A Credit Card Strategy for Families on a Budget

You’ve seen the travel blogs that advertise various credit cards with lucrative sign-up bonuses and how to leverage those points and miles into first class flights and luxury hotels. It’s pretty enticing and inspiring. Unfortunately, acquiring those credit card bonuses often require spending a minimum of $3,000 (per card) within three months. When you’re on a budget, that can be a challenge. However, that doesn’t mean you can’t get in on the fun. It just means you have to re-adjust your expectations and develop a credit card strategy that can benefit your family.

Points vs. Miles vs. Cash Back

When you’re on a budget, you have low(er) monthly expenditures. This makes it difficult to accumulate both airline miles and hotel points through credit card spend. As nice as it is to keep expenses down and save money, it also hinders your ability to rack up extra rewards. If you get a little overzealous and try to accumulate both miles and points, you’ll be spreading yourself out too thin. It will take forever to earn any type of reward for you and your family. It’s better to focus on one airline or hotel program so you can maximize your earnings. Between the two, I recommend going with hotels. Although airfare is more expensive, it’s easier and faster to acquire points for free hotel nights, which are good for your entire family, than it is to acquire enough miles to cover each family member’s airfare.

Of course there’s always good old cash back if miles and points just aren’t your thing. You don’t have to worry about valuations because your cash back balance is exactly how much you have to spend. However, you’re still limited to the amount of cash back you can earn because of budget limitations. One of the best all around cash back cards is the Citi Double Cash. You earn 1% cash back for each purchase, and another 1% when you pay for those purchases. If you spend $1,000/month, you earn $20 cash back. Over the course of a year, you’ve earned $240 cash back. That could be enough for one or two hotel nights.

Deciding Which Program to Focus Your Efforts

If you do decide to go with hotels, you’ll have to choose which brand you want to utilize. Hilton, Marriott, and Intercontinental Hotels Group offer a lot of presence throughout the world so you shouldn’t have any problems finding a hotel that falls under their brand portfolios. From extended stay hotels to full-service luxury hotels, there are a variety of options to fit your budget and lifestyle.

Ever since we became parents, we’ve gravitated towards hotels like Embassy Suites and Hyatt House. With the ability to easily book a suite that separates the bedroom from a living room, parents have the freedom to keep the lights on, chat, and watch TV without having to worry about waking up the kids. At Embassy Suites and Hyatt House, you also get free (hot) breakfast. These types of hotels offer a lot of value over other full service hotels.

Acquiring the Sign-Up Bonus

Credit cards that offer sign-up bonuses for new cardmembers require a sizable amount of spend in order to receive the bonus. Usually the amount is $3,000 within the first three months of card membership. This can be difficult when you’re trying to minimize your expenses. However, timing your application around major expenses can help soften the blow of spending such a large chunk of money. Here are a few scenarios to consider when trying to time your application:

  • Purchasing new appliances – New appliances aren’t cheap. If you need a new washer/dryer set or a refrigerator, this is a great time to start working on acquiring a sign-up bonus. These sets can often cost in excess of $1,000. With just one purchase, you’ve knocked off one-third, or more, of your minimum spend.
  • Holiday shopping –  This is the one time of the year that it’s difficult to save money. Having to buy gifts for family and friends can add up fast. If you apply for a new card at the end of October or the beginning of November, you should have it in time for the holiday shopping rush that starts with Black Friday.
  • Future vacations/trips – Whether you have a major vacation or few small family trips coming up, pre-paying those expenses on your new card can take up a sizable chunk of the spend requirement. If you’re focusing on free hotel nights as your reward strategy, then that still leaves airfare. Depending on where you’re going, airfare for a family of three or more will help tackle your minimum spend requirement.
  • Paying taxes – Unless you pay off your credit card bill each month, I wouldn’t recommend doing this. While this scenario will differ for each individual, it can be very helpful towards earning a credit card sign-up bonus. The value of the bonus can outweigh the extra cost in fees. You’ll have to do a little math, but when you have a lofty bonus on the line, paying your taxes with a credit card can be a viable strategy.
  • Paying monthly expenses – This doesn’t have anything to do with timing but it’s still a strong strategy. Paying your monthly recurring charges with your credit card can add up over the course of three months. These can include cell phone, cable TV and internet, electric bill, water/sewer/gas bill, gasoline, monthly medications, etc.

The Bottom Line

While saving money and cutting expenses is actually counter-intuitive to earning points and miles from credit card spend, it’s better to earn something on your expenses than nothing at all. The bonuses are the best way to begin or pad your balances. Depending on your travel habits, you’ll need to decide if you want to use your rewards as quickly as possible, or start stockpiling them for the future. I’m in the stockpiling camp. While you run the risk of programs devaluing their points and cutting your reward potential, I prefer to save my rewards for a big trip than a bunch of mini-trips. Plus, it’s also nice to have that stash on hand just in case of last minute travel expenses. Whatever your strategy may be, just know that you have options and that you can use this to your advantage.

(Featured Image Attribution: “Moving the queen” by Gabriel Saldana is licensed under CC BY SA 2.0 Generic)

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