Editorial Policy

My rewards card plan

Kristin McGrath

August 30, 2013

As I mentioned last week, I applied for the Citi Platinum Select AAdvantage card. And I’m glad to report that I was accepted. The card is in my wallet, it’s linked to my AAdvantage rewards account, and I’m ready to start charging. I’ve got a sign-up bonus of 30,000 miles to earn and $1,000 to spend to get it.

Yet I’ve worked for CreditCardGuide.com long enough to know that credit cards can lead to overspending — especially rewards cards, as our blogger Allie Johnson discovered when she tried transferring all her spending to cards to earn rewards.

So these are the rules I’ve set for myself. By following them, I should get the sign-up bonus and not drain my bank account by chasing after miles.

1. Carefully plot the route to my sign-up bonus: My sign-up bonus requires me to spend $1,000 in three months. I can just see that turning into “I get to spend $1,000, and it’s totally worth it because I’m getting miles!”

The only responsible way to get a sign-up bonus is to spend money you would have spent anyway. This is how I plan to earn my bonus:

  • Plane tickets home for Thanksgiving and Christmas. These tickets generally cost me at least $300 each, so if I buy them before November (which I certainly will), that’s $600 shaved off my spending requirement. I go home every year, so I’d be buying these tickets even if there weren’t 30,000 miles on the table.
  • Early Christmas shopping. Boarding Area (an online community for frequent fliers who do this sort of thing all the time) recommends coordinating your sign-up bonus with holiday shopping. I’m a notoriously late holiday shopper, but I have until November to earn my bonus. I can knock off the “easy-to-shop-for-or-just-wants-a-gift-card” folks from my list in October. I estimate this will move me $100 closer to my goal.
  • Food. I spend at least $100 a month on meals out and groceries. So that’s $300 right there. I do try to pay with cash as much as possible, but, for the next three months, everything is going on the card.
  • Gift cards. If I’m still a bit short of my minimum spending requirement, I’ll follow Boarding Area’s advice and pick up a gift card, which I’ll then spend on necessary living expenses only.

Boarding Area also recommends paying utilities with your credit card, but my utility company charges a fee for that. If yours doesn’t, that’s a great way to make your living expenses work for you. My $110 electric bill for August would have made a nice dent in my spending requirement.

2. Do the math: After I’ve earned my sign-up bonus, my card will continue earning me miles with every purchase. Credit and personal finance blog DebtGuru points out a common trap — the thrill of earning miles and points might tempt you to throw extra items in your shopping cart. DebtGuru recommends running the numbers before charging something you don’t need. That $50 sweater might earn you 50 miles — but 50 miles are generally worth just about 50 cents toward a ticket.

3. Limit my card use to certain categories: I’m pretty responsible when it comes to grocery shopping. My boyfriend and I use an app that lets us keep a master list of things we need. I pull out my phone when I get to the store and check off those items as I put them in my cart. When the list is blank, I hit the register, and I almost never buy extra stuff. When I try a new recipe, I make a list before leaving home and stick to it.

Clothes shopping, on the other hand, is a problem for me. A new shirt is often a gateway purchase to things that go with said shirt. If I’m earning miles for those things, I can see myself getting into trouble.

That’s why personal finance blog Seeking Alpha recommends assigning your card to certain “safe” categories. For me, that’s groceries. If I have trouble sticking to that, I might follow advice blog Lifehacker’s advice and tape a note to my card that reads “DO NOT BUY CLOTHES.” Sometimes a visual queue is all that’s needed to snap you back to reality. If I’m still having trouble, I might follow this more extreme advice from personal finance blog Trees Full of Money:  Keeping the card at home if I’m doing anything but grocery shopping.

Finally, I’m going to avoid my credit card’s autopay option for now. I’ve found automatic payments can be a financial snooze button that lets me forget how much I’m spending. Logging in every week or so, reviewing my purchases and paying the bill in full each month, I hope, will help me notice if my spending is going off the rails — and keep me from hurting my finances with my brand new, potentially dangerous, financial tool.