Ladies and gents, I introduce to you the first post written by N! Read on for intro level questions on travel hacking with credit card bonus/reward points. Can’t wait to share more with you guys!
If you’re reading this, unless you’re already an expert in the travel hacking world, you likely fall into one of two categories:
- You’ve heard a ton about how people get “free travel” using credit card reward points and frequent flyer miles. OR
- You thought all credit card rewards were essentially just ways to get cashback and you forgot that frequent flyer miles existed until the previous sentence.
As cynical as it may sound, claiming that one can “travel for free” using credit card points and miles is a bit disingenuous. Depending on your life situation, you may be able to earn tons of points and miles without breaking a sweat, but there are taxes, fees, opportunity costs, and real world expenditures to consider. Many award flights (flights you pay for using points/miles) still come with taxes and surcharges (some in the $Hundreds). Using those points for flights means you’re not cashing them out to pay your bills, and traveling somewhere often means that you’re spending money you wouldn’t have otherwise spent.
Having said that, travel can still be pretty darn cheap. The trick is knowing the best ways to earn and use your points/miles. The world of award travel can be complicated and easily overwhelming if you’re starting from scratch. My overall goal with writing these posts will be to help educate you such that you don’t have to wade through a bunch of unnecessary information to get to what you’re looking for.
5 Frequently Asked Questions
1) What’s the big idea?
The general process is: Sign up for a credit card that offers X bonus as long as you spend $Y in Z amount of time. The average bonus is usually in the form of points and is equivalent to $400-500 (ex. 50,000 Chase Ultimate Rewards points can pay for $500 of anything you can put on your credit card). However, when you transfer the points to an airline and use them to purchase a ticket, your value can hit in the $Thousands (no joke). Usual required spend amount is between $2,000-$4,000 and the required amount of time to hit that spending goal is almost always 3 months.
2) What’s the catch?
Aside from the “free travel” caveats I mentioned above, to start earning bonuses you will need a decent credit score to jump right in. If your score is sub-650/700, you may have to start slower and work yourself to 700+ for the better deals. Using the points/miles for travel also requires a bit of effort. It’s not exactly “sign here and pick up your money”.
The other catch is that you are accustomed to the standard airline ticket supply and demand economy, which differs from the award ticket economy. You can always find a cash flight, but prices will change greatly based on many factors. Booking tickets with miles, with some exceptions, is the inverse. Generally, whether you want to fly tomorrow, in 6 months, on a Wednesday, or on a Friday, the price of your flight in miles will remain constant. Can you find seats, though? That’s the real question. Airlines only release a limited number of seats that can be booked with miles, so flexibility is a huge asset.
3) Won’t getting a bunch of credit cards hurt my credit?
It MAY temporarily ding your credit (I say “may” because my credit only went up when I started getting cards). However, it’s like exercising. You’re sore for a while, then ultimately you’re in better shape than when you started. The ding (usually 5-10 points) starts wearing off after 6 months and by 12 months, you’ll be higher than when you started. This process is net-positive for your credit score. This is all assuming you pay your bills on time and don’t buy more than you can afford.
4) What if I don’t normally spend enough money to earn a sign-up bonus?
There are MANY ways to hit the minimum-spend goal if you wouldn’t normally spend enough naturally. Almost anything you pay for with cash can be paid for with a credit card, even if it requires a check-mailing service like Plastiq (typically charges between 1.75-2.5%) to pay your bills (rent/mortgage, car payment, etc.). Credit card companies are perfectly fine with using services like this to earn your bonus.
You may also be able to use peer-payment services, such as Venmo, to send money to someone you trust, who then gives the money back to you. Services like this are usually more costly (Venmo charges 3% to use a credit card). Credit card companies are less fine with using services like this to earn your bonus and, in rare instances, will close your account if you’re super obvious about it (super obvious being something like opening a card, sending $3,000 through Venmo, then not using the card anymore).
5) Why would credit card companies do this?
Simply, marketing. They want to get you in the door. Sure, you plan to get the bonus and quit, but maybe you put a big purchase on the card and can’t pay it all off at once. Maybe you put some unexpected bills on the card and have to pay interest on your balance for a couple months while you pay it off. Credit card companies are willing to make the gamble that they’ll get more out of you than you get out of them. Sometimes they win – sometimes they lose. Obviously, they win more than they lose. Most customers are normal, interest-accumulating, annual-fee paying customers. Obviously, you do not want to be one of those customers. Personal financial accountability is important in making sure that you’re making this system works for you and not the other way around.
This sounds complicated.
If you read more about this, you’ll find that most credit card companies have airline partners, who have other airline partners, and all of them have different transfer rates, transfer times, redemption rates (cost in points/miles), etc. However, there are “best practices” and “sweet spots” for how to use your points. Using my guidelines, it can be decently simple. The rest of the complications will come from how complicated your own travel life is.
Ready for some travel hacking?
T: I’d love to hear from those who are travel hacking veterans and how it’s been going for you. And for those who are hearing this for the first time, I’d be interested in your thoughts on whether you think this is something you’d want to start! N and I started travel hacking in 2016 (oh boy, it’s been 2 years!). Within the past 2 years, we’ve learned a decent bit, and we want to share it all with you. So, keep your eyes peeled for similar posts to come!
Check out these posts for more travel tips: