Beginner’s Guide to Using Airline Points

I’ve talked about using airline points to earn free tickets to Europe, Japan, and around the US.  To some, this is confusing; to others, it sounds too good to be true. Today, I’m going to give a simple outline about how and why using points is a good idea.  I’ll explain how someone new to the idea can get started earning free tickets.

How to Earn Points

Originally, frequent flyer programs were for people who flew often. For each flight they took, they would receive points.  When they accumulated enough points, they would be awarded a free flight. Flyers still earn points for flights, but there are different types of points and different ways to use them.

Waiting to Take-Off

The points system has become complicated – United Airlines Mileage Plus has four levels of status for those who fly the airline often. Each of the levels offer perks like free upgrades, free checked luggage, and priority boarding. People who fly for business can often earn enough points for higher status.

Flyers can earn Premier qualifying miles, segments, and dollars (PQM, PQS, and PQD) depending on the flight distance and cost. Premier Silver status (United’s lowest level) is achieved by flying 25,000 miles or flying 30 segments and spending $3000 in one year.  Requirements for United’s highest level, Premier 1K, are four times the amount for Silver.

At the Airport

American Airlines and Delta Airlines have programs that have the same requirements for nearly identical benefits. These programs are somewhat complicated and are not recommended for beginners or for people who only travel once or twice a year.

A Better Way

In addition, flight miles can be earned by using credit cards. Each of the three major airlines works closely with a different credit card company. Delta has a relationship with American Express, United Airlines with Chase, and American Airlines with Citibank. I’m going to use Chase and United in my examples, but, again, the programs are all very similar.

Using Credit Card Points to Save Money

Certain Chase credit cards earn Ultimate Rewards points that can be used for cash back or to purchase flights – Chase Sapphire Preferred, Chase Sapphire Reserve, and Chase Ink Business Preferred.  Each of these cards has a yearly fee, although some of the fees are waived the first year you have the card.

The Chase Freedom, Chase Freedom Unlimited, and Chase Ink Business Cash cards earn cash back on purchases, but if you have one of the cards above, you can transfer your points and then use your points for flights. These three cards do not have a yearly fee. In addition, United Airlines offers three cards (one free, two with a fee) that earn miles that can be used for flights. Southwest Airlines also offers three or four credit cards. The airline card points can be used to purchase flights on their own airlines.

Regular Spending

On all of the cards above except the Freedom Unlimited, cardholders earn one point for every dollar spent.  For the Freedom Unlimited, one and a half points are earned for every dollar.  By paying for all of your purchases throughout the year with a credit card, your points can add up.

When using credit cards, be sure you pay the balance in full each month. If you don’t, and you pay interest on the money used for purchases, you will erase all the gains received from points.  Do not use credit cards for airline points if you do not have your spending under control.

Category Spending

Additional points are earned on certain cards for purchases within certain categories. For the Chase Sapphire Preferred, travel and dining purchases earn two points per dollar spent, and for the Sapphire Reserve, it’s three points per dollar.

The business cards, Chase Ink Preferred and Chase Ink Cash, earn extra points for purchases made in certain business related categories.  For the Ink Cash, five points are earned for purchases in office supply stores and on cable, telephone and internet services; two points are earned at gas stations and restaurants.  The Ink Preferred offers three points for travel, shipping purchases, internet, cable and phone services, and some advertising.

The Chase Freedom card offers five points per dollar spent in rotating categories.  Each quarter, different categories are chosen for the bonus, such as gas stations, grocery stores, or restaurants. For the fourth quarter of this year, the bonus is given for purchases at Wal-Mart and department stores.

The airline cards offer bonuses for airline ticket purchases.

Sign-Up Bonuses
Taxiing to the Terminal

In addition to the categories, most cards offer bonuses to first time credit card holders ranging from 15,000 points to 50,000.  Bonuses of 100,000 points come along once in awhile. These bonuses usually require a minimum purchase amount to receive the bonus.

The lower bonuses usually require purchases of $1000 or more in the first three months of account opening, the higher bonuses are earned from purchases of $4000. Each card has its own bonus – the details will be listed on the offer page.

Remember, carrying credit card balances will wipe out the value of the credit card bonus is a very short time. Only sign up if you are comfortable spending the required amount and know you can pay it off.

Shopping Portals

In addition to the above, points can be earned by going through the shopping portals for each airline. After an account is set up, items and gift cards can be purchased from different merchants.  Although it is not unusual to earn just one point per dollar, there are also opportunities to earn multiple points. Each merchant has their own offers, but if you shop online, you may be able to build your point stash quicker with shopping portals.

Earlier this year, I purchased some bedding from Kohl’s.  I went through the shopping portal and received two points per dollar. At the time, the airline was offering a point bonus for spending a certain dollar amount and I was able to add a bonus to my purchase.

Shopping portal points go directly into the airline frequent flyer account and cannot be redeemed for cash. If you are an infrequent flyer, using the shopping portal can help keep your points from expiring.

How to Spend Points

There are several ways to spend points, although some have a better redemption value that others. Values start at less than one cent per point to six or more cents per point.

Gift Cards, Amazon, or Cash

Credit card points can usually be redeemed for gift cards or used for purchases on Amazon, although you may get less than a penny per point. Cash value of Chase points is $.01 per point. Points can be redeemed by logging on to your account, making your way to the point redemption page and filling in the required information.

If you spend $10,000 on your credit card, you would get 10,000 points and could get $100 back in cash. If all of the purchases are made in Chase Freedom’s quarterly categories, you would have 50,000 points and could get $500 back.

Travel Portals

If you have a Chase Sapphire Preferred or the Ink Preferred card, you can book travel through Chase’s portal and get 1.25 cents per point.  If you have the Sapphire Reserve card, you can get 1.5 cents per point.

Getting Ready for Take-Off

Using the above example, if you have 10,000 points, you would get $125 or $150 worth of travel expenses paid. If you have 50,000 points, you would get $625 or $750 toward travel. Chase’s travel portal offers flights, hotels, rental cars, and tours so you don’t have to be traveling abroad to take advantage of the offers.

Check around before booking, because sometimes you can find a better deal on travel from a different source.

Airline and Hotel Partners

Chase has several airline and hotel partners – United, Southwest, British Airways, Air France, Hyatt, Marriott, and several others. Points are transferred one to one – one Chase point equals one airline or hotel point.

A “Saver Fare” economy flight to Europe usually costs 60,000 points. It is possible to use a sign up bonus and points from a Choice Freedom category to earn a free trip in a matter of months. It is also possible that it will take longer.

Waiting for the Plane

A couple years ago, I looked at tickets to Europe. When I first looked, a round trip flight cost $1800 – eventually the price came down to around $1200. I bought the tickets with 60,000 points which had a cash value of $600. In this case, the points I used had a redemption value of between 2 and 3 cents apiece. Some of the points were earned through bonuses or categories, so the value was actually even greater.

Another place to get high values, is to use points to purchase business class tickets. Round trip “Saver Fare” business class tickets to Europe are as low as 120,000 points – a cash value of $1200. Business class tickets often sell for $3-4,000.

Transferring points to Southwest Airlines is also smart, because points can be used for even the cheapest fares (Wanna Get Away), with the points worth almost two cents apiece toward fares.

Recommendation for Getting Started

Where should you start?  If you want to get started in the points and miles game, a good card to start with is the Chase Freedom Card.  The card does not have an annual fee and the points are easily redeemed for cash. If you fly almost exclusively on Southwest Airlines, you might want to consider getting a Southwest credit card. The points cannot be redeemed for cash, only flights, but they are a good value.

If you use these cards for awhile and start to understand how point acquisition works, you might want to add a fee based card such as the Chase Sapphire Preferred or Chase Sapphire Reserve.

Fee-based cards usually provide benefits beyond points.  The Sapphire cards offer trip insurance, rental car insurance, and no foreign transaction fees, in addition to double or triple points on travel (see above). The Sapphire Reserve also includes a $300 automatic travel credit per year and credit for Global Entry and TSA PreCheck every four years.

Right now, I have two fee-based cards – the rewards and benefits I’ve received far outweigh the fees I’ve had to pay. However, I travel often – maybe more than you. Sometimes a fee-based card can be acquired, the bonus earned, the points used, and then the card cancelled or downgraded to a free version.  Although it isn’t wise to continually sign up for cards and then cancel them, it has little, if any, impact on your credit score to do this once in awhile.

Start slowly. Pay attention to your account balances.  Before you know it, you will be flying for free.  Have a good flight!


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