When you’re knee-deep in debt, the last thing on your mind is opening another card to earn travel rewards. In fact, you probably want to shred your existing credit cards and throw in the towel altogether.

But there’s light at the end of the tunnel.

By creating a solid debt-payoff strategy and becoming debt free, you’ll be positioned to start earning rewards on your expenditure. And as you continue to earn more rewards on your spending while paying your balance off in full every month, your credit score will begin to improve.

Before you know it, you’ll be debt free and have enough points to fund your travel dreams.

Let’s see how to get out of debt and into travel rewards.

Create a Debt-Payoff Strategy

Debt can be overwhelming, but a solid strategy can get you out of deep waters.

It’s important to begin by analyzing your situation to decide on the best strategy. This starts by looking at your debt-to-income ratio, in other words, how much you owe compared to how much you earn.

In short, if your existing debt represents a small portion of your annual income, it’s likely that you’ll be able to use a do-it-yourself debt-payoff strategy to get you back on track. However, if your existing debt represents a significant portion of your annual income or even exceeds it, you’ll need to consider debt consolidation or debt relief strategies.

Option #1: DIY Debt-Payoff Strategies

Generally speaking, if your debt-to-income ratio is less than 43%, you can pursue a DIY approach to paying off your debt.

Paying only the monthly minimums on your debts keeps you in the spiral of ever-increasing interest charges. If you fail to ever pay more than your monthly minimums, the total of your debts will continue to increase, making it even more daunting to pay off.

The first method you can employ to get yourself out of debt and the never-ending spiral of interest charges is the debt avalanche method.

When using the debt avalanche method, you’ll begin by paying off the debt with the highest interest rate first, while ensuring you continue paying the monthly minimums on all other debts. Once you’ve managed to pay off the debt with the highest interest rate, you can then allocate those extra payments to targeting the next highest interest-incurring debt.

The debt avalanche method helps you reduce the total amount of interest you’ll pay over time, as it targets debts with the highest interest rates first. This can enable you to save more money in the long run.

However, as the debt avalanche method targets the highest interest rates instead of the highest balances, you might feel like you’re not making progress in paying off your debts. If you find this disheartening or psychologically stressful, you may be better off going for the debt snowball method.

The debt snowball method targets your debts with the smallest balances first and works upward. That means you’ll begin by trying to pay off the debt with the smallest balance while still making the monthly minimum payments on your other debts. Once you’ve paid off the debt with the smallest balance, you’ll focus on the next smallest debt.

The debt snowball method enables you to pay off smaller debts at a quicker initial rate, which can feel like a series of small wins—boosting your morale. The only downside to the debt snowball method is that if your debts with the largest balances are also those with the highest interest rates, you’ll accumulate a significant amount of interest in the long-run, due to compounding.

Getting Out of Debt

Option #2: Debt Consolidation

If your debt-to-income ratio is between 43% and 50%, you should consider consolidating your debt.

Debt consolidation allows you to combine all your debts into a single payment, making it easier and cheaper to pay off. However, you need to decide whether a credit card or personal loan is the better option for debt consolidation.

The decision comes down to the type of debt you have, the amount of debt and how long it will take you to pay it off.

In broad terms, if you have high-interest debt that will take more than two years to pay off or debt with a large principal, you’re best off consolidating it using a personal loan. On the other hand, if you can pay off the total of your debts in less than two years, a 0% APR balance transfer credit card may be the best option for debt consolidation.

A 0% APR balance transfer credit card typically has an introductory window lasting between 12 and 21 months, in which you can transfer existing debts onto it and avoid additional interest charges. There is typically a balance transfer fee added to the transfer, generally 3-5% of the amount being transferred. However, once the introductory period is over, you’ll face double-digit interest rates on any remaining debt. So for debts that will take longer to pay off than the introductory period lasts, you’re better off using a personal loan.

Likewise, not every card issuer allows you to transfer all types of debt onto a balance transfer credit card. In contrast, a personal loan can be used to pay off all types of debt and requires you to make recurring payments in installments. Personal loans also offer higher transfer limits which may be necessary depending on the total of your debts.

To decide which method is best suited to your situation, check out our ultimate guide: credit card vs. personal loan for debt consolidation.

Debt Relief Strategies

Option #3: Debt Relief Strategies

If the total of your unsecured debts exceeds more than half of your annual gross income or if it will take more than five years to pay off, you should consider a debt relief strategy.

Debt relief strategies include debt management plans, debt settlement or declaring bankruptcy.

The most preferable of these options is a debt management plan, as it does the least harm to your credit score. A debt management plan is run by a credit counselor to help you organize your personal finances and come up with a debt-payoff strategy. In some cases, your credit counselor may also negotiate with your creditors to reduce interest rates, helping you to get back on track faster.

It’s key to ensure you work with a reputable credit counselor, such as one certified by the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA). Although there are fees involved, a reputable credit counselling agency is typically nonprofit and strives to minimize both your debts and the damage done to your credit score.

Another option to consider is debt settlement. This involves either you or a debt settlement agency negotiating with your creditors to accept a lump sum payment that is lower than what you currently owe in debt. If you’re in a dire financial situation with no prospects of paying off your current debts, creditors may be inclined to accept a lump sum payment instead of nothing.

While debt settlement may sound like a get out of jail free card, it has its pitfalls. Firstly, it can be difficult to negotiate with your creditors on your own which means you’ll likely need to work with a debt settlement company. However, debt settlement companies come with extra fees and will typically advise you to stop paying off your debts to give you leverage in negotiations. While this may work, it’s a risky move that will certainly damage your credit score.

Likewise, the debt settlement industry is known for fraud, so you’ll need to be extra careful when searching for a reputable company.

The very last option is filing for bankruptcy. You can file for Chapter 7 or Chapter 13 bankruptcy, which vary based on the number of assets you’ll be able to keep, among other differences. Bankruptcy also damages your credit score, with Chapter 7 bankruptcy staying on your credit report for 10 years and Chapter 13 bankruptcy staying on it for seven years.

That said, if these debt relief strategies help you to become debt free, you can still work toward improving your credit score afterward in the long-run. Doing so will simply take longer compared to using a DIY debt-payoff strategy or debt consolidation.

Take Our Credit Repair Course

Want to learn more about credit repair after getting out of debt? Check out the free 10xTravel Credit Repair Course.

Getting Out of Debt Fast

Whether you’re facing a small or significant amount of debt, reducing your spending will always enable you to pay off your debt quicker. That could mean swapping your gym membership for a home workout or ditching takeout and Uber Eats for a home-cooked meal. Likewise, you can also call your utility companies, cable providers and other sources of recurring bills to negotiate better rates.

That way, you’ll save more money that can be put toward reducing your debt load faster.

Debt Consolidation

It may sound obvious, but increasing your earnings can also help you put more money toward debt payments. While you could ask for a raise at work, you could also consider working a second job or starting a side-hustle on weeknights or the weekend. Whether that’s dog walking, copywriting, babysitting or some other gig, this additional income will help alleviate your debt load.

Once you’ve gotten yourself out of debt, your side-hustle might even make you eligible for a small business credit card.

Build Your Credit Score: Secured Cards and Timely Payments

Once you’ve made it to the holy land of zero debt, your next focus is to begin building your credit score. Depending on the debt-payoff strategy you used, your credit score may have received minor or severe damage. In either case, the strategy to rebuild your credit score remains the same.

improve credit score

How Does Your Credit Score Work?

Your credit score is a measure of your reliability as a borrower. It tells prospective creditors how likely you are to pay them back on time or how likely you are to default on your payments.

Equifax, Experian and Transunion are the three major credit bureaus in the United States who use either the FICO model or the VantageScore® model to determine your credit score. These models give slightly different weightings to different factors, but the principles remain the same.

The FICO model uses the following factors:

  • Payment history
  • Credit mix
  • Amounts owed
  • Length of credit history
  • New credit

In contrast, the VantageScore model calculates your credit score using these factors:

  • Payment history
  • Depth of credit
  • Credit utilization
  • Recent credit
  • Balances
  • Available credit

In both models, the most crucial factors that affect your credit score are missed payments and credit utilization (the amount of debt you owe compared to your total available credit).

Therefore, to improve or rebuild your credit score, your top priority is to always make timely payments and avoid carrying a balance. By doing so, you’ll create a positive payment history, further improving your score.

You can also improve your credit score by opening another line of credit, such as a credit card. While this may seem counterintuitive, opening an additional line of credit increases the overall amount of available credit you have which reduces your existing credit utilization ratio.

For example, if you have an aggregate credit limit across all credit cards of $10,000 and a balance of $4,000, your credit utilization rate would be 40%, which is above the recommended maximum of 30%. However, if you were to open another credit card, increasing your aggregate credit limit to $12,000, your credit utilization rate would now be 30%.

That said, we never recommend carrying a balance, as you’ll be charged interest on your balance, leading to more debt. Instead, the optimum solution is to pay your balance off in full before its due date but after your statement closes. That way, your positive payment history will be passed on to the main credit bureaus while you avoid running into debt and any spikes in your credit utilization rate.

Open a Secured Card

When navigating the road to better credit, opening a secured credit card is a solid move.

Secured cards require an initial deposit to open them, which acts as your credit limit. This deposit works as collateral that reduces the risk to the creditor.

Some examples of secured cards include the Capital One Quicksilver Secured Rewards Credit Card and the Capital One Platinum Secured Credit Card.

Some secured cards offer the opportunity to earn rewards such as cash back while others are simply a line of credit for spending.

Either way, by opening one of these cards, you can begin using it for everyday expenses and paying your balance off before its due date every billing cycle. That way, you’ll slowly increase your credit score as well as your available credit limit over time.

travel rewards credit card

Apply for Your First Travel Rewards Card

Once you’ve built up your credit score, you should take our free course so that you better understand the world of points and miles. Then, you’ll be ready to apply for your first card.

By selecting the right card, you’ll maximize your rewards and be well positioned to redeem them toward travel expenses, from flights to hotel stays.

Let’s look at how to choose your first travel rewards card.

How to Choose Your First Travel Rewards Card

Choosing the right credit card is like choosing a romantic partner—they need to be suited to you and your habits. Specifically, a credit card needs to reward you on the types of purchases you typically spend the most on. And if it happens to offer additional cardholder perks, these need to be perks that you’d be likely to utilize.

By following this approach to credit card selection, you’ll maximize your rewards and offset any annual fees through perk maximization and spending.

The pitfall is to select a card with flashy perks that you’ll never use or competitive points multipliers on spending categories you never make purchases in.

Travel rewards credit cards have four key aspects you need to analyze and compare:

  • Their bonus spending categories
  • Their welcome offers
  • Their cardholder perks
  • Their annual fees

Let’s take a look at each of these aspects of the card selection process.

bonus spending categories

Bonus Spending Categories

You should begin by analyzing each cards’ bonus spending categories. These are also known as its point multipliers and help to reward you on the things you spend the most on.

For example, if a significant portion of your spending is on dining and grocery shopping, you should prioritize a card that earns lucrative rewards in these categories, such as the American Express® Gold Card.

The card’s bonus spending categories are what makes it valuable to hold and will enable you to maximize your earnings on everyday expenses. They’ll also make offsetting the card’s annual fee far easier.

Maximizing Welcome Offers

After you’ve narrowed your selection down to cards with bonus spending categories suited to your spending, you should turn your attention to their welcome offers.

Welcome offers are equally as important as bonus spending categories, as they give you the chance to earn the highest number of points (or cash back) per dollar spent. A welcome offer usually comes in the form of earn X amount of points after spending Y within the first three to six months of card membership.

For instance, a card may offer 100,000 points after spending $4,000 within the first three months of card membership. If you were to earn this welcome offer, you’d be effectively earning 25X points per dollar spent—a points multiplier you’ll never find on standard bonus spending categories. This makes welcome offers invaluable and crucial to earn.

There are two points to keep in mind with welcome offers: the time at which you apply and their eligibility criteria.

Welcome offers change over time. That means you could earn anywhere from 20,000 to 100,000 points more (or less) on the same minimum spend simply by applying for the card on a different date. For this reason, it’s good to check previous welcome offers on the card and try to apply when the welcome offer is historically highest.

That said, don’t put off your application for too long while waiting for the best welcome offer. Getting into points and miles sooner rather than later is more important than waiting months to apply at the perfect time, particularly for your first card.

Eligibility rules also vary for earning welcome offers on different cards.

For instance, Amex operates a one welcome offer per card per lifetime rule, meaning you can only ever earn the welcome offer on an Amex card once in a lifetime (approximately every seven years). Similarly, certain card “families” (groupings of cards that earn the same type of rewards) have their own restrictions relating to one another.

For example, you’ll be ineligible to earn the welcome offer on certain cards when you’ve held cards with higher annual fees within the same card family. This is to prevent you from downgrading your card to one with a lower annual fee—that said, policies vary between card issuers.

While this may sound overwhelming, the key is to narrow your selection down to several cards and then do some research around welcome offer history and eligibility for each card.

When trying to hit the minimum spending threshold for a welcome offer, focus on leveraging your natural expenditure rather than overspending. You can do this by using your card for everyday expenses consistently. If you’re still struggling to hit the welcome offer’s minimum spend, you can get creative by prepaying upcoming expenses, such as utility bills, insurance premiums, vacations and even your taxes.

That way, you’ll stay within your budget and avoid carrying a balance, protecting your rewards and credit score.

Annual Fees: Worth It or Not?

The last piece of the credit card puzzle is annual fees. While it’s natural to balk at extra fees, annual fee-incurring cards often come with better perks. To work out if an annual fee is worth paying, you need to ensure that the value of perks and points multipliers the card offers can offset the cost of holding it.

When choosing a credit card, you’ll want to consider additional cardholder perks. These can be anything from statement credits with specific merchants, complimentary elite status with hotel and airline loyalty programs and complimentary airport lounge access. Choosing a card with perks you’ll be able to use will help you when it comes to offsetting its annual fee (assuming it has one). Typically, the more cardholder perks, the higher the annual fee will be.

For cards with multiple statement credit perks and complimentary status benefits, you can simply add up the value of each perk to see if it’s greater than the annual fee or not. If the total value of cardholder perks is less than what you’ll pay in annual fees, fear not—you can make up the difference (and then some) through the points you’ll earn on your annual expenditure.

For example, the Chase Sapphire Preferred® Card earns 3X points on dining, including eligible delivery services, takeout and dining out, as well as 3X points on online grocery purchases (excluding Target, Walmart and wholesale clubs), among other bonus spending categories.

According to the Bureau of Labor Statistics (BLS), the average household spent $9,985 a year on food both at and away from home. If this spending was charged to the Sapphire Preferred, you’d earn 29,955 Ultimate Rewards points.

You can redeem these points for 1.25 cents apiece through Chase Travel℠, making 29,955 points worth at least $374. Therefore, if you know your spending habits and can calculate a rough estimate of the number of points you’ll earn annually on the card, you can deduct this from the annual fee to see the degree to which you’ll offset it. When you also take the value of cardholder perks into account, you’ll often be able to offset the annual fee by a longshot.

best travel rewards credit card for beginners

Best Travel Rewards Card for Beginners

Given that you should always choose a card that matches your individual spending habits, there is technically no universal “best” beginner’s credit card.

However, for most people, the Chase Sapphire Preferred® Card is the best beginner’s credit card, as it offers a solid balance between perks and annual fees, as well as versatile redemption opportunities and travel insurance protections.

Due to Chase’s 5/24 rule—which means you’ll be denied a new Chase card if you’ve opened five or more credit cards with any other issuer within the last 24 months—you’re best off applying for Chase travel rewards cards first.

Let’s take a look at the Chase Sapphire Preferred Card and see how it can be your gateway to the world of points and miles.

Chase Sapphire Preferred® Card

The Chase Sapphire Preferred Card offers the optimum balance between earning rates, perks and annual fees, while giving you access to one of the most lucrative rewards currencies available—Chase Ultimate Rewards points.

For an annual fee of $95, you’ll earn competitive points multipliers on a range of everyday expenses, from dining and online grocery purchases to streaming and travel expenditure. Each year you renew your card, you’ll receive a points boost equivalent to 10% of your total expenditure within the previous year.

You can redeem your Chase Ultimate Rewards for 1.25 cents apiece through Chase Travel℠ or transfer them to any of Chase’s 14 hotel and airline partners, including United Airlines, Southwest Airlines and JetBlue Airways.

If that wasn’t enough, the Sapphire Preferred Card comes with some of the most comprehensive travel insurance protections of any credit card on the market, including trip cancellation and interruption insurance, baggage delay insurance, lost baggage reimbursement and an auto rental collision damage waiver.

If you’re looking to dip your foot into the world of points and miles, you couldn’t do much better than start with the Chase Sapphire Preferred Card.

Here’s a breakdown of its full features:

  • $50 annual statement credit for hotels booked through Chase Travel℠
  • 5X points on travel purchased and booked through Chase Travel℠ (excluding hotel purchases that qualify for the $50 annual hotel credit)
  • 5X points on up to $5,000 in total purchases (for a maximum of 25,000 points) for Peloton equipment and accessories of at least $150 (through March 31, 2025)
  • 5X total points on Lyft purchases through March 2025
  • 3X points on dining, including eligible takeout, delivery services and dining out
  • 3X points on online grocery purchases (excluding Walmart, Target and wholesale clubs)
  • 3X points on select streaming services
  • 2X points on all other travel purchases
  • 1X points on all other purchases
  • 25% value bonus when you redeem points for travel through Chase Travel℠
  • Annual 10% bonus point boost based on total expenditure on your Sapphire Preferred Card in the previous year. Earned after you renew and pay your annual fee
  • Complimentary 12-month membership for both DoorDash and Caviar—the DashPass—when you activate it by Dec. 31, 2024. Unlocks lower service fees and $0 delivery fees on eligible orders.
  • No foreign transaction fees
  • Trip cancellation and interruption insurance
  • Baggage delay insurance
  • Lost baggage reimbursement
  • Auto rental collision damage waiver

Final Thoughts

When you’re deep in debt, it’s hard to envision a world of point-funded travel. But if you create a solid debt-payoff strategy, have patience and always pay your balance off in full and on time, you’ll be able to swap the balance transfer cards for lucrative travel rewards cards. All the while, your credit score will see improvements and you’ll be able to trade cash for points when paying for travel.

Remember: if you treat your credit card like a debit card, you’ll never pay a dime in interest charges and will have more points than you ever thought possible.

When you’re ready to apply for your first travel rewards credit card, take our free course first so that you can learn more about points, miles and how to travel the world for next to nothing.