Are you tired of watching all those basics posting photos in foreign lands to their Instagram with inspirational quotes as captions? Maybe you want to pose with dolphins, zip line over waterfalls, or sip vino in Rome. If you proclaimed yes with each comma you read, then do I have a treat for you.
Welcome to travel hacking.
Today I am going to give you an introduction to one of the most rewarding hacks in the world. A hack that changed your life for the better. We call it travel hacking, but it’s better known as earning rewards points. It’s a system that creates opportunities you would never have otherwise. You can experience places you never thought you would go. So sit back, with your tray tables upright, because we are about to take journey my friend.
I am going to break this introduction down into two parts. The first will be the quick version in 100 words, for all of those folks who will yell at their screen “Get to the point already!”.
The second part will be the detailed version for everyone who wants to get nerdy. Fair warning, the nerdier you get, the more rewards you can earn, and the more places you can go.
The Quick Version:
Travel Rewards a simple five step process that you can repeat over and over again. Here’s how it works:
1.) Open a travel rewards credit card
2.) Use that card exclusively and put all your bills on it to receive the sign-up bonus
3.) Pay off your card in full
4.) Book your travel with your earned rewards points
5.) Sip coffee overlooking the Mediterranean
Shaved down to it’s core it really is that simple. BUT let’s dive deeper.
The Long Nerdy Version
What is Travel Hacking?
Travel Hacking is a system where you open up credit cards that have big sign-up bonuses. You then redeem those points for free travel.
So here’s a typical example:
You open a card that has a minimum spend of $3,000 dollars in three months. If you spend $3,000 in those first three months, and pay off your card, you will earn a 50,000 mile bonus.
This means you have 3 months from the day you are approved for the card, to spend that $3,000. Notice I said approved, not the day you receive the card.
The clock starts ticking right away. Additionally, you should pay in full every month. I will get to why travel hacking is not for everyone, but I am sure you can already see why.
Oh wait, I’ll just do it now..
This is not for everyone.
I repeat, this is not for everyone. If you have any sort of credit card debt whatsoever, this is not for you. You need to make sure you are responsible with credit cards before you even consider this.
Since “responsible” is subjective, here is how I would define it:
1.) You have no credit card balances before you start. I don’t care if you are just paying off your La-Z-Boy from last year’s Memorial Day Sale. Do not do this until you are at a zero balance.
2.) You do not spend “more than normal” on purchases just because you are using a credit card. I know it feels like magic the first time you use one. You just insert this plastic thing into the machine, and you get to take home stuff. If you think of your credit card as a magic wand, travel hacking is not going to work for you. Do not do this if you can’t help yourself.
Well, Mr. Judgy Pants who is this for?
Since this is not for everyone, the question then becomes who would this strategy be good for? You are in luck, there are a few factors that lead to the successful travel hacker.
A.) Good Credit Score: You should have a minimum credit score of 700. Really 750 is ideal. This is because many of these cards require good credit scores to even get started.
B.) Organized: You should be organized. You don’t have to be Leslie Knope organized, but open dates, points, and cards should all be tracked to maximize your travel options. We use a spreadsheet, but you can use whatever fits your fancy.
C.) You must be Flexible: I don’t mean hit up your local yoga studio. I am saying becoming flexible with dates, times, and destinations. Your points will be maximized this way.
Will this affect my Credit Score?
Fair warning, I am about to get into the weeds a little here. If you want to know the quick answer as to if this will hurt your credit score, the short answer is no. Over time, your credit score will stay the same or improve (mine has actually gone up), but in the short term, you may see a slight dip. If you applying for a big loan in the next six to twelve months, don’t start this strategy just yet.
Like I said earlier, you should have a minimum credit score of 700. If you aren’t sure what your credit score is, check out Credit Sesame. They will give you a detailed credit score for my favorite price, FREE.
Next, to understand the impact this could have on your credit score, I will break it down into three buckets:
1.) Low Impact
2.) Medium Impact
3.) High Impact
Total Accounts: The more accounts you have open, the better. The fact that a large number of creditors will give you an account makes you “credit worthy” in their eyes.
Credit Inquiries: The more credit inquiries you have, the worse it is for your score. This is luckily short lived (2 to 3 months). Most credit score experts (I am yawning just thinking about that expertise) say this knocks your score down about 5-7 points per inquiry for those 2-3 months.
Age of Credit History: Each time you open a card, you add a card with the age of zero to your score. This is not a good thing. If you are opening cards like a mad person, your credit history can shrink pretty quickly. If you decide to go wild, you can travel much more, but you will take a hit because you credit history is what I call “Benjamin Buttoning” (aging backwards). We take it slow and steady while leaving room for more free travel points than we can spend.
Derogatory Marks: I will say this again. If you get a little too spendy with your cards, this is not for you, and here’s why. The absolute worst thing you can do for your precious credit score is not pay your bills on time. This includes defaulting on a loan or going into bankruptcy. These will lower your score faster than a speeding bullet.
Credit Card Utilization: This is where you can make everything right in the world. Creditors want you to use only a small percentage of your credit line. Travel Hackers usually look like angel’s when it comes to this important metric. That is because, you will have more cards open then the average person. So, if you open 5 cards that have a limit of 10 grand, and you spend 3k between those cards, you are only utilizing 6% of your allowable.
You have to decide for yourself whether or not you are comfortable with small fluctuations in your credit score. For those of you with high scores, this should not bother you, since it has no change to your credit worthiness. If you are on the fence, you may want to bring up your score first.
When we started our strategy, we decided to take it slow and easy, thinking that we would accumulate enough points for 1 trip a year. Since, we have not changed our strategy or open rate and we have more points than we have time to use. The strategy is simple. It doesn’t matter if you are single, married, or have a large family, you can replicate it and see if it works for you.
We open one card at a time, rotating between my wife and myself. We put every possible cent we can on that card. From the car insurance to Netflix. Here’s what it looks like:
I open a card in my name. I spend 20 minutes changing every bill to run on that card. I then pay off that card on a weekly basis (You can do monthly, I’m just crazy and don’t like creeping balances). Once we hit the minimum spending requirement to get the bonus, my wife then opens the same card and we repeat the process.
It’s that simple. Here’s the numbers:
It takes about 4 hours a year.
Results in about $4,000 in free travel per year ($1,000/hr).
We each end up opening 2-3 cards per year.
Extreme travel hackers take a way more aggressive approach. We just don’t have the need right now. In the future, if we decide to travel more, then we may get more aggressive. There are pro’s to becoming more aggressive such as room upgrades, flying first class, or being able to travel to more destinations per year.
Types of Rewards Cards
If you have gotten this far, then I am sure you are dying to know which cards to start with. Before you can choose what fits your travel goals (#travelgoals), you need to understand the different types of cards.
There are three types of rewards cards that you can use for travel hacking.
A.) Transferable Points Credit Cards
These are by far my favorite. You can get the most bang for your buck and redeem some pretty amazing vacations. The reason they are so valuable is they have extreme flexibility.
Let’s take the Chase Ultimate Rewards cards for example. You can transfer your Chase points to many of their partner cards. They have 10+ airline and hotel partners within their network. You can book a flight through British Airways, a hotel with Marriott, and redeem points as cash back for an excursion. The possibilities are endless! Here is a great article on the possibilities.
B.) Co-Branded Cards
Co-Branded Cards are my second favorite and what you would think of when someone says frequent flyer miles. They are cards that you can book through their awards sites. These are valuable because there are times that you can really maximize these points. They post award charts and on their websites that have “sweet spots.”
For example you can use your British Airways bonus points to book 6 one-way tickets under 1,115 miles.
The downside to these cards is that you can only use them for one airline or hotel.
C.) Fixed Value Cards
These are what we started with. They are by far the easiest to use and great for any beginner who is unsure about this newfound hobby. With fixed value cards you get a fixed amount per dollar spent. The most common is 1 cent per dollar. This means that 50,000 points (the typical bonus), would be worth about $500.
With fixed value cards you just book the trip and redeem the points after. The downside to this is that there are no aforementioned sweet spots, you just get what you have earned.
I think there is value with starting with fixed value cards just to get your “feet wet”. Especially if you want to travel domestically.
How Do I know Which Cards to Open?
Figure out where you plan on traveling in the next 12 to 18 months. This is the biggest factor in selecting cards. Once you have that in mind proceed to selecting cards. There is a fantastic list here that can get you started here.
I want to say this first – I highly recommend starting with the Chase Ultimate Rewards cards.
They have some of the best redemption’s out there, but the main reason, is what it known as their 5/24 rule.
The 5/24 rule is simply that if you have opened 5 credit cards within the last 24 months, you can’t open another with Chase UR. It’s worth noting that this includes becoming an authorized user on someone’s account, so if you can, avoid being added as an authorized user.
The 3 best chase cards in my opinion are:
- Chase Sapphire Reserve
- Chase Sapphire Preferred
- Chase Ink Business
There are plenty of other great cards. Below are some other great cards we have used:
- Capital One Venture Card
- Southwest Rewards Card
- Marriott Rewards Card
- United Mileage Plus
- Starwoods Rewards
Reasons Why Someone Should Travel Hack
When you ask people who are 100 years old what they regret most, a majority will tell you one of two things. They wish they spent more time with family or they wish they experienced more places. Travel experience is something that you will keep with you for a lifetime. When you see a place that literally takes your breath away, you will understand the joy of travel.
Travel hacking allows you to recharge your batteries. You can fully relax knowing the main expenses are paid for (flight and hotel). You won’t feel that tight pain in your chest knowing that when you get home you have to face the vacation spending bill. That, my friends, is true relaxation.
C.) Meet New People
One of the best parts of traveling is meeting the locals. The majority of the time they are extremely welcoming. I have seen travel hackers develop lifelong friendships just by visiting another country.
Whether you have a 5 course meal in Thailand for $20 or dine next to the Roman Coliseum, it’s hard to find a bad meal if you eat at local restaurants. I recommend doing your homework before you leave on the best authentic restaurants in each city you visit. Or, ask the hotel staff where would you go if they could eat anywhere tonight? That’s how you find the best places.
E.) Deepen Relationships
Whether you travel with a friend or significant other, you will inevitably deepen your relationship when you travel. Between experiencing the culture, sights, and food, you develop a bond with that person.
Wrap it Up:
Travel hacking is an extremely rewarding hobby. You are investing your time in experiences that you will cherish for a lifetime and affording what you otherwise may not be able to do. At times, it feels too good to be true, especially when you are boarding first class for free. Wander on!
I keep track of all my cards and their balances in Personal Capital. It’s easy to monitor my spending without having to log-in to each credit card company’s website.
If you are still stuck on the fence with what card to start with, here is an awesome site for travel rewards cards.
On my last trip to Colorado I booked my flight with Cheap-O-Air and had a great experience. They had the cheapest prices and were extremely helpful when I had to change my flight.
Readers, now I want to hear from you. Where do you want to travel to next? What have been your favorite travel memories? Do you travel solo or with family? What has been your favorite travel destination?