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This year has been a rough year for travelers. The recent pandemic has disrupted not only our sense of security and safety but also our ability and willingness to travel based on the risks. Fewer flights and hotel stays means that many of us are not using our points and miles. This means that it might be time for us to reevaluate our strategy and pivot as necessary. In this post and video, I’ll share how you may want to pivot your credit card strategy during the coronavirus outbreak.
Travel is often our goal with credit card points and miles
We collect points and miles for a variety of reasons. Some of us are interested in cashback, but many of us gravitate toward travel as our primary goal for collecting credit card rewards. Other than working in the travel industry for a hotel brand or airline, I can’t think of a more effective way to offset the cost of travel. And oftentimes, the welcome offers associated with these cards are enough to pay for a roundtrip flight or several nights at a fancy hotel.
How the outbreak changes things
What happens when worldwide travel is disrupted? That’s exactly what many of us are facing now with the recent outbreak. In this video and post, I want to discuss how you might pivot your card strategy this year to changes in your travel plans or lifestyle.
Step 1: Review your current spending pattern
I would examine how your spending patterns have changed. For example, if you’re not traveling as much, then you might be spending more money in other categories like groceries and streaming services. It’s also possible that you’re saving more money now due to all the uncertainty, which is a good thing.
Understanding your outflows and how they might have shifted is a great way to think about how you might want to adjust your card strategy to capture bonuses on your new spending pattern.
Step 2: Review your current travel plans
I recommend reviewing your current travel plans. I assume that most people following our content are avid or more frequent travelers, so I can imagine how the current outbreak situation has affected many of you.
Whether you travel or not is a personal question and dilemma. I covered how we decided to postpone our Maui trip in our recent video/post based on our assessment of risk. That assessment was based on a lot of factors, not just the risk of getting infected.
For a lot of people, you might factor in the risk of being stuck somewhere because air travel is disrupted. Some of you might have people whom you interact with regularly who are high-risk and don’t want to inadvertently pass the infection as a carrier. There are so many things that fall into the equation of whether to travel right now.
Focusing on different types of travel due to the outbreak
Due to the outbreak, we are planning to shift our travel to more local trips where we can explore by car. An example is our upcoming trip to Joshua Tree where we plan to stay in an AirStream and go hiking. This sort of trip allows us to explore but not be dependent on air travel in case there are more restrictions. We also happen to love the outdoors, so getting away and disconnecting is something that we always look forward to. This is perhaps even more relevant now with all the overwhelming and depressing news regarding the outbreak.
Assess your travel benefits
Traveling less means that you may not use certain travel benefits included on your card. While I love having lounge access as a benefit, it might not be valuable to me this year. That also means that I may not use other services and benefits like ride-sharing services, which could affect whether I renew a card like the Sapphire Reserve.
Step 3: Asses your current card setup
Do you have a mix of points-earning and cashback cards? If you’re heavily invested in points, then you might want to consider augmenting your setup with cashback cards. I say this because points are generally most valuable for travel. But if you don’t plan on traveling, especially in the near future, you might want to look to earn cashback instead.
Adding cashback cards to your credit card setup
My recommendation is to focus on cards that can get you at least 2% cashback on the bulk of your purchases. I would argue that this is the minimum earning rate expectation for non-bonus spending. In fact, I think a flat-rate card mixed with a rotating bonus card can give you a lot of coverage if you don’t already have one.
What if you already have a lot of flexible points?
If you’re heavily invested in a flexible points program and have a lot of points in your account, don’t panic. You can always save them for future travel. Things may seem bleak right now, but this situation will eventually pass. Continuing to earn points is still worthwhile as long as you are willing to be patient.
Redeeming flexible points for non-travel
You also have the option to redeem flexible points for cashback or other shopping options. While I typically advise against these redemption options since it’s generally a lower redemption value than travel, it might make sense given the current climate.
For example, you might be affected economically by the outbreak. Cashing out your points might give you some extra security. On the flip side, you might be looking to invest money in the market due to the drop in stock prices and the ability to gain more shares for the long term.
Redeeming Chase Ultimate Rewards points
For Chase Ultimate Rewards points, you’ll get one cent per point if you initiate a cashback redemption. Chase also offers redemptions in the form of gift cards for certain retailers and sometimes offers promotions and discounts.
Redeeming American Express Membership Rewards points
For American Express Membership Rewards points, you can redeem your points for statement credits at a rate of 0.6 cents per point, which is low. You can get a slightly higher redemption rate for redemptions through Amazon and PayPal and usually at least one cent per point for gift cards.
For those of you with the Charles Schwab American Express Platinum card, you have the special ability to redeem Membership Rewards points at 1.25 cents per point toward your Charles Schwab investment account. That’s not a bad way to use your points, especially if you don’t plan to travel.
Redeeming Citi ThankYou Rewards points
Citi allows you to redeem ThankYou Rewards points for a statement credit or charitable donation at 0.5 cents per point and gift cards at one cent per point.
Additional tips and considerations
I also want to share some things to consider when reevaluating your credit card strategy.
1. Take advantage of banking relationships:
Some banks allow you to unlock additional rewards by simply banking with them. You can often unlock higher earning rates on their cards by maintaining a high balance. This can drastically improve the earning rates on their credit cards, making it a compelling component of your set-up.
2. Consider product changing cards to avoid losing points:
If you are sitting on a lot of points but don’t want to pay a large annual fee on a premium since you’re not able to maximize the benefits, you might consider product changing your card to a no-annual-fee version. Most issuers offer some card that allows you to still retain your points while reducing or eliminating the annual fee.
The notable exception is American Express charge cards, which do not have a no-annual-fee version. You can park your points on other American Express credit cards (e.g., Platinum and Gold card) that earn Membership Rewards points, but you would have to cancel your charge card or product change to the Green card, which still has an annual fee of $150.
3. Be careful of high minimum spend requirements:
Using a large trip can often be an easy way to meet a high minimum spend requirement. If you think your spending patterns may change or life may experience more disruptions, you may not want to add the stress of spending a large amount of money to meet the requirement.
That being said, there are usually ways to pay bills using services like Plastiq. Also, most cashback cards have modest minimum spend requirements, so it may be less of an issue if you start shifting toward a more cashback-oriented setup.
There is no better time to reevaluate your credit card strategy, especially if you think you won’t be traveling as much in the near future. Cashback is a great option for those looking for more immediate value.
Redeeming flexible points for travel is still a better value in most cases. However, since these are weird times, you may want to pivot your credit cards to reflect this new reality.
How are you all responding to the outbreak? Are you adjusting your credit card setup given the current events? If so, how are you pivoting?
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