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Annual fees for credit cards can eat up a significant chunk of the rewards you earn, but you may sacrifice important benefits if you’re not willing to pay the up-front cost. Today TPG Senior Points & Miles Correspondent Jason Steele looks at how you can make use of cards with no annual fee and still have access to the best redemption options.
Most of the top travel rewards credit cards come with an annual fee. While the fee for each individual card may be justified by the rewards offered, the total cost of carrying several of these cards can be impractical. So what travel rewards enthusiasts need is a strategy to get the most value from cards with annual fees while also leveraging rewards cards without fees.
Some rewards cards come in multiple versions: one that includes an annual fee and allows points transfers to airline and hotel partners, and another no-fee card that earns the same type of points, but typically doesn’t allow transfers and earns at a lower rate. Fortunately, you can move points from accounts that don’t allow transfers to ones that do. Sometimes this is a matter of moving points between two accounts held by the same person, but other times cardholders can move points to another person’s account that allows transfers to travel partners.
In this post I’ll look at three of the major travel rewards programs, and offer strategies for using no-fee credit cards to earn transferable points.
Chase Ultimate Rewards
Chase offers several different credit cards that earn points in the Ultimate Rewards program, but it helps to think of these cards as belonging to two separate tiers. The entry level tier includes the Chase Freedom, Chase Sapphire (not Sapphire Preferred), and Ink Business Cash cards. Points allocated to these accounts are worth only about one cent each toward cash back, gift cards, travel reservations, and a few other redemption options.
The upper tier of the Ultimate Rewards program includes the Chase Sapphire Preferred and Ink Plus (along with the JP Morgan Palladium card, which is only available to private banking clients). Points in these accounts can be redeemed for the same options as the lower tier, but can additionally be redeemed directly for travel at 1.25 cents apiece or transferred to any of the 11 Ultimate Rewards travel partners.
Interestingly, Ultimate Rewards points are held in separate accounts for each eligible card you have. For example, if you have Freedom, standard Sapphire, and Ink Plus cards, you’ll have three different Ultimate Rewards balances. Fortunately, cardholders can freely transfer points between their own various Ultimate Rewards accounts. In this example, points earned on your Freedom and Sapphire accounts must be transferred to the Ink Plus account before you can redeem them for travel reservations or transfer to travel partners. In addition, you can transfer Ultimate Rewards points to an account held by the your spouse or domestic partner.
With that in mind, individuals and couples only need to hold one of the higher tier cards at a time. The Sapphire Preferred and Ink Plus each have a $95 annual fee. Unless you spend heavily in bonus categories unique to each card (for example, office supplies and airfare), then there’s little need to keep paying the annual fees for both cards.
For instance, I converted my Sapphire Preferred to a standard Sapphire when the annual fee came due. I still earn double points on dining, which I can then transfer to my Ink Plus. I do lose out on some of the double points the Sapphire Preferred offers for travel purchases, but not entirely, since Ink Plus still offers double points on hotels. In addition, The Hyatt Credit Card offers double Hyatt points on car rentals and air travel, and both the Hyatt card and Ink Plus have no foreign transaction fees, unlike the standard Sapphire. Another popular strategy is to use the Freedom card and its 5x offers to earn Ultimate Rewards points that can be transferred to an account in the higher tier.
American Express Membership Rewards
The American Express Membership Rewards program also has multiple tiers. Like Chase Ultimate Rewards, the lower tier does not allow point transfers while the upper tier does, but unlike Ultimate Rewards, Amex pools all points earned from eligible cards into a single Membership Rewards account. American Express still supports several cards in this lower tier (such as the Blue for Business Credit Card from American Express) that earn Membership Rewards points that are not transferable. On the other hand, the Amex Everyday Credit Card is the only no-fee card available (from any issuer) that presently offers point transfers to airline and hotel partners.
Finally, there are many American Express cards that earn transferable Membership Rewards points, but have annual fees of $95 or more, such as the Amex Platinum card, the Amex Everyday Preferred, and the Premier Rewards Gold card. Cardholders are frequently offered the no-fee Amex Everyday card when they cancel other accounts and cite the annual fee, which can be a sensible move if you’re not using the other cards enough to justify the expense, since switching to Amex Everyday allows you to retain your transferable points.
Citi offers several different cards that earn points in the ThankYou Rewards program, but only two current offerings allow transfers of points to travel partners. The Citi ThankYou Premier card offers triple points on dining and entertainment, and double points on airfare, hotel, and travel agency purchases. Points are also worth 1.25 cents for airfare purchased through Citi. It has a $125 annual fee that is waived for the first year.
The Citi Prestige card offers 3x points on airfare and hotels, and double points on dining and entertainment. In addition to offering point transfers, points are worth 1.6 cents apiece when you redeem them for tickets on American Airlines and US Airways, or 1.33 cents on other airlines. There is a $450 annual fee that is not waived the first year. In contrast, other Citi cards that offer ThankYou points, such as the Citi ThankYou Preferred Card, only allow points to be redeemed for about one cent each toward travel reservations, gift cards, and other options.
What makes this program unique is that cardholders can freely and immediately transfer points to any other ThankYou Rewards member. So if you have a ThankYou Preferred card, you only need to know someone you trust with a Premier or Prestige card, and you can then effectively redeem your points for airfare or transfer them to an airline partner and ticket an award in anyone’s name, even though you don’t have one of the higher tier cards. This makes the Preferred card a good no-fee option for accumulating points, since it does offer double points for dining and entertainment purchases, and you can later get a Premier or Prestige card to enable point transfers and better airfare redemptions.
If you want to maximize your travel rewards, you’re probably going to need a strategy that involves more than one credit card. TPG often talks about the importance of diversifying your loyalty points, and having a selection of cards at your disposal is a step in the right direction. Cards that work well together to add flexibility with transfer partners and minimize annual fees will help you get where you want to go more quickly and affordably. It's a stellar Cash Back card on its own, but when paired with the Chase Sapphire Reserve or Chase Sapphire Preferred, the Freedom's 5x Category Bonuses let you rack up Chase Ultimate Rewards Points, transferrable to partners or redeemable via the portal.
It's a stellar Cash Back card on its own, but when paired with the Chase Sapphire Reserve or Chase Sapphire Preferred, the Freedom's 5x Category Bonuses let you rack up Chase Ultimate Rewards Points, transferrable to partners or redeemable via the portal.