The goal – How you can earn better than a 1-2% cash back return – Mile Cards 101

This post is the first in a series helping those of you brand new to mile credit cards learn how to extract more value.

I think too many people settle for a mediocre return on their credit card spending.

• The credit card companies themselves are enjoying up to 3% in cash from every purchase you make in the form of a fee paid by merchants that accept the cards.
• Most rewards cards give you 1% of that back in the form of cash back or something similar. That’s easy, but unremarkable.
• I think you should strive for something better. And if vacations or travel interest you, then you have the ability to find rewards that give you 2%, 3%, and 5% or more in cash return on your credit card spending with a touch of extra effort.

If you’re fine with a 1-2% cash value return, then get yourself one of the better cash back credit card choices — but if you want the chance for much more, read on with this series…

Here are some of the most common ways you can earn a greater than 2% return on your credit card spend by putting it on good mile credit cards:

• International travel. Flights to Europe often run $1,200+ roundtrip, yet can be purchased with miles for 50-60,000 miles — offering you a quick 2%+ return on spending.
• Expensive domestic travel. Today, with airline capacity down, we’re facing more $500+ fares for our flights. In these cases, redeeming 25,000 miles for a flight makes a lot of sense and nets you a 2%+ return right away
• First / business class flights. If you value a more comfortable ride, this can be one of the highest values in miles and points. While it can take quite a few miles (80-100,000 roundtrip; 68,000 if you’re clever), international business class tickets typically cost $3,000-$5,000, still netting a 3-5%+ return on your spending.
• Hotel nights.The right hotel program (Starwood (Westin, W, Sheraton) and Hyatt especially) can offer easy, great values at relatively few points. For example, free nights at Starwood and Hyatt hotels start at 3,000-5,000 points per night, with a value of $100+ per night that’s 2-3% return right there. Their most expensive properties are available for less than 25,000 points, yet cost $600-$1,000 per night, a 3%+ return on spend.
• Emergency travel. We think it’s important to keep some airline miles handy in case you’re faced with last minute emergency travel. A last minute domestic fare can cost $700-$1000 or more, yet need only 25,000 miles to purchase with miles. That yields a 3-4% return on the credit card spending that earned it.
• Big bonus offers. Cash back credit cards typically have lower bonuses than travel based credit cards. Even if you don’t plan to put your primary spending on a card, the 50,000+ point bonus offers on some credit cards can quickly give you $500, $1000+ in travel value.

If these rewards interest you and you want to cut to the chase, our Mile Credit Card Comparison Calculator lets you input the price you would pay for a flight or hotel night, and then shows which credit cards offer the highest value for the reward you want.

Otherwise, stay tuned for our next installments.

And as a sneak preview our two favorite ‘starter’ credit cards to achieve rewards with a better than 2% return are the Chase Sapphire Preferred and Starwood Preferred Guest American Express. We’ll explain more in the next installment.

Wondering why the Capital One double miles card isn’t on here? Well, it’s not a bad card, but the value is fixed at a 2% cash return — no more, no less. If you want to give up upside, that’s a fine card, but we prefer to strive for more than 2%.