I just wrote about how I decided to get a travel focused credit card to take advantage of some of the travel perks they offer. However, another reason to get a travel focused credit card is because you want to get start travel hacking!
Travel hacking is the process of earning travel reward points at little, or no, cost to you and then using those points to travel for the least amount of money possible and/or experience the joys of first class travel by strategically redeeming points in exchange for upgrades and travel experiences.
I am not a travel hacker, but I know people who are! I asked my friends and travel hackers Tim and Amy Rutherford to do a guest post on Travel Hacking for Beginners. They eagerly said yes! They provided me so much information I have actually split it into two guest posts: Accumulating Points and Perks, and How to Travel For Less
In an effort to bring you some new voices on Ottsworld, here is a guest post from an Ottsworld reader and Youtuber Tim Rutherford. Amy and Tim Rutherford retired in their 40s by trimming $6.500 from their monthly spending. They are passionate about teaching others the strategies that helped them say goodbye to their careers and hello to their freedom. All opinions and experiences expressed here are theirs. –Sherry
When I was working (I’m now retired) I traveled extensively for business. My business travel lasted for roughly 20 years. Some parts of my career had me traveling as infrequently as once per quarter and at the height of my business travel I was on a plane almost every week (traveling Tuesday-Friday.) While business travel was exhausting, it piqued my wanderlust. I love traveling with my wife and family and the points I earned from my business travel (plus the points we continue to earn) allow us to inexpensively enjoy our family adventures.
During my business travels, every time I flew a new airline or stayed at a new hotel I would sign-up for their frequent flyer/stayer program. All points programs I have ever experienced are free to join. With each new stay or flight I would earn points. However, as travel providers started to build relationships with credit card issuers, I soon realized earning points from my frequent travel was not nearly as efficient or rewarding as simply signing up for a new credit card. Today, my wife and I carry almost 30 cards in our combined wallets.
These have been accumulated over 5 years by signing up for 1 or 2 credit cards a quarter. For those who think that sounds crazy, the more credit cards you have, the more it will actually help you in the long run. The longer you have a card there it benefits your overall credit score. Credit history is important, so we don’t close out our cards. Instead, 25 of the cards are put away safely and they are never touched.
We have accumulated over 3 million points in various programs and continue to grow our balances to meet our planned travel needs. In 2017, we spent roughly $9,800 (combined with our points and miles) to make 10 trips. This spending included food, entrance fees, airfare, lodging, public transportation, rental cars, gasoline, trains, parking, etc – basically, every expense we encountered from the time we left our home until the time we returned. Our destinations included Paris, Monaco, Nice, Boston, New York, Orlando (Disney), Los Angeles, Santa Barbara and San Diego.
Why You Should Start Travel Hacking
Simply put, earning points and miles is a great way to travel the world very inexpensively. Credit card sign-up bonuses are the easiest way to quickly accumulate the points you need for “free” travel. If used responsibly, adding credit cards to your wallet over time will improve your credit score. With a little organization, careful planning and strategic spending, there is unlimited upside to accumulating miles and points to help fund your world travels.
The Best Travel Credit Cards Out There
“Best” is very subjective and the best card for you might not be the best card for someone else.
Some of the things that might factor into picking a card that is right for your specific needs:
• Do you travel for business?
• Are you allowed to put business expenses on your personal credit cards?
• Do you own a business and would you consider business credit cards?
• Are you planning a trip and have a specific airline or hotel already in mind?
• Are there limited-time promotions being offered by a specific card that might make the card more valuable?
• Do you already have a collection of points in a specific program?
• Are you planning to travel internationally?
• How far out are your travel plans?
• How easy is it to earn points in the program you would like to use?
• How easy is it to use the points you’ll be earning?
• Are you planning on luxury travel or budget travel?
• What airlines have hubs that are near your home?
• What airlines fly to your home airport?
• What airlines have lounges in your airport?
If I were just starting out with Award Travel, I would sign-up for a card that offers cash-back for travel expenses (e.g. Capital One’s Venture card or BarclayCard’s Arrival+) or a card that has a transferable points structure (e.g. Chase’s Ultimate Reward points or American Express’ Membership Rewards points). Transferable points keep you from being locked into a specific program and provides more travel options when it’s time to use the points.
There is the potential for a little complexity when evaluating the cards that are right for you, and getting started may seem like more of a hassle than it’s worth. If you start with one of the cards mentioned above, there is little risk that you’ll be unable to use the points. By adding new credit cards to your wallet multiple times a year (assuming you’re picking cards that are offering compelling sign-up bonuses) you could easily add many hundreds of dollars or more of “free” travel to your wallet annually.
How to Accumulate Award Travel Points and Perks
1) Have good credit and pay off all of your credit card bills in full every month.
- If you maintain debt on any of your credit cards, I would not suggest signing up for new credit cards or using them in a way to maximize travel rewards. Pay off your balances before you start travel hacking and make sure to pay them off in full each month.
2) Pick a card that is right for your travel plans.
- If you have a hard time selecting navigating the many hotel and airline programs, sign-up for a travel cash card or a card that offers transferable points.
3) Sign-up for the new credit card
- Make sure that the bonus you will receive through the initial sign-up and the first year’s spending will equal at least $500 in value. Consider signing up for 1-4 new cards each year as a good start to begin collecting points
4) Meet the initial minimum spending requirements
- Have a plan to meet the minimum spending before applying.
- If you don’t meet the minimum spending requirements, you will not receive the sign-up bonus points.
5) Earn the bonus points
- Track all of the points you earn and understand how to keep the points active in every program.
6) Spend the points
- Treat your points like cash and use them wisely. (e.g. Don’t “spend” 25,000 points on airfare you can purchase for $100).
- Programs regularly devalue their points. Consider that the points you earn are devaluing each year and you should use them as quickly as practical after earning them.
What Should You Consider When Choosing a Credit Card?
- Do you have a good credit score and will your qualify for a new card?
- Do you pay off your credit cards in full every month? If you accrue interest on your credit cards, you should avoid accruing Award Travel using credit cards for your points earning.
- Do you have a plan for meeting the minimum spending requirements?
- Do you have a plan for the points you intend to earn before you earn the points? Do not speculatively sign up for points you may never use just because of a promotion.
- Does the card you want provide points in a program you can easily use? For example, if Singapore Airlines has a fantastic bonus offer, but Singapore doesn’t fly to your local airport, it’s probably not a good idea to sign-up for a Singapore Airlines credit card.
- What is the value of the points you’ll be earning? There are many resources on the Internet that will help you determine the value of the points that you’ll be accumulating. However, what you’ll find are valuations that are based on a specific style of travel and this style might not match your personal plans. In practice, you should have a trip in mind and look at the cash price for your travel plans. This will help you to accurately understand how your points should be valued.
What are the Top Benefits of a Travel Card?
The two most important questions to ask when considering adding a new card to your wallet are:
1. How many points are being offered with the initial sign-up and how valuable are these points?
The value of points is often subjective and based upon the redemption(s) you make when using the points.
- If Sam earns 100,000 Marriott points and then pays 20,000 points per night for a five-night stay at an Indianapolis property where the same room could be purchased for $80 per night – Sam’s redemption is only worth $400 or .4 cents per point (CPP).
- If Susan earns the same 100,000 Marriott points and then pays 50,000 points per night for two nights in Times Square that could be purchased for $300 per night. Susan’s redemption is worth $600 or .6 cents per point (CPP).
2. What is the annual fee and is it waived year one?
- If there is an annual fee, does the value of the points far outweigh the fee?
- If there isn’t an annual fee in year one, will you be keeping the card after the initial sign-up bonus?
***I would not sign up for a new card unless I am able to net $500 worth of points, miles or cash from the card in a single year. Typically, the cards that I obtain provide this much value in the initial sign-up bonus.***
Here’s a list of card features that are frequently found with award cards. These features may weigh into your personal decision to apply for the card and, more importantly, might weigh into your decision to keep a specific card that has an annual fee. However, your circumstances, travel habits and purchasing patterns would make these more or less valuable.
• Rental car insurance
• No Foreign Transaction fees
• Bonus spending categories and overall earning for everyday spending (3x points for Grocery, travel, and gas purchases and 5x points for Office Supply purchases)
*Typically, cards offer 1 point for every dollar spent (regardless of category.) However, there are some cards that offer only ½ of a point for every dollar spent. Be aware of the earning structure for each dollar you spend after the initial sign-up bonus is earned. You want to be utilizing the card with the highest return for each category of spending in order to maximize the points you earn
• Purchase protection
• Extended warranty protection
• Travel accident insurance
• Lost luggage reimbursement
• Free VantageScore or FICO scores
• Free credit monitoring
• Free checked bags
• Free annual hotel night
Premium cards (cards with a $300+ annual fee) offer:
• Airline Club/Lounge access
• Reimbursement for Pre-Check/Global Entry
• Bonuses for transferable points
• Cash back for travel expenses
• High returns (5%+) for specific categories of spending
How to Fulfill the Initial Spending Requirements
Any card that is offering a significant amount of points for signing up will come with an initial spending requirement. This obligation to spend is usually within the first 90 days of having the card and you’ll be required to spend a certain amount of money within the defined window. (e.g. You need to spend $3,000 on card X within the first 90 days to earn 50,000 points) If you do not meet this requirement, you will not earn the bonus points. So, it’s very important to understand before you apply for a card how you intend to go about meeting the spending commitment.
Never let a minimum spend requirement force you to spend more than you would otherwise spend. Have a plan before you get your new card.
Here are a few ways you can go about meeting the minimum spending requirement:
1) Plan your sign-up around a known large cash outlay (A new roof, car, home improvement)
2) Divert all of your spending to the new card. Remove all other cards from your wallet and put them away in a safe place until you’ve met your minimum spend requirement
3) Put every expense you have on the card: home insurance, car insurance, car payment, utilities, cell phone, taxes, gym dues, groceries, dining out, doctors, tuition, HOA fees, travel, etc. Some institutions will charge you a surcharge for using a credit card. I would not pay this extra fee unless you absolutely need the extra spending AND the fee is substantially outweighed by the value of the points you’d be earning
4) Pre-pay monthly fees that you otherwise spread throughout the year.
a. If you are paying your gym fees on a monthly basis, they may appreciate you paying for three months in advance
b. You can pay for a whole year of HULU, Netflix, Spotify, etc
c. Your cell phone provider might also accept a prepayment for 6 months of service
5) Use a service like Plastiq to pay your mortgage or rent on the new credit card
a. This service has an associated fee and should only be used if the fee can be justified by the value of the points you’ll be earning
6) Buy gift cards to “pull spending forward” (Grocery store gift cards from your favorite grocer, Merchant gift cards for stores that you frequently visit, Gasoline gift cards,Visa, MasterCard and AMEX gift cards)
These cards often come with significant fees and these should be considered a last resort for meeting a minimum spend requirement. Additionally, some credit card issuers (American Express) explicitly exclude gift card purchases for meeting your minimum spending.
With these tips from Tim, you’ll be able to get start Travel Hacking and accumulating points right away! Stay tuned for the next installment, how to use a travel credit card to travel for less!
Meet the Authors
Tim and Amy Rutherford blog at GoWithLess. They retired in their 40s by trimming $6.500 from their monthly spending. Their new life is filled with fun, travel and adventure. They are passionate about teaching others the strategies that helped them say goodbye to their careers and hello to their freedom.