Travel Hacking for Beginners
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In the past, the term “hacking” had a negative connotation. Today, terms like “life hacks” are work-arounds to make your life easier. So what is travel hacking? Can anyone do it? How do you start? Let’s dive in to the nitty gritty!
What is Travel Hacking?
Travel hacking means leveraging rewards from credit cards & loyalty programs to discounted or free travel. Often people associate credit cards as bad, assuming they mean debt. Wrong! When used responsibly, credit cards provide so much value to consumers! They reward you with points or miles for money spent on these cards. These points can be redeemed towards hotel stays, airfare, rental cars, lot of possibilities! Various companies reward users in different ways. Some may offer points used as a “purchase eraser” or statement credit. Others offer points that can book travel directly through their portal or transfer to travel partners. Heck there are even cards that you can use their points to shop on Amazon with! Endless opportunities! The trick is to find the best value of those points to really maximize on your rewards.
What are the basics? Who can do this?
- First and foremost, you should be responsible in your finances! We are not talking about racking up spending to earn bonus points. No amount of points are worth paying interest on your balance! You should put all your regular spending on credit cards to be rewarded, but you should also pay off that card in full every month! It’s essentially just adding one more step to your regular process. You are probably using a debit card at the grocery store and it is paying you absolutely nothing to do so. Instead you will use your credit card to pay for your regular spending, then you can log in and pay off that card from your bank account. But this way, you earned points on your spending!
- You should have a good credit score. In order to be eligible for the cards with the best bonus offers, they will expect good/excellent score ratings. If your credit score is less than desirable, you aren’t out! You can start by applying for a lower bonus/no annual fee card, use responsibly and pay off in full, and watch your credit score slowly but surely increase. You can monitor your credit score for free with no adverse effects on Credit Karma, its a soft pull on your credit so no harm done in checking it. You’ll also see all your open lines of credit including loans, mortgage, etc. To go right along with this bullet point, you should be smart in your strategy for applying for new cards. Too many hard pulls at once can have a negative impact on your score. Not to mention, applying for cards too close together will get you denied!
- You will put all your regular spending on credit cards. Groceries, utility bills that accept cards, restaurants, activities, gas, school tuition… if they take a card, charge it! Remember you are going to pay it off, so no sweat!
- Are you married? If so, it’s generally best to not add each other as authorized users on a new card. Instead, you can each apply for that card under your own social security number, and double up on the rewards. Many times those bonuses can then be combined into one account and HELLO, you just double dipped on free points/miles!
- If you are planning on buying a home or car in the near future, you will want to lay low on the points game. If you know you’ll be applying for a loan but open credit cards in the months prior (6 months is standard), creditors for your loan may see you as a risk! However, as soon as you close on that beautiful new home or drive off the lot, game on!
Sweet Spots
Okay, so we are using cards and earning points. How does this add up to free/cheap travel? The sweet spot here is credit card bonuses. When you apply for a new credit card, there will be some sort of offer if you spend $XXXX in the first 3 months, you’ll be rewarded with XX,XXX bonus points. You may have a card you use now that gives you a whooping 1% cash back and think this is as good as it gets. NOPE. Let’s say a card is offering 50,000 points when you reach a $3,000 minimum spend in the first 3 months. NOTE: your clock starts ticking on the day you are approved, not the day you receive the card! So plan to lose a week or two of that 3 months when figuring if you can meet that spending. Also note – if the card has an annual fee, that does not count towards the minimum spend. You should consider, is $3000 within my usual range of spending in 3 months or less? If not you may look at cards with a lower minimum spend. But for a family like ours with 3 children in sports, competition cheer, dance lessons, karate, 5 mouths to feed, and gas to chauffer them all over creation… this is not out of reach at all and we often achieve minimum spend well before our 3 month time frame!
The next way to really accumulate points is through bonus spending categories. Some cards offer 2 miles per $1 spent across the board. Some may be 1 point per $1 spent. But often they will have bonus spending categories – such as earning 3x points on dining or travel, 2x points on grocery stores etc. Some cards even have rotating bonus categories where they offer 5x points in specific categories for a certain time frame. An example would be for the next 3 months, you can earn 5x points at gas stations or PayPal. Our favorite card for rotating bonuses is the Chase Freedom – referral link. When you start maximizing the bonus categories, you can really see your point balance start to take off!
Now what?
Where do you want to go? What are your travel goals? Are you looking to save up points for one big amazing trip? Or would you like to get in a few small trips a year? The beauty of the points game is that you get to move at your own pace. You can be conservative in how you choose to open credit cards or you can apply for 2 in one day, people do both! Your travel goals will determine which cards you should open in what order. Just wait until you see that first bonus post – its like Christmas morning for grown ups!
The majority of people who start using points & miles often start with Chase cards. This is because Chase has something called the 5/24 rule. If you have 5 new cards opened in the previous 24 months, you’ll be declined for most Chase cards (however there are a couple exceptions!) This is one of many reasons our favorite card to start with (in most cases) is the Chase Sapphire Preferred card – referral link. This is a great card to keep in your wallet, the current offer is 50,000 Ultimate Rewards points for reaching a minimum spend of $4,000 in the first 3 months with your card. The $95 annual fee is waived for the first year. Points are worth 25% more when redeemed through the Ultimate Rewards portal so up to $625 worth of travel! You can also enjoy benefits such as no foreign transaction fees, trip protection & insurance.
The last thing to touch on is closing cards. People wonder about this, and it’s not really something we can tell you how to do. You have to develop your own strategy. You will find some cards will be absolutely worth the annual fee every year. Some may not be a fit for your wallet in the long term. If you do plan to close a card, wait at least 10 months from opening. You can even call once the annual fee posts and see if they have a retention offer for you before you decide to cancel or not. You can also downgrade to a no annual fee version of that card to maintain that line of credit and any points you may still have. Keep in mind that the average age of your cards will impact your score. So if you have a no annual fee card, you’ll want to consider keeping it open forever!
Whew that was a lot to chew on, wasn’t it? I hope this gives you a starting point in determining if cheap/free travel through credit card rewards are for you. I’ll be sharing posts with info on the trips we are taking using rewards, I hope you’ll stay in touch with us! I’d love to hear about your wins travelling with points & miles!