska Airlines used to be a partner of Delta. What I used to do is if I needed to go out West, I could actually book my flight on Alaska airline using my Delta sky miles. I would use about half of the amount of miles that I would have had to use for the same flight on a Delta flight on an Alaska airlines flight. And I could upgrade the class as well.”

“So it's important to know how those things transfer. They don't only transfer with airlines, but sometimes you can get them to transfer across hotels. And so now it's the difference between I could fly first-class to Hawaii, or I could fly coach to Hawaii, but stay at the Ritz Carlton for $50 a night. I'd rather do that than take that first class flight, but you get to choose. Make sure to read the fine print and understand all of the terms and conditions on the card itself. Don’t fall for traps. Many companies will offer various promotions to convince you to spend more money. Examine these deals and decide whether or not it’s going to benefit you. For example, some people will take unnecessary flights to collect additional miles and points to get bumped to the next level. You really have to ask yourself if that next level is really worth it.”



Will asks Question 4: "When should you not spend money to get extra points? Is there a specific scenario where it would make sense to have one card for your gas and groceries and the other card for something else?”

Heidi responds: “You want to look at how you're using the card. Using a credit card instead of a debit card is a great way to maximize your rewards. Make sure you're using the right cards to reap benefits that are most important to you. It all comes down to doing your due diligence and analyzing different offers on each card. Sometimes it's better to have it all on one card. It all depends on your spending habits and how you're looking to get your rewards back.”

Kevin adds: “I agree with Heidi on analyzing the way you spend. Having multiple credit cards can absolutely help you maximize rewards. A lot of people are worried about having multiple cards because they're afraid of lowering their credit score. However, this is not accurate if you do it the right way. You can have multiple cards by keeping your payments low and consistently paying them off each month. It doesn’t matter how many credit cards you have as long as you understand how to manage each card.”

“Here's another money saving tip: call to cancel your travel airline card at the end of the year. Tell the representative you can’t pay the annual fees since you didn’t travel due to COVID-19 this year. Most of the companies will waive that fee for you. And if they don't waive it? No harm, no foul.”



Cristina asks Question 5: “As someone who's only had one credit card their entire life, how do I start branching out to other credit cards? How do I start maximizing my savings?”

Kevin responds: “Start with the end goal. Cash back cards are a great way to spend however you want. There are also many point cards that can be converted into cash or into gift cards. These gift cards can be purchased with points at a lower cash value. For example, you might be able to score a $50 gift card by only paying $40. You have to try to save anywhere you can.”

“I would analyze all of your spending money, not just what you spend on the most. Some people will fall into the trap of using their credit card to pay for their car payments. This will cost you a small fee, but you must do the math because you’re more likely to lose money on those points by paying the small fee. Therefore, It's important to look at all of your spending in order to maximize your savings.



Cristina asks a follow-up question: “If I start using a new credit card, how does opening a new line of credit affect my credit score? Should I keep using the card I have all of my history with?”

Heidi responds: “You definitely want to keep using your credit card you have all the history with. Maintain and keep it active by designating it for certain uses. You can utilize it just the same as long as you’re using it and paying it off. If you want to start using other cards, that’s OK, just make sure to give some love to the cards you haven’t touched.”

Learn more: Highest Credit Score: 5 Factors that Influence Your Rating



Will asks Question 6: “What are some other strategies that our listeners should know about maximizing their points and savings this holiday season?”

Heidi answers: “Analyze your credit cards to maximize on what you can get with your points.”

Kevin also responds: “Ensure you’re looking at your cards program as a whole. Some of them allow you to use their site as a portal so that you can purchase items to get bonus points. With airline cards, book your other parts of travel, such as rental cars, through their website because you’ll get extra bonus points. Always make sure you’re looking at the program and see if they are running any special promotions or extra points for some other vendor or local merchant. And don't get sucked into the game where you’re spending money where you wouldn't have, just to get the discount.”

The Savvy Seasonal Shopping Guide to Prevent Overspending


Cristina asks Quick Question 1: “What’s the best way to avoid overspending on the holidays?”

Heidi answers: “You definitely want to make that list and check it twice. Know who you’re going to buy gifts for and set limits on your spending. It’s all about budgeting and knowing what you have to make sure you don’t overspend.”



Will asks Quick Question 2: “What’s your favorite holiday movie? Is there one you have to watch every year?”

Heidi answers: “National Lampoon’s Christmas Vacation.”



Cristina asks Quick Question 3: “What’s a big mistake that people make with points and rewards cards?”

Kevin answers: “Using them incorrectly and not understanding the program. If you’re collecting points constantly and not redeeming them, then it's a waste. Understand the program you’re in, how to best use the points and make sure you’re actually using the rewards you’re paying for.”



Will asks Quick Question 4: “What’s the best thing about spending Christmas in Florida?”

Kevin answers: “Every year that I actually spend in Florida I get to send pictures of me in the pool to my family in Michigan, who are usually shoveling the snow off the driveway. So, I get great joy by doing that.”



Cristina asks Quick Question 5: “Is there any points-related benefit of getting your holiday shopping done early?”

Heidi answers: “Yes. It depends on how long it takes the credit card carrier to credit points to your account but you could use the points you accumulate to get your shopping done early. And even those last minute purchases.”



Will asks Quick Question 6: “Gingerbread or sugar cookies? Which do you prefer at the holidays?”

Heidi answers: “Sugar cookies dunked in coffee.”



Cristina asks Quick Question 7: “What is the coolest thing you’ve done with your points?”

Kevin answers: “A trip we were booking that didn’t get to happen because of COVID. But that would’ve been the winner. But because we couldn’t go through with it, I would say a 15 day cruise to the panama canal we went on a few years ago. I used my points to pay for a flight and a rental car.”



On this episode, we shared two downloadable guides to help you maximize your credit card reward points and cash back:

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