Earn a million miles in a year! Maybe not.
In November, blogger Hilary Stockton laid out her plans for earning a million miles in credit card rewards in a year without leaving the ground. As blogs go, it was an extraordinary tour de force, made even more compelling by her opening paragraph, which described her and her family's first- and business-class flights to Bali and Hong Kong aboard Cathay Pacific airplanes.
Rewards credit cards and gaming the system
Within a year, Hilary seemed to imply, you could be enjoying the salmon and caviar in-flight platter pictured on her blog -- if you follow her "mileage running" strategy. And it seems likely you could -- but only if you're an unusual sort of person. Here are some of the characteristics you would need to hit her million-mile target:
- You'd have to have a spare $200,000 lying around, and be prepared to invest it with BankDirect. That's where 240,000 of your miles would come from. In return, Hilary said, you'd get only a modest interest rate, and would be charged $12 a month in account fees. Still, could be worth it.
- You'd need a really great credit score. You're going to be applying for 11 cards, most with with sign-up bonuses, and some of them are very high-end indeed.
- You'd have to be prepared to see that credit score fall. All those card applications are likely to reduce it significantly, so you certainly -- as Hilary warns -- wouldn't want to follow this strategy if there were any possibility of your wanting to make a mortgage, refinancing or any other loan application anytime soon.
- You'd need to spend a total $29,000 across some of the cards within months of acquiring them in order to qualify for your sign-up bonuses.
- You'd have to be willing to pay more than $1,000 in annual and other fees during the year.
- You'd need to be ready to micro-manage your accounts, including transferring some of your rewards onto gift cards.
- You'd have to remember to cancel many of the cards before their annual fees, which are waived for the first 12 months, kick in at the start of year two.
Rewards credit cards without that effort
Now, maybe you are prepared to jump through those hoops, and have the resources to do so. Perhaps you regard following Hilary's strategy as a hobby; one that could provide you with a good return on the time you invest. Good for you.
But let's face it: if most of us put that much industriousness and commitment and ingenuity and motivation into our working lives, we'd be able to buy our own first-class airline tickets without a second thought. The reason we can't currently afford them is precisely because we lack those qualities. And the chances are remote of our discovering them within ourselves through the carrot of free flights.
Keeping current with credit cards
Luckily, credit cards are designed to give ordinary people like us something worthwhile without all that hassle. If you're prepared to spend just an hour or so every two or three months on the IndexCreditCards.com website, you might easily save yourself hundreds or thousands of dollars during 2013. Precisely how much is likely to depend on your personal circumstances: your credit score, your current card balances and your willingness to open and close card accounts. Here's what you need to do during your regular visits:
- Click through to the rewards credit cards section, and check out current sign-up bonuses. There are several cards offering at least 10,000 bonus points/miles, and the highest gives you 40,000. Find the one that suits you best (often the most generous), and then don't hesitate: Apply! It's only inertia that's holding you back.
- If you currently have a significant card balance on which you're paying interest, visit the balance transfer credit cards section. There's been a recent resurgence of 0 percent balance transfer offers that last anywhere from six to 18 months. If you have balances of $5,000 and are paying the average rate for rewards cards on them, you could save close to $1,000 in interest during the first year alone.
- Scan the news blogs and feature articles. These frequently highlight some of the perks and benefits on particular cards you might otherwise miss. Some might even apply to plastic you already have. For example, extended warranties, and price and purchase protection could save you serious bucks -- but only if you know you're covered.
Okay, none of this is likely to buy you a first-class flight to Hong Kong with complimentary Champagne and caviar. But it doesn't feel like a full-time job, either. Your only commitment is a few hours over the next 12 months. Now that really could be a worthwhile New Year's resolution.