By Dr. David Rosen, Guest Writer
Is this a cult? Is it a scam?
The goal of this post is two-fold: to demystify some of the concepts around the points and miles game and to show WCI readers how they can leverage their existing spending to get some awesome travel perks (specifically for members in training, for whom there is often a wealth of desire to travel but not the budget to back it up). This was written with the 80/20 principle in mind: we will explore some general principles and common ways to get a majority of the benefits without it becoming a second job. Before going any further, however, a couple of ground rules should be established.
- Credit cards are not for credit. They are for convenience. How can these companies offer perks that seem too good to be true? They make a small fee on the merchant side for every transaction, but that is not why banks are clamoring for your business. It’s because consumer debt is a real problem, and credit card debt in particular comes at a sky-high price. If you have a credit card balance or you are concerned that your search for points and miles will cause you to spend beyond your means, this is not the post for you. Carrying even a small balance and having to pay extraordinarily high interest will far offset any benefit gained from travel credit cards.
- Credit card optimization is not part of a financial plan. This is not a substitute for having a written financial plan in place, saving for retirement, and insuring against catastrophe. If those items are not solidly in place, it's best to save this article for another day and get your financial ducks in a row.
Picking a Travel Goal for Your Credit Card Rewards
Similar to a well-thought-out financial plan, having a clear goal in place will help you streamline your progress and keep you out of trouble when it comes to credit card rewards (i.e., “shiny card syndrome”). What does this mean? Travel hacking can take a myriad of forms. Maybe you’re a med student with an upcoming wedding and you’d like to plan a honeymoon with first-class tickets to a luxury location abroad. Perhaps you are a resident or a new attending with a family and hope to take the kids on a trip to visit family across the country, and you would like to offset the cost of some economy airfares. Either way, using points and miles can help, but how you can best use them to reach your travel goal may differ.
Not all points are created equal. In general, flexibility is king in the points and miles world. Finding great deals often requires a combination of flexibility in accommodation (which hotel you stay at or airline you fly with), flexibility in destination (where you head to and where you depart from), and flexibility in schedule (snatching up deals when they appear). Co-branded cards for a specific airline or hotel chain may offer higher bonuses or points per spend, but these are generally considered less valuable because they can only be redeemed within that company (for example, if you rack up a bunch of Hilton points but travel to a location without a Hilton, you can’t transfer your Hilton points to another hotel carrier). Points with programs like Chase, AMEX, Capital One, Citi, and Bilt are generally considered more valuable because each company has its own set of transfer partners (several airlines and hotels) with whom it partners and to whom your points can be transferred.
In general, medicine does not lend itself well to flexibility in schedule; not many of us can drop everything to fly to Tahiti next week when a great deal arises. Often, you may not even have much flexibility in your destination if your goal is to fly to visit family in a particular location. This means that having increased flexibility in your accommodation is key to finding a great deal. Having points that can transfer to a number of various carriers is highly advantageous. There are exceptions to every rule, though. If you live in a major airline hub city (like Atlanta for Delta or Charlotte for American) or are going for something like the Southwest companion pass, it may be worth focusing on a specific carrier. But in general, a point that can be diversified is more valuable than a point that can only be used with one company.
Hopefully, you are now thinking of a concrete travel goal. I’ll share my current one. After taking Step 1, I had about a week of vacation. My wife was pushing for a trip to Hawaii to destress after all that studying (let's be honest: board study is just as hard on the partner in the relationship). I was pushing to go on a climbing trip to develop some boulders in a remote part of southern Utah where the closest restaurant was a gas station an hour away, there was no cell service, and accommodations were either in the back of our car or a tent. Being the wonderful but overly trusting person that she is, she said that because I was the one taking the test, I could have the final say in how we spent our vacation. So, I started planning a trip up to the Grand Staircase Escalante (which is not anywhere close to Hawaii). While there was plenty of sand, it was not the sandy beaches she had been dreaming of, and camping with overnight lows in the teens left something to be desired. Needless to say, a trip to Hawaii has been long overdue.
In Hawaii, we would not have had to thaw the dog's water by the fire. In southern Utah, though, this was a must.
Fast forward through a global pandemic, an internship, most of a residency, and the addition of two kids into the mix, and Hawaii is looking like a great destination for a post-training trip. My next steps involve looking at various routing options for flights and places to stay and researching what credit card points programs are transfer partners for those options.
More information here:
WCI Travel Club: Meaningful Trips to Half Dome, Thailand, and Alaska
Accumulating Credit Card Points
This section is where the 80-20 rule will really apply (getting the majority of the benefit while keeping the effort input to a minimum). Figuring out ways to maximize point accumulation can be (and for some people is) a full-time job. For those putting in the long hours to become a high-income professional, maximizing every cent spent is unrealistic and far from the best use of time. Because of that, I want to focus on only two methods for earning points: bonuses and everyday spending.
Perhaps the quickest and simplest way to accumulate a healthy number of points is through signup bonuses. Each credit card has its own specifics, but in general, if you spend a few thousand dollars on the card in the first few months of signing up, cards offer generous point bonuses (generally around 50,000 points, but it can be in the six-figure range depending on the card or promotion). While meeting these minimum spend requirements can seem unrealistic for someone who is on a budget and who already has massive debt, there are periods of time during the training pipeline that can streamline this. Spending $4,000 in three months seems much more manageable when there are looming events like a move to a new city, applications for residency/fellowship, or travel for interviews. By being strategic when you sign up for cards, you can time planned periods of big spending to get significant signup bonuses. If you want to go a little further, many cards also offer referral bonuses (usually not as large as signup bonuses, though), so if your peers are going through similar events, you can refer them for these cards as well. They can get the signup bonus, and you can accumulate some free points for referring them.
By using this strategy, a typical trainee could accumulate hundreds of thousands of points in just a few years. Granted, signup bonuses are typically a one-and-done type event: once you get a signup bonus for a given card, you usually can't get it again or you'll have to wait several years before you are eligible for another bonus. That means that to maximize this strategy, a typical medical trainee may sign up for three or four cards during medical school and residency.
But wait, isn’t that going to tank my credit score? While a hard pull on your credit score may cause a single-digit point dip for a few weeks after applying for a new card, signing up for a handful of cards over several years is unlikely to have any meaningful impact on your credit score (as long as you are following rule #1 and never carrying a balance). In fact, I’ve found that my credit score has gone up: as I have slowly accumulated more cards, my available credit has increased while my spending has remained stable. This reflects positively on my credit utilization ratio (the amount of credit used compared to the total amount of credit available to me); this ratio is one of the major categories that affect a credit score, and the lower the number, the more positively it affects your score.
For the WCI trainee, signup bonuses are likely to be the most significant way to accumulate points. However, you can still gain a modest number of points by being strategic with how you use the cards you have for day-to-day spending. Most cards offer bonus points for various spending categories, such as dining, travel, groceries, etc. In addition, some non-travel cards can convert cash-back options into points if you own a travel card from the same bank (the Chase Freedom and Sapphire series combo is a popular example). Rather than just putting all purchases on one card, you can maximize your points return by using a specific card for a specific spending category in which it receives a higher bonus. If your wallet only has a few cards in it, this takes minimal work; if you have several cards and have trouble keeping track of when to use which card, there are resources that can help you keep it straight.
If you want to take this one step further, many card issuers also have online shopping portals where they partner with outside brands to give a higher point return if the purchase is made through the portal. For example, instead of buying a new pair of shoes on the Nike website directly, you could log in through a shopping portal (available through credit cards, airlines, etc.) that partners with Nike and buy the same product at the same price but earn significantly more points. This does add another layer of complexity, however, and you may be tempted to either overspend because you are frequently browsing a shopping portal or buy a product that wasn’t exactly what you wanted if the shopping portal you are using doesn’t partner with the desired merchant.
In my case, I have chosen one shopping portal for one of my cards to use; if I’m making an online purchase, I will quickly log on to see if the seller is partnered with the shopping portal. If so, I’ll make the purchase through the portal; if not, I’ll make the purchase how I otherwise would. I’m not logging onto five different portals to see if one of them will partner with the seller or if one offers a better points bonus; at some point, it's just not worth the hassle.
Aside from point accumulation, many cards geared toward travel also come with significant benefits you can use while traveling. Features like auto rental collision damage waiver, trip cancellation/interruption reimbursement, and trip delay reimbursement come standard on many of the “premium” travel cards. These features can save a significant amount of money throughout an interview season, and they can more than make up for the annual fee on a card.
When it comes to selecting which card to get, the most important part is ensuring that the card’s transfer partners align with your travel goals. Aside from that, there are a few factors to consider. Many cards that allow for the accumulation of points toward travel are “premium” credit cards, which means they come with an annual fee. This fee can range from around $100 to greater than $500 depending on the card. In general, the higher the fee, the more perks that come with the card (travel credit, discounts on ride-sharing or grocery delivery, TSA Pre-Check or Global Entry reimbursement, airport lounge access, etc.). While a $500 fee may seem bananas for a physician in training, think about it this way: if you get a $300 travel credit, free Global Entry (~$100), and the signup bonus, you’ve more than made up for the fee. When the time comes to renew the card, it is important to evaluate how much value you are getting out of the card to determine if it is still worth the fee. You’ll have to do the math for your personal situation.
Often, card issuers will have different tiers of cards. For example, the Chase Sapphire Reserve comes with a higher annual fee than the Sapphire Preferred; if you are traveling for interviews, you can use many of the perks of the Reserve, and it may be a good value despite the higher annual fee. The next year, though, you may be starting residency, fellowship, or a new job where travel and time are more limited. Instead of paying the higher Reserve annual fee, you could then downgrade to the Preferred which comes with fewer perks.
If you have a substantial points balance, you do not want to outright cancel an account or you will lose the points you’ve accumulated. When the anniversary of a card is coming up, you can call your card issuer to tell them you are thinking of downgrading to a lower or no-annual fee card, and it will occasionally offer to waive or reduce the annual fee or give you a points bonus if you keep the higher annual fee card. But this is far from a guarantee.
Best Credit Card for Renters
Let's take a moment to talk about one specific card ideal for renters. If you don’t rent and don’t plan to anytime soon, this section isn’t very relevant. But if you have found yourself on the rent side of the buy vs. rent while in training debate, this section is for you. To be very clear, I have no affiliation and no paid partnership for this card. I’m just a happy user who wishes I’d found it earlier.
Housing is one of, if not the most, significant fixed cost for many people. For many hoping to maximize credit card points, it’d be great to put that expense on a card, but the exorbitant processing fees outweigh any potential benefit. The Bilt card, however, waives that fee. The card partners with many online processing sites, and if the platform your landlord uses isn’t supported, the company will mail them a rent check each month (the option I currently use). Are you worried about your credit utilization ratio or are you concerned that if you accidentally missed a payment, you’d be paying upward of 20% interest on your rent? Bilt has a feature where you still earn the points for paying rent, but the funds are pulled directly from your linked bank account instead of showing up on your credit card statement.
Not only can you earn points on rent, but the card has no annual fee, a great selection of travel partners, cell phone protection for theft/damage if you pay your phone bill on the card, rental collision coverage, trip cancellation/delay reimbursement, and bonus points for spending on dining and travel. The downsides? No signup bonus, and it's only for renters (no, you can’t put your mortgage payment on the card). Given how significant the annual cost of renting is, though, I will end up spending more on this card than any other, which helps offset the lack of a signup bonus. If I could only have one card, this would be it. If you think this may be a good fit for you, you can learn more here.
More information here:
From Wedding Planning to Owning 16 Credit Cards
Redeeming Your Credit Card Points
You have the vacation planned and some points earned. Now, how do you use them? The best answer to that question is ever-changing. Rewards and loyalty programs can change, transfer partners can be added and taken away, and the value of a given program’s points can shift based on company policy. It is impossible to write a step-by-step guide that will remain evergreen and serve every situation out there. When it comes time to redeem your points, the best thing to do is search online. There are numerous resources that will show you how to transfer your points and get great value. There are some general rules, though, that are good to know.
If you earned flexible points (points that aren’t exclusive to a specific airline or hotel chain), your best value comes from transferring points to a specific transfer partner. Sure, you could use your AMEX or Chase points and book directly through their respective travel portals, but this is unlikely to yield the best results. Instead, you can transfer those points to a travel partner. Finding good deals does take some leg work, although there are resources that can help find spots for award travel.
Often, great deals can be found by looking for availability through alliance partners. For example, maybe you’d like to fly to Hawaii on United, but you aren’t finding great deals; well, United is part of the Star Alliance, which includes the Turkish Miles and Smiles program. Instead of booking the flight directly through United, you could search for that same flight through the Turkish site and you may find the same flight for significantly better value. You could then transfer your Bilt points to Turkish and book your United flight that way. In such a scenario, the value is significantly more than booking through either the Bilt portal or the United site, but you get the same flight.
This highlights a couple of key points. First, this is the power of flexible points with multiple transfer partners. If you had a United card and earned just United points, you are locked into the availability on the United site. Even though Turkish Miles and Smiles is part of the Star Alliance with United, you can’t transfer your United points to other Star Alliance carriers’ programs. Second, once you have transferred your points, you can’t transfer them back; it is usually best to wait until you are ready to book your ticket to transfer points. Occasionally, programs will have a transfer bonus (you get greater than a 1:1 transfer to a particular carrier); these can seem enticing, but unless you have a specific trip in mind on that transfer partner carrier, it's best to keep them as flexible points. Third, this can get complex. There is a whole points and miles world out there that is up-to-date on the latest deals and happenings. Finding deals on your own can be tricky, and transferring your points to travel partners can be daunting. Once you have a specific trip in mind, spend some time researching current deals for your planned routing. When it comes time to book your ticket, look for up-to-date blogs, social media posts, and/or YouTube videos that can walk you through exactly how to do this. It is ever-changing, but you are sure to find multiple sources that will help you along the way.
The exact value of points is always changing. In general, getting around two cents per point is a good value. If you are cashing them in for significantly less, it may be worth continuing to explore for better alternatives. But at the end of the day, if you can take a trip you wouldn’t have otherwise taken, then you got great value.
In a similar vein, when it comes to redeeming points, there is no time like the present. I don’t mean that you should use points the instant you earn them, but hoarding points is often not the way to go. Like most anything else, points devalue over time. Companies change their policies, and suddenly a great value redemption is gone. There is no high yield savings account you can put your points in to to help them grow. So, save up those points with a goal in mind and then use them!
How is this playing out for our Hawaii trip? Getting a direct flight is a top priority while traveling with two kids, so that helped narrow it down to two airline options from our departure city: Southwest and Hawaiian. Chase can transfer to Southwest; AMEX and Bilt can transfer to Hawaiian. I already have a Chase card with some accrued points, and our family had some bigger spending recently. So, I referred my wife for a Chase Preferred card, which she signed up for and then hit the minimum spend. This got us 75,000 points in bonuses alone (60,000 for hitting the minimum spend, and 15,000 for the referral). Those points, plus additional ones accrued from day-to-day spending throughout the year, added up to enough to cover flights. Any leftover Chase points can be transferred to Hyatt along with Bilt points to help offset the cost of a hotel as well. Without any changes to our spending habits and while living on a resident salary, a very significant portion of the trip will be paid for with points.
The Bottom Line
If your goal is to save on travel—whether that be a luxury trip abroad or flying a family across the country—credit cards can be a powerful tool to accomplish this. It can be difficult to save for travel while in training, but by timing periods of significant spending (moves, applications, interviews) with signup bonuses for travel credit cards, you can maximize your ability to subsidize travel. You can even earn points on rent. Happy travels.
Do you use credit cards for points or cash back? How much time do you spend on it? Is it worth it? What kinds of trips have you taken with points?
I loved this article. Good information!
Great summary on an extensive complex topic! There has been general consensus that the Chase Sapphire reserve with its current sign up bonus is the best travel card right now. I think that is the one you mentioned your wife got. Do you agree?
Thank you. I personally don’t think there is any “best” card, it all just depends on your goals. I think the Chase ecosystem is very user friendly, so the sapphire cards are both good options. In addition, Chase has the 5/24 rule, so often people starting out will go for chase cards first then branch out to other programs (you can read more here https://thepointsguy.com/credit-cards/chase/ultimate-guide-chase-5-24-rule/) .
I will caveat that a card like the reserve has a high annual fee, but comes with various perks to offset that fee (travel credit, lounge access, etc). You have to decide if you are going to use the perks enough to offset the increased annual fee compared to a less premium card, like the preferred.
On one hand, invest in index mutual funds (set it & forget it), and on the other hand, make life complex with multiple credit cards to chase points (this chase benefits the bank much more than the user)……I guess what’s left to do after set it & forget it?
Remember, everytime you swipe a card for points, a business is paying for it, not the bank. Small businesses take the greatest hit by these fees.
Regarding complexity – I agree that for most readers of this blog there isn’t much of a financial case to make to optimize credit cards for travel. I find it interesting to meet with clients who have a seven figure nest egg, spend $250,000+ each year, save 20-30% of their income, whose hourly rate at work is four figures, and that same person spends a shocking amount of time and mental bandwidth to save ~1% of their annual budget via “points hacks” or any other credit card “strategy”. I think there is a strong mathematical and behavioral case to make for the simplicity of a 2% cash back card for most high income professionals.
That being said, when I explore this more with clients I often find that they really enjoy playing this game. It has transcended math and become a hobby that brings them meaningful happiness or satisfaction. While there are probably more lucrative potential hobbies than points hacking, this is almost certainly more profitable and harmless than stock picking or mining for crypto.
I also think travel hacks can be worthwhile for medical/dental students and residents/trainees. My wife and I used some of the strategies outlined in this article to go to Thailand right after dental school essentially for free. It is a trip we never could have afforded at that stage of life and I am so grateful we had that experience when we did. At that time, the hours and effort we put in for our free trip was well worth the complexity and hassle. It isn’t anymore but “worth it” is always relative.
Here’s that column Tyler was talking about, detailing his credit card travel hacking. https://www.whitecoatinvestor.com/wci-travel-club-half-dome-thailand-alaska/
Nothing personal or criticizing here, but,
Whenever I get an email or a mail regarding Credit cards offering such points, airline miles, etc, I remember:
“When you locate a bargain, you must ask, ‘Why me, God? Why am I the only one who could find this bargain?'” - Charlie Munger (1924-2023)
These credit card offers come in shiny, attractive envelopes, all gold/silver foiled text, and bright colors. I have never seen a tax refund check from the IRS in this fashion. Why would someone spend so much money to bring “happiness and satisfaction” to your pitiful life?
Life is short. Most of us here have spent the best years (of our lives) studying hard. We should prevent our younger generation from getting into these schemes rather than calling it a “hobby” or “game” that brings “satisfaction or happiness” (at others’ expense).
Charlie Munger also said-“You need one stock to become wealthy.” Finding that “one stock” would be the most gratifying hobby or game if pursued.
We need to prepare our readers for this type of “hobby” or “game,” not the ones where you are being given a small piece of a pie, and the more significant piece goes to the traders offering it. Then, we complain about decreasing reimbursements and the payors getting wealthier. How funny is that?
Not sure that stock picking is a better hobby than credit card games.
I was waiting for Jim to say something……. Writing comments on this blog doesn’t help improve my Saturday, but I should.
Charlie Munger was a legendary investor. Anyone who thinks to imitate him is a fool. He once said- “Investing is hard, and anyone who tells you different is stupid.”
Therefore, please do not take his advice literally. Allow me to explain. To me, “one stock” means anything. It does not have to be an actual stock of a company, stock picking, or investing.
For example, in 2011, Jim wrote a blog on this website about a backdoor Roth IRA process. I found my “one stock”. Since then, I have spent five minutes every year on the backdoor process, checking if my tax return had form 8806 filed.
Then Jim wrote about the 529 plan. I found another “one stock”. I opened the plan and contributed when the pregnancy test turned positive! It has been on automatic for over ten years now.
A few years later, I asked about other investing methods in one of the forums, as I thought I had enough of Roth, 529, 401k, UTMA, taxable investment, and real estate investments. Jim replied with one sentence- “Sorry, but a good investment is a boring investment.” There, I found another “one stock.”
Most readers of this blog are smart enough to be trained to think critically rather than casually. If a credit card is of some value in your life, a critical thinker should focus on finding a card with a fantastic spending limit (100k to no limit cards) and keeping the APR as low as possible.
I have only one credit card for 22 years, with a 5.9% APR. Who needs an emergency fund? If in dire straits, I can get 0% for one year and then pay below market rate… forever!
Now, is that worth discussing?
The problem with the blog is that it has grown big, so the contributors have to adapt to cater to a wide variety of readers. I am one of the early readers of this blog and have seen it changing colors, similar to aging or something like that. Nevertheless, I am thankful for what I have learned.
In regards to Credit card fees to businesses, they are decided upon their volume of transactions. Therefore, large retailers pay less while small businesses pay the most.
https://www.washingtonpost.com/technology/2023/12/08/credit-card-fees-small-businesses/#:~:text=A%20big%20business%20probably%20pays,a%20credit%20or%20debit%20card.
https://www.commercialappeal.com/story/opinion/2023/09/25/credit-card-swipe-fees-burden-owners-of-small-businesses/70856989007/
Small businesses don’t take a much bigger hit than a larger business, but you’re right that the businesses pay higher fees than the rewards you’re getting and they’re passing that cost on to you.
Your website store had 1,183 orders in 2023. Do you really think you paid same credit card processing fees as a large e-commerce website having 1,183 orders a day? If so, its the Saturday night!
I’m aware of what our credit card fees are, yes. They’re a lot lower than many businesses pay. I’m sure they’re not as low as some businesses pay. Negotiating them is an important part of keeping our costs down and something we do periodically. I’m not going to share them here. I hope that answers your question.
My business puts my nose in the books of multiple small business clients. I truly hate how much they pay in fees. I am thinking of a car repair business. About 95% of the payments are by credit card. The monthly payment fees are 3% of the business revenue. Thousands a month. Literally $,$$$.$$s. Most of that money stays with the credit card company. I estimate that only about 20% of it goes back to the spender as rewards.
I make a point to take cash or checks to my mechanic, hairdresser, local restaurants etc. My hairdresser actually says “All my business owner clients pay cash. They get it.”
When I send out my own invoices to clients, I turn off the credit card option for anything over $500. Below that, I can pay the 3% ($15 on $500). It is just about worth it for the convenience of easy collection. But on a $5,000 invoice? It is not a fair exchange that I lose $150 just so the client can get an extra 10,000 miles. The rewards are not worth but a fraction of what the business gives up. I don’t make clients go all retro and send a snail mail check. They can click through and pay from a bank account.
Do I use credit cards? With rewards? Of course I do. Buying online and in many sectors it is the only way to go. But be aware that all of our awards are not free. They are paid for by pushing the average price of everything you buy with them up by 2 to 5%. And by giving most of that money to the credit card companies, not to the payer or the payee.
Thanks for your comment. I agree, none of the rewards are “free”, but you can definitely get a greater return than 3-5% when using points for travel. Whether someone thinks its worth the time or ethical for them to use the credit card in the first place is up to them.
A quick personal example to highlight. I recently got a card that gave 90k points after spending $6k. From my limited knowledge, it seems most credit card processing fees fall more in the 2-3% range, but even if we assume businesses up-charged 5%, I would have paid $300 “extra” in general markup on the $6k in spend. I transferred 88K of the points to a partner airline, and was able to book 3 round trip flights to Europe, valued at a little over $3k in total.
Why would a credit card company allow this? Because at the end of the day, it is likely a small single digit percentage of users who are getting this value out of the card. Not only are the credit card companies getting the processing fee from businesses, but >50% of Americans have credit card debt. These companies are making so much money off of the average consumer, that a small handful of users getting outsized value from their rewards programs is insubstantial.
Now, if every credit card user paid their card on time, never carried a balance, and were maximizing the value out of rewards programs, I think the reward space would look significantly different. The credit card landscape may change (ie laws requiring significantly reduced processing fees), but this article’s goal is to highlight a way to get the most consumer value out of the current system.
I often share this thought when discussing credit card benefits…
My father traveled domestically for business for several decades and got pretty high up in status for Continental/United and Hilton. He usually had enough miles/points for either accommodations or flights for a week’s vacation with our family of 5. That was great to have, obviously, and I’m very grateful for those experiences… but many “travel hackers” out there nowadays have much higher expectations (“Surely I can get yearly business class flight to Europe with my points!”). My father liked to point out that the people who REALLY load up on credit card rewards are international business travelers.
Anyways, we have the American Express Gold and Costco Citi cards (with exec membership). We have enjoyed having the best of both worlds — transfer amex points to airlines, and also get two reward certificates each year for our gas, grocery, and miscellaneous shopping.
As a PGY2, I’m happy to report exceeding $10k in various bonuses over the last year, largely by averaging 20% back on purchases I would have made anyways. This can be a very lucrative project for conscientious residents, and can amount to a substantial income supplement in the form of tax-free rewards