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How Do Credit Card Miles Work?



The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Credit card miles are rewards points that help you earn credits toward travel and other purchases. How credit card miles work and whether this type of rewards card might be a good idea for you depends on a few factors, which we’ll cover below.

What Are Credit Card Miles, and How Do They Work?

Credit card miles are similar to credit card points. They’re a reward that you earn by taking certain actions, including making eligible purchases with the card.

Once you earn enough miles, you can redeem them for rewards. They’re called miles because typically these types of rewards credit cards are aligned with an airline or travel service. That usually means the most value comes from redeeming miles for airfare or rewards miles in an airline program.

However, you can often choose to redeem them for other rewards, such as merchandise, hotel and other travel credits or gift cards at a lesser value per point.

How Are Credit Card Miles Different From Frequent Flier Miles?

In some cases, credit card miles and frequent flier miles may be the same thing. If you have an airline-branded card, such as a Delta SkyMiles credit card, your points may be in the form of the airline’s frequent flyer miles. You can redeem those for flights or other rewards within the frequent flyer program.

If you have a non-branded card, then you may earn generic credit card miles. Those may be redeemed for flights with numerous airlines or other rewards, typically via the credit card rewards program’s online portal.

Hotel rewards cards work in a similar manner. If it’s a branded card, you may earn rewards directly via the hotel chain’s membership rewards program.

How Do You Earn Credit Card Miles?

The exact way you earn credit card miles depends on your card. But typically, you can earn by spending with your card to qualify for various rewards.

Use Your Credit Card Often

Rewards cards are designed to promote spending. You usually earn a certain number of miles or points for every dollar you spend on qualified purchases. In some cases, you can earn more by spending with certain retailers or on certain categories.

For example, it’s common for an airline-themed card to reward more for spending in travel categories. You might earn 3x miles or 5x miles for every dollar you spend with a certain airline, for example, and one mile per dollar on all other purchases.

The key to earning a lot of miles is using the card as much as possible for things you would already be buying and then paying the balance off immediately so you don’t owe interest. For example, if you earn two miles per dollar spent at grocery stores, you could use your credit card to cover your grocery shopping each week.

If you spend $200 a week, that’s roughly 1,600 miles earned per month just for doing grocery shopping you already do.

Take Advantage of Sign-Up Bonuses

Many rewards cards come with sign-up bonuses, and this is a great way to earn a lot of credit card miles right from the start. Typically, the bonus requires you to spend a certain amount of money when you first open the card.

For example, you might earn 50,000 miles if you spend $5,000 in the first three months as an account holder. That sounds like a lot, but it’s often achievable just by using the credit card to cover all normal expenses, such as fuel, groceries and even utility bills. Just make sure you’re paying off the card balance regularly so you don’t end up with a high utilization rate and expensive interest.

Refer Your Friends

Some credit card rewards programs offer extra miles if you refer friends. If your friend applies for the card using your referral code and is approved, then you may be awarded extra credit card miles.

How Much Are Credit Card Miles Worth?

The value of credit card miles varies, but typically they’re worth about one cent. That means if a flight costs $400, you need 40,000 miles to cover it. In some cases, you may be able to raise the value of your miles by redeeming them through a select online portal or via certain airlines.

Redeeming Your Miles

Follow the general steps below, as well as any unique instructions from your credit card company or rewards program, to redeem miles.

Check Your Balance

First, find out how many miles or points you have. This is typically listed on your last statement, but most credit cards support online account access where you can get up-to-date information about your points. You can also call your credit card company or rewards customer service line to find out.

Understand the Limitations

Before you plan on using miles to pay for travel, look at the fine print to understand restrictions. Some rewards programs have blackout dates, which means you might not be able to use miles to pay for airfare during peak times. Others require mile minimums, which means you need a certain amount of miles to redeem to cover part or all of your airfare.

And miles do expire, so make sure you keep track of when you earned the miles and when they will expire so you can redeem them beforehand.

Have a Flexible Schedule

Being flexible about when exactly you travel can also help you get the most out of credit card miles. For example, in some cases you can save hundreds on airfare by leaving a day earlier or later than planned. That means your miles can stretch further to cover more trips or tickets.

Choosing the Best Card for You

Earning and using credit card miles helps you boost your spending power. With the right credit card, you’re getting more than your original purchase when you buy things. But you do need to stick to recommended credit card use, such as paying off your bill every month and keeping your balance as low as possible.

Otherwise, you could end up paying high interest rates or driving down your credit score, and the miles you might earn in the process are not valuable enough to make up for those costs.

Which card you should get depends on your personal needs and preferences. Popular options include the Chase Sapphire Preferred Card, the Bank of America Travel Rewards card and the Capital One Venture Rewards card. These are unbranded cards that let you earn general miles.

If you fly regularly with a certain airline, you might be able to maximize value from a branded airline rewards card. Most rewards credit cards do require good or excellent credit. Check your credit before you apply so you know what cards you might qualify for.

And if you find anything inaccurate on your credit report that could be dragging down your score, reach out to Lexington Law for information on how we can help you dispute errors on your credit.

Reviewed by Kenton Arbon, an Associate Attorney at Lexington Law Firm. Written by Lexington Law.

Kenton Arbon is an Associate Attorney in the Arizona office. Mr. Arbon was born in Bakersfield, California, and grew up in the Northwest. He earned his B.A. in Business Administration, Human Resources Management, while working as an Oregon State Trooper. His interest in the law lead him to relocate to Arizona, attend law school, and graduate from Arizona State College of Law in 2017. Since graduating from law school, Mr. Arbon has worked in multiple compliance domains including anti-money laundering, Medicare Part D, contracts, and debt negotiation. Mr. Arbon is licensed to practice law in Arizona. He is located in the Phoenix office.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

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Credit Cards

What is Financial Profiling? – Lexington Law



The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

FICO, the company that created the credit scoring system most often used by bankers, reports that your credit score is defined by five simple factors:

  • Repayment habits
  • Credit card utilization
  • Length of credit history
  • New credit acquisition
  • Account type diversification

Although those facts are known, a less publicized force also has the power to influence your creditworthiness: financial profiling.

It’s no secret that your credit score is partially based on how you spend, but is it affected by what you buy? When it comes to financial profiling, the answer is yes. Despite consumer outrage and FTC criticism, such factors are sometimes used by credit card companies to assess client behaviors and overall risk. Such creditors may decide to reduce limits based on profiling information they identify.

Financial profiling comes with a slew of implications and consumer consequences:

  • Assumptions. Creditors using financial profiling tactics sometimes draw harsh conclusions about what you buy. Excessive spending on travel, entertainment, and even healthcare costs could result in lower credit limits. Why? Creditors may view these expenses as frivolous or at risk for non-repayment. Whatever the reason, assumptions play a vital role in financial profiling and creditors’ resulting actions.
  • Grouping. Consider the following scenario:

You and your neighbor are both in the market for a motorcycle. You decide to shop together and end up purchasing bikes from the same pre-owned dealership. Despite a high credit score, you realize shortly after your purchase that your credit limit has been reduced by $1,000, but you have no idea why.

While this scenario may be a bit dramatic, the practice of grouping consumers is a common component of financial profiling. Creditors may choose to consider your spending and repayment habits alongside others who have shopped in the same places and bought similar items. If you bought a motorcycle from a dealer whose customers are notoriously delinquent spenders, you could be marked with the same red paint.

  • Credit damage. A reduced credit limit is more than an inconvenience. In fact, it can actively damage your credit score by affecting your utilization ratio. Credit utilization is measured based on the amount you currently owe vs. your total credit limit. For example, if Marshall has a credit credit card with a $2,000 balance against an overall credit limit of $20,000, then his ratio is 10 percent. Your credit utilization ratio should never exceed 25 percent. If Marshall fell victim to financial profiling and his credit limit was reduced to $10,000, his utilization ratio would automatically rise to 20 percent, putting him at risk for unbalanced debt utilization.
  • Unfair practices. You are probably thinking, “What gives a creditor the right to judge my spending habits?” Countless people are asking the exact same question. Although creditors have access to your personal spending information, do they have the right to analyze it without your knowledge even if you’ve proven to be a reliable customer? Further, is it fair to make account changes based on a list of recent purchases?

While these practices are not often acknowledged, it seems clear that financial profiling can be a significant factor in creditor business practices. If your credit limits are taking an unprovoked nosedive, call your creditor and ask for a written explanation. Contact the FTC for help if they cannot provide the information you seek. Credit is a choice, and you should never be forced to settle for an unfairly damaged credit score.

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Will My Credit Score Drop if I Don’t Use My Cards Regularly?




The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Credit health is a lifelong goal, one that requires attention and consistent credit use. An improved score means access to lower interest rates, insurance premiums and even high-reward credit cards. As you move forward in life, what happens to credit cards of days gone by? Will neglecting your old accounts affect your future? The short answer: Maybe.

Each credit bureau uses their own method of credit scoring. In general, payment history and credit length have the potential to impact 50% of your total score. Your oldest accounts play a role in these calculations as time lengthens your history and timely payments are recorded on your credit reports. Review the following dos and don’ts as you decide how to manage old accounts. They will help you protect your credit score along the way.

  • Do: Remember the value of each credit account. It’s easy to forget about old credit cards as you gain access to newer accounts with better rewards. That said, that first credit card carries more influence than you realize. Consider the following example:

Carrie opened her first credit card just after college in 2006. She plans to buy a home this year and is working on her finances. A friend advises Carrie to close her first credit card because, “Mortgage lenders are wary of too many credit accounts.”

While it’s true that mortgage underwriters don’t like seeing applicants with lots of debt, open accounts are another story. A credit account with a low balance isn’t likely to impact your ability to gain new credit elsewhere. An available limit also improves your credit utilization ratio by increasing your cumulative credit limit (more on that here).

  • Don’t cancel cards due to inactivity. Carrie’s first credit card solidifies 10 years of credit experience. Closing her oldest account erases her history, credit length, and available credit, three factors that could significantly lower her score. Dust off your oldest account and use them for small, regular purchases. Pay your balance in full each month to ensure a steady payment history and a positive credit influence.
  • Do: Consider your budget needs. In addition to boosting your credit score, reviving an unused credit card can have a valuable impact on your budget. For example, suppose you opened a Visa account in 2004. Your credit score was sub-par and you didn’t qualify for any perks. 12 years of history and an improved score could entice your lender to upgrade your account to include rewards and a lower interest rate, two factors that save you money simply by using your card.

The bottom line: Neglecting old credit cards may not hurt your score drastically, but it won’t help, either. Don’t miss an opportunity to improve your financial strength by building experience and keeping your accounts active.

Related Articles:

What is My Credit History?

Five Factors of Your Credit Score

Credit Cards: What We Found in the Fine Print

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The Importance of Establishing a Good Credit History



The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Looking around at the number of people struggling with debt, it’s easy to see why someone might think the best route to staying out of trouble is to avoid credit altogether. On the surface, this may seem like a good plan; without taking on any debt, it is certainly impossible to be buried by it. Unfortunately, for the majority of people, the credit-free lifestyle simply isn’t an option.

From car loans to home mortgages, most consumers will need to use some sort of credit in their lives, and, thus, take on some type of debt. Furthermore, when it comes time to get that big loan or mortgage, not having a well-established credit history can make the process much more difficult — and, often, more expensive.

Consumers Without a Credit History are an Unknown Risk

Whether taking out a loan or opening a credit card, when a borrower receives a line of credit from a creditor, that creditor is faced with the inherent risk that the borrower will default on (fail to repay) their debt. To help mitigate as much of that risk as possible, creditors rely on a consumer’s credit history to determine the actual likelihood of the consumer repaying the debt.

Borrowers with well-established credit histories showing consistent, on-time payments to a variety of credit types are considered to be good credit risks. These consumers will be offered the best interest rates and lowest fees when they seek new credit.

When a potential borrower does not have an established credit history, however, the creditor is left without any information on which to base a lending decision. While some creditors are happy to give an unknown borrower the benefit of the doubt and assume they are more likely to pose a good risk than a bad one, other creditors are less optimistic.

Of course, even when creditors are willing to take on the unknown risk of an unestablished applicant, they rarely extend that optimism too far. Borrowers without proof they can pay back their debts in full — and on time — will pay higher rates than their established counterparts.

Most consumers looking to begin establishing credit will have the best luck starting with a credit card, and there are a good number of options for consumers who need credit cards for no credit. All of the major credit card issuers report to the three main credit bureaus, and many also offer cards with no annual fees.

Having No Credit is Bad (But Bad Credit is Worse)

From the time of the first credit card bill or loan payment, consumers start establishing their credit history. Each payment made to a creditor according to the credit agreement (that is, at least the minimum amount, by the due date), counts in the consumer’s favor when reported to one of the three major credit bureaus, and is the best path toward developing a good credit history.

At the same time, when a consumer makes a late payment, misses a payment, or defaults on a debt entirely, those actions are also reported to the major credit bureaus. Where those without an established credit history are considered to be an unknown risk, those who demonstrate a pattern of missed or late payments are considered to be high risk, and more likely to default. This, of course, is reflected in your credit score.

In the case of high-risk applicants, creditors know there is a greater chance of not being repaid; they attempt to mitigate some of the increased risk by charging those consumers much higher interest rates. For consumers with extremely risky credit profiles, the only option for new credit may be to turn to a creditor that specializes in subprime credit cards and loans. The easiest credit card to get with bad credit will be a secured card, which requires a cash deposit; that said, some unsecured options are still available.

Depending on the types of negative accounts impacting a consumer’s credit report and score, some may benefit from going through credit repair. An experienced credit repair specialist, such as those at Lexington Law, will have the tools necessary to find any disputable accounts on a credit report and may be able to have some or all qualifying items removed.

Don’t Hide From Credit, Build It

Anyone who has watched a loved one struggle with debt, or been through it themselves, may be tempted to swear off any type of credit. Unfortunately, credit has become a necessity for many people, especially those interested in one day owning their own home. The best way for a consumer to ensure they will qualify for an important loan in the future is to establish a good credit history early on.

Whether they have no credit or bad credit, every consumer’s path to a healthy credit profile is the same: use credit, in moderation, and make all payments as required by their credit agreement. The best credit histories are built over years, not days or months. With a little patience and a lot of diligence, even a blank or bad credit history can be made creditworthy.

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