Having an emergency fund of credit card points has saved me thousands of dollars on last-minute, emergency travel. Here's how I do it.

Courtesy of Elizabeth AldrichThe author, Elizabeth Aldrich.
  • I keep at least 30,000 credit card points at all times for emergency flights and hotel rooms.
  • Chase Ultimate Rewards earned with my Chase Sapphire Reserve are my favourite points to have on hand because of their high value and flexibility, but I’ve also used Hyatt points and Delta miles to save hundreds of dollars on last-minute travel.
  • Credit card points are a back-up emergency fund. I always have at least six months of living expenses in high-yield savings accounts to make sure I can cover the unexpected.
  • Read more personal finance coverage.

I love collecting credit card rewards – specifically airline and hotel points. Thanks to my credit card points, I can travel more frequently and stay in luxury hotels I wouldn’t normally be able to afford.

However, I don’t spend all of my credit card points. I like to keep a balance of points in at least one of my rewards accounts, and here’s why.

Keep in mind that we’re focusing on the rewards and perks that make these credit cards great options, not things like interest rates and late fees, which can far outweigh the value of any rewards.

When you’re working to earn credit card rewards, it’s important to practice financial discipline, like paying your balances off in full each month, making payments on time, and not spending more than you can afford to pay back. Basically,

treat your credit card like a debit card

.

How I use credit card points as a second emergency fund

If you think about it, most emergencies involve some form of travel. When your car breaks down, you’ll probably need a rental car. You might have to fly back to your hometown at a moment’s notice to visit a sick family member. If something happens to your home, such as a natural disaster, a fire, or an insect infestation, you might need to get a hotel for a few nights.

While it’s not an emergency, I know I’m not the only traveller who’s found myself trying to book a last-minute trip during high season only to realise that prices have skyrocketed – FYI, you can’t “just wing it” when it comes to accommodations in Europe’s most beloved cities in mid-July unless you’re prepared to spend a small fortune.

Credit card points can come in handy in all of these situations. Miles from airline credit cards can help you purchase last-minute emergency flights without spending a fortune, while points from hotel credit cards can get you a few free nights if you’re unexpectedly stranded. Generic travel credit cards that offer flexible points can help you cover flights, hotels, rental cars, and more.

My favourite credit card points to save for emergencies

I mostly save my generic travel points for emergencies because they can be applied to a wide range of expenses, and flexibility helps when you’re in a pinch. Chase’s Ultimate Rewards points are my favourite because they offer the highest value and the most flexibility. I earn Ultimate Rewards points with both my Chase Sapphire Reserve and my Ink Business Preferred Credit Card. I try not to let my balance of Ultimate Rewards points fall below 30,000 points, which is usually more than enough to get a few nights at a hotel or a round-trip domestic flight.

Hotel points can be good to keep on hand as well, particularly if you’re saving points that are good for longer stays at budget hotels. My favourite programs for this are World of Hyatt and IHG Rewards Club, because both have budget hotels and deals that start at just 5,000 points per night. I use the World of Hyatt Credit Card to earn Hyatt points, and I used to have the old IHG Rewards Club credit card as well. You can also transfer Chase Ultimate Rewards from your Chase cards to both Hyatt and IHG.


Read more:
The best Chase credit cards

I collect these points by aiming for lucrative sign-up bonuses and promotions and putting all of my regular spending on rewards credit cards that align with my spending habits.

For example, if I’m eating out, I use my Chase Sapphire Reserve, because it gets me 3 points per dollar on restaurants. However, if I’m making business purchases, I used my Ink Business Preferred because it gets me 3 points per dollar on select business spending categories.


Read more:
Chase Sapphire Reserve card review

How credit card points have saved me hundreds in last-minute situations

A couple of years ago, I got a call from my dad saying that my grandpa passed away. I knew that his death was really hard on my dad, and I wanted to be there to support him during my grandpa’s funeral.

Unfortunately, I live abroad and last-minute flights can be very expensive. When I looked them up, they were around $US800 round-trip. Luckily, I was able to use Delta miles I’d accumulated with the Gold Delta SkyMiles┬« Credit Card from American Express to purchase the flight using 40,000 miles.

Another time, I was travelling through Europe during the summer. I’d purchased tickets to a Radiohead concert in Florence months in advance because I knew I’d be staying in a nearby town in Tuscany during that time. I figured I could take the train to Florence and spend the night at a budget hotel for the concert.

That would have worked out if I’d also reserved my hotel room months in advance. However, I forgot to do book a hotel until two days before the concert. Because I was there during the height of summer, almost everything was completely booked up by the time I went to make a reservation. The few hotels left were $US500-plus per night, which wasn’t in my budget at the time.

Luckily, I was able to find a few available hotels through the Ultimate Rewards travel portal. The cheapest one was $US400 per night, still outside of my budget. However, I could also get it for around 26,000 points. I booked it with points and got to enjoy a night in Florence at a very nice hotel for free.

Points aren’t a substitute for a real emergency fund

Credit card points can come in handy for last-minute travel situations, but they’re no substitute for a real emergency fund. If you end up with unexpected hospital bills or have to pay for your pet to get surgery, they’re not going to accept points as payment. It’s important to have at least six months of living expenses saved up in an emergency fund.

I keep my emergency fund in a high-yield savings account with Ally and Betterment so that I can earn some extra money on interest. I love knowing that I have both the cash I need to cover an unexpected expense and credit card points to cover last-minute flights and hotels.

Click here to learn more about the Chase Sapphire Reserve.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.