Travel Hacking with Credit Cards

John Smith, our travel hacker

Travel hacking, free flights, miles, credit cards, and rewards. You’ve probably heard it all before, that there’s some mystical, mysterious way that experienced travelers, or “travel hackers,” get free flights. And if you’re like me, you thought it was only for people who were really dedicated to traveling and that you got free miles by flying a LOT. Which sounds expensive. Luckily, it’s not only simple, but it’s not super time-intensive either. Plus, you don’t have to spend any more money than you usually would. Here’s the gist.

  1. Use a credit card to collect points.
  2. Sign up for rewards programs.
  3. Get free flights.

Over-simplified? Kind of, but not really. Sure, you could go the extreme route and get different credit cards for different categories and keep track of which card to use when and where since categories can rotate throughout the year and spend money to get sign-up bonuses. Or you can pick a few really great cards, take advantage of the sign-up bonuses, sign up for rewards programs for the airline(s) you use the most, and slowly rack up those points/miles/what-have-yous. And best part is that you don’t actually need to pay for flights to get flights!

Related: Skiplagged Review – Hidden City Ticketing to get Cheaper Flights

Since we’re talking about credit cards, though, we should talk about the risks. They might seem obvious, but for new credit card users like me, they’re definitely worth noting!

Things to Keep In Mind

Keep the following in mind

Point Expiration

You want points that don’t expire. Is it likely that it’ll take you two years to use them? No. But who really knows how drastically your financial situation might change in the span of a year?

What are your points worth?

One cent? A quarter of a cent? You might want to find about before getting excited over 10,000 points. It could be the difference between $25 and $100.

Airline Loyalty

Many people recommend signing up for one airline’s frequent flyer program instead of several. You might have to spend more on some tickets, but being loyal to an airline can lead to certain perks, like lounge access and free seat upgrades. In many cases, airlines are part of a group, so if you’re part of United’s MileagePlus program, you can also earn miles when you fly with their Star Alliance partners, including Air Canada and Asiana Airlines.

Risks

Sign Up Bonuses

Sign up bonuses are great. You get extra points and miles just for getting a card! Kind of…

If you actually finish reading the rest of the offers, you’ll notice that these bonuses come with a caveat. 50,000 bonus points (the equivalent of $500-$625) from your new Chase Sapphire Preferred card sounds great, but you’d have to spend $4,000 within the first three months of opening the account. As with any credit card, don’t spend more than you have and pay off your balance in full every month! But if you’re going to be spending that much anyways, you might as well get some free money back. đŸ™‚

A warning: Existing members don’t always get bonuses! So if you already had a Chase Sapphire Card and canceled it, you can’t get the the sign-up bonus again unless a certain amount of time has passed.

Annual Fees

No one likes fees. Especially recurring, annual fees. So when you see “$0,” you smile. But when you look a little closer, you learn that while your first year is free, the following years are not. So before applying for these, make sure you’d be getting more money than you’d be paying.

Let’s use the Chase Sapphire Preferred as an example again. You took advantage of the sign up bonus and loved the card your first year. But should you pay the $95 annual fee to keep it? As of 12/12/17, card holders get 2 points for every dollar spent on travel and dining and 1 point for everything else. We’ll look at two scenarios: one where you only spend on travel and dining, and one where you never spend on travel and dining. We’ll also assume that you want $95 in cash, or 9,500 points (instead of getting 25% more in travel redemption through Chase Ultimate Rewards).

Scenario 1: Only spend on travel and dining

If you’re getting 2 points (or 2 cents) for each dollar, you’re getting 2% back. With some math, we find that you would need to spend $4,750 a year on just travel and dining, or ~$396 a month, in order to get your money back.

Scenario 2: Never spend on travel and dining

If you’re getting 1 point (or 1 cent) for each dollar, you’re getting 1% back. This would mean spending $9,500 on anything but travel and dining, or ~$792 a month, in order to get your money back.

Reckless spending

Don't max out your cards!

Because of points

In reality, we buy tons of stuff in a bunch of different categories, so it’s difficult to definitively say that a card is worth its annual fee. But when you calculate how much you would need to spend in order to pay for your cards each year, we at least get an idea of whether or not they’re worth. For the Chase Sapphire Preferred, we would need to spend $4,750-$9,500 to break even.

Don’t forget, though, that our goal is to get free flights. If we spend $4,750 just to pay for the annual fee, we need to spend another $12,000-$30,000 to get a $300 flight (depending on whether or not you book through Chase and what categories you spend your money on). That’s a lot of money. But sometimes, we get so obsessed with the goal and getting a certain number of points that we risk spending more than we have.

Because… it’s a credit card

Andddd sometimes we just risk spending more than we have because… credit cards. Because it’s easy to and because we can. Luckily, there are tools to help us keep track of our finances, like Mint or Simple. Treat your credit card like it’s a debit card and you shouldn’t run into any problems. Check if your credit card’s bank’s app lets you set up alerts. I use mine to alert me every time a balance is posted; as soon as there’s a balance, I pay it off in the app.

Related: Get $20 for joining Simple, the fee-free online bank!

Credit Score

There are many many factors that go into making up your credit score, and one of them is the age of your accounts. If you open a new account, the average age of your accounts suddenly decreases, causing a temporary hit to your score. If you need your score to be in tip-top shape for something, you might want to wait until you get that something before applying for another card. And if you plan on closing an account, be aware that it may or may not affect your credit score since the average age of your accounts could be affected.

Benefits

Benefits of using credit cards for travel hacking
I know I started with the risks, but there are definitely some major benefits to credit cards. Especially ones that are catered towards travelers. Each one is different, but here are some common themes among some of the travel-oriented cards.

Points!

Obviously. Points are great. Cash back is great. But make sure you’re really getting all the points you can get. You’re probably already paying for Netflix with your card, but what about your car insurance? Or your utilities?

Is there a fee for paying any of the following with a credit card?

  • Gas bill
  • Electric bill
  • Internet bill
  • Phone bill
  • Miscellaneous bill
  • Car insurance
  • Health insurance
  • Rent

If the answer is no, put it on your card! These are all things you have to pay for anyways, so you might as well get some cash back. Most stores in the United States accept credit cards (though some pay have a minimum purchase requirement to offset their fees), so groceries, clothes, gifts, medicine, coffee, pet food, and books should all be paid for with your card. As long as you can pay it off, of course. Be smart, my fellow wanderers. Always know how much is in your bank account and again, treat your credit card like a debit card.

Sign Up Bonuses

As long as you can easily meet the requirements for the bonuses, you pretty much get free money, which leads to free flights. Especially with…

Travel Redemption Values

Some travel cards give you a better rate for your points when you purchase travel items directly through their site. The Chase Sapphire Preferred, for example, gives you 25% more for airfare, hotels, car rentals, and cruises when you buy through Chase Ultimate Rewards. If you have 50,000 points, then, you could choose to either get $500 cash back, use those points to purchase other things, or spend up to $625 on travel items.

0% Foreign Transaction Fees

A lot of the travel-oriented credit cards offer 0% foreign transaction fees! Even my fee-free bank‘s debit card hasn’t managed that (damn Visa). If you’re visiting a country where credit cards are widely used, you won’t need to worry about exchanging money or running out of cash.

Travel Insurance

A lot of us opt out of travel protection and checked bags. What’s the worst that could happen?

Hopefully, you won’t ever find out. But if you do, using your travel card to purchase flights and rooms could help you out. Many travel oriented credit cards offer perks like trip cancellation insurance and baggage delay insurance.

Airline Perks

Airline credit cards generally offer perks for members like priority boarding, free checked bags, and lounge access. Get all the benefits of traveling comfortably without having to pay for it. (Unless there’s an annual fee, that is.)

Related: Travel Hacker’s Toolkit – Cheaper Flights WITHOUT Credit Cards

General Credit Card Protections

Most credit cards come with fraud protection, price protection, purchase protection, car rental insurance, extended warranties… You get the idea. Travel cards are no different. Each card comes with different benefits, so learn what they are in order to take advantage of them.

For Those New to Credit Cards and Travel Hacking

Don’t know if you want to commit to an annual fee quite yet? Not sure which card(s) to start with? Here’s what I’m doing/planning on doing!

1) Chase Freedom Unlimited

Chase Freedom Unlimited for travel hacking
This is truly a stress-free card. There’s NO annual fee and automatic unlimited 1.5% cash back. You get $150 when you spend $500 within the first three months and $25 after your first authorized user makes a purchase in the same time period.

As of this post (January 2018), this is the only card I have. I’m racking up points and improving my credit score to eventually get…

2) Chase Freedom

Chase Freedom card for travel hacking
There’s no annual fee for this card either, but you get 5% cash back up to a certain amount on rotating categories like gas or groceries and 1% unlimited cash back on everything else. A minor annoyance is that you have to activate the 5% cash back every time there’s a new category. This card comes with the same sign up bonuses as the Chase Freedom Unlimited (so $150 after you spend $500 on purchases in the first three months and $25 when your first authorized user makes a purchase within the same time period.)

Use this card with the Chase Freedom Unlimited to maximize your points. Rotating categories can include Walmart, Target, gas, and department stores. I don’t have this yet.

3) Chase Sapphire Reserve

Chase Sapphire Reserve for travel hacking
This is the card I’m working towards. (Unfortunately, I don’t quite have the credit score or the ability to pay for the annual fee yet.) You get 50% more towards travel when you purchase through Chase Ultimate Rewards so 50,000 points converts to $750 towards airfare, hotels, car rentals, and cruises instead, or $500 cash back. You get THREE times the points on travel and dining and 1% cash back for everything else. There are tons of travel benefits, like $100 application fee credit for Global Entry or TSA PreCheck and access to airport lounges worldwide. On top of that, you get up to $300 travel credit every year! And, of course, there’s no foreign transaction fee.

The downside? A $450 annual fee and a sign-up bonus that unlocks only after you spend $4,000 in the first three months. Doable? Sure. I guess. Maybe. Maybe not. I don’t have this card yet either.

Side note: Make sure you don’t try to get all of these cards at once unless you can definitely pay the minimum amounts needed for the bonuses! And if you have someone you totally trust financially, sign him or her up as an authorized user to get additional bonuses.

4) Rewards Programs

Next time you go on a trip, see if your hotel or airline has a frequent flyer program. (Hint: it probably does.) These aren’t credit cards and you can sign up for these any time without worrying about your credit score. Ideally, you want your credit card(s) to be compatible with your rewards program(s). (For instance, the Chase Sapphire Reserve allows you transfer your points to programs including United MileagePlus and Marriott Rewards.)

Summary

You can pool your points from all three cards! Use the Chase Freedom to earn 5% on certain categories, the Sapphire Reserve to earn 3% on travel and dining, and the Freedom Unlimited to get 1.5% on everything else. Shop through Chase to earn even more cash back at sites like Walmart, Kate Spade, Barnes & Noble, and Lenovo. Then, use your Chase Sapphire Reserve on all your flights to get 50% more value for your points.

So can you “travel hack” with credit cards? Yuuup. But it’s not magic, and you need to spend money to get points/miles/more money (even though many many YouTube videos might make it seem otherwise.) Whether or not your flights are really “free” depends on your perspective. But by intelligently taking advantage of the cards, rewards, and sign-up bonuses, you can get tons of travel benefits, free flights, and free rooms just for using your card as you normally would. Just make sure you don’t spend money you don’t have, read the fine print, and take advantage of all the benefits your card(s) offer(s).



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