Can You Live off of Credit Card Points?

happy man on sofa looking at credit card with laptop
©Shutterstock.com

Credit card points can be incredibly lucrative. Some people have learned to “churn” credit card sign-up bonuses systematically, claiming thousands of dollars in yearly rewards. This begs the question: can you live off of credit card points?

Explore: GOBankingRates’ Best Credit Cards for 2023
See Why: If Your Credit Score is Under 740, Make These 4 Moves Now

Considering how much some people have earned in credit card rewards, it seems like a reasonable question. We’ll explore the potential of credit card rewards, their limitations, and whether one could theoretically use them to fund their entire lifestyle.

The Most Valuable Sign-up Bonuses

To understand how much potential there is in credit card rewards, we must first have a sense of how much we can earn with sign-up bonuses. While rewards credit cards accrue points in other ways, including daily spending, sign-up bonuses are often the most lucrative reward credit cards provide.

According to Frequent Miler (as of October 2022), the top five consumer credit cards based on the value of their first-year sign-up bonuses are:

  • The Platinum Card® from American Express: $1,978
  • The Platinum Card® from American Express (Exclusively for Morgan Stanley): $1203
  • The Platinum Card® from American Express for Schwab: $1,203
  • Chase Freedom Unlimited: $1,110
  • American Express® Gold Card: $1,087
Get Credit Card Perks

The total value of these five sign-up bonuses is $6,581 based on Frequent Miler’s valuation. Not bad! But that amount wouldn’t cover most people’s expenses for the year. And here’s an important caveat: several of the credit cards above are premium credit cards.

That means hefty annual fees — the top three will all cost you $695 per year. Some credit cards might allow you to use points to pay your annual fee, but many will require you to cover the fee with cash.

Take Our Poll: Do You Believe in Quiet Quitting?

Why You Can’t Live off of Credit Card Points

Credit points can be valuable. Very valuable. But you probably can’t live off of them forever. Here are the main reasons:

  1. Most credit cards top out at around 5X or 6X points, meaning you still must cover most of the purchase with cash or your points balance.
  2. You can make up the difference in other ways, such as with referrals and sign-up bonuses. However, referrals usually have caps. Sign-up bonuses are often valuable, but there are only so many bonuses, especially when it comes to those with four-digit valuations.
  3. Credit card points tend to be the most valuable when you redeem them for travel. Free flights are lovely, but that won’t help when you have to buy gas and groceries.
Get Credit Card Perks

There are other reasons credit card points have limitations. For example, some banks, such as Chase, are known to limit the number of credit cards you can open in a year. This is known as the 5/24 rule — if you try to open more than five credit cards in 24 months, Chase will begin to deny your credit card applications. Both Chase and non-Chase cards can count against this limit, too. You can’t earn your bonuses if you can’t open credit cards. Meanwhile, Capital One might be leery of people opening more than one credit card every six months.

In general, opening too many credit cards too quickly is not a good idea. Not only can each application drop your credit score, but some card issuers will deny people who apply for credit cards too quickly for their liking.

So, Can You Live off of Credit Card Points?

The principles in the previous section explain why you probably won’t be able to live off of credit card points forever. Still, you might be able to live off of them for a while. If you save up enough points, you could theoretically use them to cover all your expenses until you run out. How long that time is will depend upon how many points you have.

Get Credit Card Perks

There are still some things to keep in mind, though. One is that credit card points can expire, so you won’t want to leave them sitting too long. Generally, points you earn with branded credit cards, such as those for hotel and airline brands, may be more likely to expire.

The other concern is that card issuers can devalue credit card points. It probably won’t happen every day or every month, but you never know when you could get hit with a devaluation. Hence, it’s likely better to use your points to discount certain purchases, like booking flights and hotels, rather than living off them entirely.

More From GOBankingRates

All information about American Express card offers have been collected independently by GOBankingRates and have not been reviewed or approved by American Express. These offers are not available through GOBankingRates.

The information related to Chase Freedom Unlimited was collected by GOBankingRates and has not been reviewed or provided by the issuer of this product/card. Product details may vary. Please see issuer website for current information. GOBankingRates does not receive commission for this product.

Share This Article:

facebook sharing button
twitter sharing button
linkedin sharing button
email sharing button
Get Credit Card Perks

About the Author

Bob Haegele is a personal finance writer who specializes in topics such as investing, banking and credit cards. He left his day job in 2019 to pursue his passion for helping people get out of debt and build wealth. You can find his work at outlets such as Business Insider, Forbes Advisor and SoFi.
Learn More

BEFORE YOU GO

See Today's Best
Banking Offers

1pximage