Rewards and Cash-Back Credit Cards: Boost Your Travel Savings
- by Matt
It’s tough to save up for travel. Surprise bills happen. And travel savings is often the first casualty. Fortunately, there are lots of rewards and cash back credit cards to help boost your travel savings (or emergency fund).
What’s in my pocket? I combine two Chase cards–the Chase Freedom Unlimited and Chase Sapphire—with the Costco Anywhere Visa by Citi to boost my travel savings.
Most websites that discuss credit cards are selling a product. When you click on their links, they may be paid. This post has no affiliate links. Travel in Coach and I will receive no benefit if you sign up for any of these credit cards.
Chase Ultimate Rewards
Chase’s popularity among those who seek to boost their travel savings is well-deserved. With the Chase Ultimate Rewards program, the cardholder earns points by making purchases with a participating Chase credit card. Points can be redeemed for travel, cash back, gift cards, or other purchases.
The beauty of the Chase Sapphire cards is that rewards are supercharged when you redeem them for travel through Chase’s portal, run by Expedia. Points are worth 50% more (Sapphire Reserve) or 25% more (Sapphire Preferred) when redeemed for travel through Chase’s portal.
Or you can transfer Ultimate Rewards points on a one-to-one basis to loyalty programs of the following: Aer Lingus, British Airways, Emirates, Air France KLM, Iberia, JetBlue, Singapore Airlines, Southwest Airlines, United, Virgin Atlantic, IHC, Marriott, and Hyatt.
The Chase Duo (or Trifecta)
You can accumulate more Ultimate Rewards points by strategically using two or more Chase credit cards. Lots of articles tout the “Chase Trifecta”—either the Chase Sapphire Reserve or Chase Sapphire Preferred—in combination with the Chase Freedom Unlimited and Chase Ink Business Preferred. For most people, however, the Chase Duo—the Chase Sapphire Reserve or Sapphire Preferred along with the Chase Freedom Unlimited—is more than sufficient.
Chase Card One: Chase Sapphire Reserve or Sapphire Preferred
Start with either the Chase Sapphire Reserve or the Chase Sapphire Preferred. What’s the difference? To start with, the annual fee. The Sapphire Reserve carries a hefty $550 annual fee, while the Chase Sapphire Preferred is a more modest $95 a year.
$550! You’re probably clutching your pearls right now….
If you’re in doubt, start with the Chase Sapphire Preferred. After a year, you can calculate whether the Sapphire Reserve would be worth the cost based on your level of spending.
But before you decide, determine if the Chase Sapphire Reserve’s added benefits are worth the cost to you based on your needs and annual spending.
The Sapphire Reserve’s $550 annual fee is offset by a $300 annual travel credit. The cardholder is reimbursed for the first $300 in travel expenses charged to the Sapphire Reserve every year. As long as you pay for $300 in travel with the card, your annual fee is effectively $250.
What does the Chase Sapphire Reserve offer for $250 more a year (assuming the travel credit is used)? Plenty.
To start with, the Sapphire Reserve has a more generous rewards structure. The card earns 3 Ultimate Rewards points per dollar spent on dining worldwide, 3 points on travel worldwide (after earning the $300 travel credit), and 1 point per dollar everywhere else. In contrast, the Chase Sapphire Preferred earns 2 points per dollar spent on dining worldwide, 2 points on travel worldwide, and 1 point everywhere else.
In 2020, as travel spend came to a screeching halt, Chase offered more ways to earn the Chase Sapphire Reserve’s $300 travel credit. From June 1, 2020, through June 30, 2021, both gas station and grocery store purchases will count toward earning the travel credit. So it’s easy to get the $300 credit even when traveling on the couch.
Neither the Chase Sapphire Reserve nor the Sapphire Preferred has foreign transaction fees. And both cards have primary auto rental collision coverage. Although many credit cards offer insurance coverage for rentals, that coverage is usually secondary or excess the cardholder’s personal insurance. Meaning, if something goes wrong, you will have to involve your insurer and may have to pay your deductible. With the Chase Sapphire cards, if you’re in an accident, you won’t have to involve your personal auto policy.
Both the Chase Sapphire Reserve and the Sapphire Preferred include a DoorDash DashPass subscription for at least 12 months ($120 value annually). With the DashPass, there is no delivery fee, and service fees are reduced. This is a valuable perk during COVID, when many of us have turned to delivery instead of in-restaurant dining.
In addition, the Chase Sapphire Reserve has $120 in statement credits for DoorDash purchases ($60 in the first year and $60 in the second). The Chase Sapphire Preferred does not have this benefit.
Priority Pass Select Membership
The Chase Sapphire Reserve (but not the Sapphire Preferred) includes a Priority Pass membership. Priority Pass members have access to over 1,300 airport lounges across the globe. There are more participating lounges in Europe and Asia than in North America, so Priority Pass is especially useful for international travelers.
Each cardholder (including authorized cardholders) may typically bring two guests. This can be a great way for the family to get a light meal or snack (and perhaps for mom and dad to have a couple of free drinks). (Speaking of authorized cardholders, there’s a $75 fee to add one to the Sapphire Reserve card. So consider that when deciding between the Sapphire Reserve and Sapphire Preferred).
When our family traveled to Hawaii last year, four of us had a light lunch at the Hawaiian Airlines lounge in Honolulu. During our return connection in Los Angeles, we had a free continental breakfast at the Alaskan Airlines lounge.
In 2020, Chase added Lyft benefits to both cards. For the first year or so, Chase Sapphire Preferred cardholders will earn 5 points for every dollar spent on Lyft. The Chase Sapphire Reserve doubles that benefit to 10 points per dollar. Additionally, the Sapphire Reserve provides a free Lyft Pink membership for one year ($199 value).
Also new in 2020, Chase Sapphire cards are giving a rebate on eligible Peloton memberships. Chase Sapphire Preferred cardholders will get $60 back on eligible Peloton memberships. Chase Sapphire Reserve cardholders are entitled to $120 back.
Both Chase Sapphire cards have valuable sign-up bonuses: 60,000 points for the Chase Sapphire Preferred and 50,000 points for the Sapphire Reserve. Redeemed for travel through Chase’s portal, these bonuses are worth $900 and $750, respectively. You will need to spend $4,000 in purchases during the first three months to get the sign-up bonus.
Some people churn through credit cards. They use them enough to get the sign-up bonus and then move to the next card.
Chase has a 5/24 rule, meaning you will not be approved for a Chase card if you have opened more than five credit cards—from Chase or any other issuer—during the preceding 24 months. Many folks who chase sign-up bonuses start with Chase cards and then move to other issuers after reaching five cards within a rolling 24-month period. The 5/24 rule is unique to Chase.
Sign-up bonuses are a great way to boost your travel savings and travel cheaper, more, and better. Travel reward gurus—who are usually trying to get you to apply for cards through their links—claim that frequently opening (and presumably closing) credit cards doesn’t harm your credit score. FICO and other credit scores, however, do take length of credit history into account. And even if opening new cards has no adverse effect on credit score, I prefer to keep it simple with a small number of cards. I might add a new card every now and then, but I don’t chase the sign-up bonuses.
Chase Card Two: Chase Freedom Unlimited
The Chase Freedom Unlimited is a fee-free 1.5% cash back card. But after enhancements during 2020, it’s much more than that.
For now, new cardholders get 5% cash back on all grocery store purchases for the first year up to $12,000. The offer excludes Wal-Mart and Target, but I’ve gotten the full 5% at ALDI and Lidl.
Cash Back Categories
What’s more, in September 2020, Chase added new cash back categories that meet or beat the Sapphire cards’ percentages (at least before the 50% and 25% boost if redeemed for travel using Chase’s portal). Chase’s Freedom Unlimited pays:
- 5% cash back on travel purchased through Chase’s portal
- 3% cash back on dining
- 3% cash back on drugstore purchases
The Chase Freedom Unlimited is the perfect companion to the Chase Sapphire Reserve or Sapphire Preferred. This is because cash back is converted into Ultimate Rewards Points when transferred to a Chase Sapphire Reserve or Sapphire Preferred account.
Fortunately, it only takes a few clicks to transfer cash back from the Chase Freedom Unlimited to a Chase Sapphire Reserve or Preferred account. Once transferred, points are worth 50% more (Sapphire Reserve) or 25% more (Sapphire Preferred) if used to purchase travel through Chase’s portal.
Note that the Chase Freedom Unlimited does charge foreign transaction fees. So international travelers should also carry the Chase Sapphire Reserve, Sapphire Preferred, or another card with no foreign transaction fees. Which brings me to….
After spending $500 in purchases in the first three months, you’ll get 20,000 Ultimate Rewards points. That’s worth $200 (or $300 if transferred to a Chase Sapphire Reserve or Preferred).
Costco Anywhere Visa by Citi
Until Chase stepped up its game with the Chase Freedom Unlimited, the Costco Anywhere Visa by Citi led the pack in fee-free cash back cards. There’s no annual fee, though the cardholder does need to have a Costco membership ($60 annually for the standard membership).
Cash-Back Percentages and Other Benefits
This workhorse of a cash back card pays a whopping 4% cash back on gas purchases (up to $7,000 a year), 3% on restaurants and travel worldwide, 2% on all other Costco purchases, and 1% on everything else. These percentages are as good as or better than many rewards cards that carry an annual fee. Even if you have the Chase Freedom Unlimited, it’s worth considering the Costco Anywhere Visa for 4% cash back on gas.
The Costco Anywhere Visa extends manufacturers’ warranties by two years when you pay with the card. Additionally, with major appliances, TVs, and water heaters, Costco automatically extends the warranty to two years. So pay for an appliance or TV with your card and get a four-year warranty! (Not to mention, Costco has one of the most generous return policies on the planet).
Another plus? The Costco Anywhere Visa has no foreign transaction fees (unlike the Chase Freedom Unlimited). So it’s perfect for the world traveler.
February Means Redemption
Redemption of the cash back award is simple, though pretty inflexible. A cash back certificate is included with the February or March statement. The certificate can be used toward purchases or redeemed for cash at any Costco warehouse before the end of the year. I usually take the cash and then transfer it into my savings account designated for travel.
For Costco members—or those interested in becoming members—the Costco Anywhere Visa is a great way to boost travel savings. Just be sure to take the cash and set it aside for future travel.
My Card Strategy
To boost my travel savings, here is my spending strategy:
- Dining: Chase Sapphire Reserve or Sapphire Preferred (3% or 2%)
- Travel: Chase Sapphire Reserve or Sapphire Preferred (or Chase Freedom Unlimited when purchased through the Chase portal) (3%, 2%, and 5%, respectively)
- Groceries: Chase Freedom Unlimited (5% cash back for first year)
- Gas: Costco Anywhere Visa by Citi (4% up to $7,000 a year)
- Costco: Costco Anywhere Visa by Citi (2%, plus warranty extensions)
- All other purchases: Chase Freedom Unlimited (1.5% cash back)
Every month or so, I transfer cash back from my Chase Freedom Unlimited to my Chase Sapphire account.
A Word of Warning
Not everyone needs to apply for new credit cards. And not everyone needs to use credit cards.
Credit cards make it easy to spend money you do not have. With interest rates exceeding 20% (reward cards usually have a higher interest rate), once the hole is dug, it’s tough to escape.
Collectively, Americans carry $756 billion in outstanding consumer debt. Though consumer debt decreased somewhat in 2020—as we hunker down and conserve resources during the pandemic—we still owe a ton. The average credit card balance is over $5,300.
My advice? If you have credit card debt—you are certainly in good company–focus on paying it off before thinking about new credit cards. (A possible exception: transferring debt to a new card with a lower interest rate). And if you regularly carry a balance, think twice before adding another card. Having more cards may let the debt pile up.
For those without credit card debt, strategically using the Chase Sapphire Reserve or Sapphire Preferred, Chase Freedom Unlimited, and Costco Anywhere Visa by Citi is an ideal way to boost travel savings.
It’s tough to save up for travel. Surprise bills happen. And travel savings is often the first casualty. Fortunately, there are lots of rewards and cash back credit cards to help boost your travel savings (or emergency fund). What’s in my pocket? I combine two Chase cards–the Chase Freedom Unlimited and Chase Sapphire—with the Costco Anywhere…