You spend HOW much?

Turning routine spending into amazing vacation opportunities!

Most of you are likely familiar with the concept of credit card reward points.  Banks routinely offer points in exchange for money charged on their credit cards.  These points can be banked, and then exchanged later for goods and services.  Banks vary in their dollars-to-points conversion, as well as the products for which their points can be exchanged.  Some banks also offer enormous “signing bonuses”, and these bonuses are really the key to achieving the level of point banking required for points-based travel.  Bonuses are achieved through a process we have termed “meet-spend” in our house.  That is, a card is issued with a promise of future points if you meet spending requirements within a certain period of time.  In my most recent post, for example, I shared about one of the greatest deals in travel – the Southwest Companion Pass!

Southwest’s latest credit card offering – the Rapid Rewards Performance Business Card – requires that you spend $5,000 in three months in order to earn 80,000 points. (By the way, you can apply for a Rapid Rewards Performance Business Card, or any of the Southwest cards right here.)  Now that is a lot of points, but it is also A LOT of money to spend, right?  Especially if you are managing multiple cards with varying meet-spend requirements at the same time!  This can be a very unnerving concept if, like us, you are accustomed to never carrying a credit card balance.

So a question I get asked a lot is, “How do you meet the minimum spend after receiving your credit card?”  Well, in fact, you have to think . . . small.  That’s right! Don’t think of credit cards as being only for large purchases.  We put every single expense that we have on a credit card, no matter how small.  If I spend $6.29 at McDonalds, I put it on a credit card. If I buy toiletries at Walmart, I put it on a credit card.  Every time I go to the grocery store, I swipe that credit card.  In fact, here’s a short list of what gets charged in our family budget: electric/utilities, water, propane, cell phone, internet, cable tv, gasoline, groceries, clothing, and medicines/toiletries.  Most payees offer the option to pay by credit card.  In fact, the list of the few recurring expenses that cannot be paid with a credit card is relatively short.  Mortgage payments cannot be made with a credit card, though rent often can be paid by credit card with a small fee (I’ll cover this in another post).  Monthly car payments also cannot be paid with a credit card, however your very first down payment when buying a new car can usually be put on a credit card.  Finally, monthly auto drafted insurance (life, auto, health, etc.) cannot usually be paid on a credit card, although some insurers offer annual auto drafted premium payment by credit card.   The truth is, $5,000 ISa large number, but $1,667 per month over three months is much more manageable . . . and that number adds up very quickly when every expense is charged.  Of course, any large expenses you may be facing should obviously be charged.

For us, big-ticket items include car repairs, pool or home maintenance, lawn equipment to manage our three acres, or tools for Daddy Starbuck’s shop.  In the last two years for example, we have replaced our septic drain field, resurfaced our swimming pool, and renovated our garage to add a bedroom to our home.  Even if we have saved cash to pay for something in advance, we still charge it, and then pay it off immediately.  This takes careful financial management and a fundamental commitment to never overspending our budget.  But it is the key to traveling on points.

Now here’s something that may surprise you.  It surprised me, but it has become our most critical tool in managing our meet-spend obligations without overextending our budget: You can make credit card payments, in part or in full, as much and as often as you’d like.  I set aside time to look at every one of our credit card balances almost every single day.  Daddy Starbucks has also created an incredible spreadsheet to help me keep track of spending.  I literally enter each receipt, and it keeps a running total while also subtracting the balance due from our checking account balance.  That way there’s never a chance for me to overspend, or at least to know what is available to spend.  We NEVER carry a credit card balance…EVER!  Every card gets paid every month (and often times, every week).  Personally, I hate seeing a balance on my credit card, so if I’ve charged something big, I may even make two payments in the same week.  Banks do not charge a penalty for making multiple payments within a statement period, however most won’t allow you to make more than one payment in the same day.  What you charge on any given day will simply show as “pending” for one or two days, then as soon as it has cleared with the credit card company, you’re able to pay it off.

Let’s Get to the Point!

If you consider all of your bills, including utilities, groceries, phone, gas, clothing, and eating out, you’d only need to spend $1,667 per month to meet the minimum spend requirement for the Rapid Rewards Performance Business Card, which I used in my example.  Actually, there are very few credit cards that have a higher meet-spend than this card’s $5K over three months.  (Most, including Southwest’s personal cards, require a much lower spending requirement.)  But the 80,000-point payoff on this card can be worth as much as $1,200 – all for the price of bills and purchases that you would be making anyway.  And for cards which offer “transferrable points” (which I will discuss in future posts), 80,000 points could be exchanged for as many as 16 hotel nights in a well-researched vacation booking, or flights on many different airlines.  I should also mention that, once you’ve met your meet-spend threshold (and have received your reward points), there is no longer a monthly minimum spending requirement.

In my next post, I’ll be talking about how to maximize the value of all of those points you are accumulating.  In the meantime, if you have questions, feel free to reach out to me on Facebook, Instagram, Twitter, or at my Let’s Get to the Point website.