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This is another entry in our introductory "Start Here" series. If you've read all the other posts and you have a working understanding of points, miles, and travel hacking, you might still wonder how many points you should be earning each year. Some of the travel hacks we talk about require 200,000 points. How often can an ordinary Jane amass that volume of points? The truth is, pretty often.
As a rule of thumb, if you spend $10,000 or more Annually on credit cards, you should be able to earn 11-12x your annual credit card spend in points, with diminishing returns after about $30,000 annual spending.
That means if your household spends $10,000 on credit cards each year, you should be able to earn about 110,000 to 120,000 points each year. That's enough for a trip for four to Aulani (including flights and hotel stay) every other year!
How did we come up with this?
At almost any given time, there is a card signup offer that offers 50,000 points for spending $4000 in 3 months. Sometimes it will be $3000, sometimes it will be $5000, but the average is about $4000. This means that if you spend $16,000 on cards in a year, you have a clear path to 216,000 points annually - just earn each of those bonuses. That is, for every $4000 you spend in a year, you could get a signup bonus of 50,000 points, plus the 4,000 points from the spending. That is a 13.5x earn rate, higher than our estimate, and that's because there are three caveats.
You'll spend more than the minimum to get each bonus
First of all, it is very difficult to put exactly $4000 on one card before moving on. We estimate you'll wind up putting about $5000 on a card. You'll want to go over $4000 anyways to avoid any later returns or reimbursements resulting in the card issuer taking back your points. That's why we estimate you'll get, as a baseline about 55,000 points for every $5000 spend. If you're earning multiple points per dollar on some of that spend, you'll wind up between 11 and 12 points per dollar.
You need to be able to hit the minimum spend in the required time
Second of all, if you're spending less than $10,000 on cards each year, you might have trouble spending $4000 in three months. At $10,000 it might be difficult, but we think you could probably still earn two signup bonuses for a total of 110,000. If you're not spending $10,000 on cards per year and it's because your financial situation doesn't allow it, that's okay! Using points and miles might not be for you, but there are plenty of travel hacks that don't rely on points and miles. If you're not spending $10,000 because you just don't put things on cards, start! As long as you're responsible and pay off your balances in full each month, you can put all sorts of expenses on your cards in order to get those signup bonuses.
There are only so many opportunities out there
Finally, after about $30,000, you'll run into diminishing returns. For many good cards, you're in some way limited to getting signup bonuses every two years. That means at $30,000 annual spend you'd need to find 12 different, meanningful signup offers (6 per year). That is where it starts to get a little trickier. Keep in mind, though, that you and a partner could each get the same six cards.
The median household annual income in the U.S. is about $51,000. At that income level, it would be reasonable to expect $10,000 to $20,000 of annual credit card charges, allowing for somewhere between 110,000 and 240,000 points per year. With that kind of earning, you could be on a Disney vacation every other year easily, and maybe even every year!