Common Myths About Credit Card Rewards

Travel rewards earned by credit card points can be amazing, but there are a lot of skeptics. These are the top 5 most common misconceptions about miles and points for award travel.

1. Travel Rewards are a scam

A scam implies that there is something dishonest going on, that there’s some sort of catch. Many people view points and miles this way. When they hear “free flights and hotel rooms” they assume that it’s too good to be true. Sure, there is a learning curve on earning and burning points. Just because something needs to be learned doesn’t mean that credit card companies are “out to get you”. The most important part is being responsible with credit.

2. Credit Card Points/Miles Ruins your credit score

In the long-term, having several credit cards actually helps one’s credit score, not hurt it. Your credit score is based on a variety of factors such as the number of inquiries, age of accounts, utilization rate and payment history. Generally, having more credit helps with the largest portion of the score: utilization and payment history. It seems counterintuitive at first but the more available credit you have, it helps lower your utilization which ultimately helps your score. Having opened a myriad of credit cards over the years, my credit score consistently is excellent at over 800. One important rule is to keep your oldest card open to help with credit age.

3. Avoid Annual Fees

A huge points/miles misconception is that annual fees are bad. They aren’t. It is often absolutely worth paying an annual fee the first year that you get the big sign-up bonus. Paying $95 for over $750 worth of travel is something most people would find a great deal. An analogy might be someone gifting you a winning lotto ticket but you decline because you pay taxes on the winning ticket. Beyond the first year, often the card benefits offset the annual fee. If not, there are often ways to downgrade the card with no fee to keep the credit history and/or cancelling the card. To maximize the use of points/miles one must overcome the fear of an annual fee.

4. You Need to Spend A Lot

The easiest way to maximize rewards is to focus on credit card welcome offers. Typically with welcome offers you can earn 10x-20x on spend rather than 1-2x by focusing on a single credit card for all spend. Over time, one learns how to navigate spend on new card bonuses and taking advantage of multipliers and benefits of existing cards.

Bottom Line

There are tons of credit card points/miles misconceptions. Don’t fall for them. Once you learn to trust the process, the opportunities become endless and the world becomes your oyster.