Your Card Points has partnered with CardRatings for our coverage of credit card products. Your Card Points and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities.
So you’ve made it this far in learning about the Credit Card Travel Reward world and everything seems almost too good to be true. So what are you missing? Is there a down side to opening lots of cards and earning rewards? Let’s dive in and take a look at these concerns.
1. Credit Card Debt:
This is a huge one. I will say it again, don’t start opening multiple credit cards if you don’t pay off every credit card bill in FULL every month. It’s not worth it and your “nearly free” travel will cost you more in the long run. This is only for people who pay off their credit cards every month.
2. Credit Score:
There are many factors to go into making your credit score and you can learn more details at this great article on cnbc.com. The factors that effect it the most are Payment History (35%) (do you pay on-time and do you pay it off in full) and Amounts Owed (30%) (this is what you’ve spent and not what your limits are). Our strategy of opening cards does NOT affect either of those. The factors our strategy does affect is Length of Credit History (15%) (how long accounts have been opened) and New Credit (10%) (applying for and opening new cards).
Here’s my personal experience, which is similar to what I’ve heard from many others who pursue credit card travel rewards. My credit score actually went up! I believe this is because I was seen as paying more accounts on-time and in full which is weighted more than the negative of opening new accounts.
My final thoughts -> Our credit card opening strategy to earn lots of travel rewards does NOT significantly effect your credit score. That being said, I would not advise you to start collecting credit card travel rewards right before a major purchase (car, boat, house, etc.) if your current credit score is on the border of being acceptable just in case it does go down 3-5 points.
3. It’s Not Completely Free Travel:
You’re right! That’s why we call it “nearly free.” Some credit cards do charge an annual fee (and some will waive that fee the first year) and that is billed when you open the card. For example, the Southwest Rapid Rewards Plus Credit Card has a $69 annual fee that is NOT waived the first year and will be applied to your first bill. But for that $69 you will earn a minimum of 40,000 Rapid Rewards points (Note: This was written January 10th, 2019, and therefore some of the card offers may not still be accurate. Clicking on the links will bring you to the most accurate data.) which is about $600 (1.7 cents per point) of free air travel on Southwest Airlines. That’s not a bad trade if you can afford the $69 upfront fee. Check our Preferred Credit Cards page to see which cards waive the first year fee.
The other pieces we can’t avoid paying are the taxes and fees charged by airlines and hotels when you redeem points. You’re going to have to take that up with our government as the saying holds true, “The only certain things in life are death and taxes.” Going back to my Southwest example, the standard taxes and fees on a one-way ticket is $5.20. Sorry I don’t have any tips to avoid paying that. 🙂
These are the only three major arguments I’ve heard against this strategy, but I would love some discussion in the comments below if you have arguments or additional questions.5
Your Card Points has partnered with CardRatings for our coverage of credit card products. Your Card Points and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities.