Obligatory disclaimer: If you are not a person who can pay off your credit card bills in full and on-time each month, stop reading now! The techniques in this article are only a good deal for you if you can pay zero dollars in interest to the banks. If you wind up paying interest on your charges, you will cut down the value of the travel cards considerably, so don’t start into this hobby until you can do so responsibly.
Before the pandemic, it was pretty common to take a quick look at Facebook or Instagram and see your friends sharing pictures from their amazing vacations to exotic locations. When looking at those feeds, you started to wonder how they can afford to travel so luxuriously and to far-flung places on the globe. Maybe they made a ton of money, maybe they went into thousands of dollars of debt, or MAYBE they learned some tips to allow them to travel nearly for free. The third maybe is what I hope to teach you in this post.
There are dozens upon dozens of credit cards on the market that offer some form of travel rewards. Some earn points, while others earn miles, and still others earn cash-back towards travel purchases. We’ll cover all of those later. But the biggest reward for your effort typically comes from the sign-up bonus, when the bank might offer you 50,000 points for spending $3,000 on the card in the first 90 days as a cardholder. This is called the minimum spending requirement and it is typically a few thousand dollars in about 3 month time period. So what does 50,000 points mean? It can vary by issuer, but many points/miles (NOT ALL) are worth at least 1 cent per point, so that’s a $500 value. Earning $500 on $3,000 of spending is a whopping 16.6% return on your dollars spent, and better yet, that bonus is often tax-free!
Some cards come from banks that have partnered with various hotel and airline companies to give you points or miles that are specific to that travel brand. One example is Southwest Airlines, which partners with Chase to offer 3 different personal credit cards and 1 credit card that is available to businesses. After you meet a minimum spend of $2,000 in the first three months, 40,000 (sometimes 50k or 60k on a good short-term bonus offer) Southwest Rapid Rewards points are awarded. This process is similar for most of the big-name hotels and airlines, and we will touch on them later.
The superheroes of the travel rewards world are the points that come specifically from the big banks, because those points are called flexible points or transferrable currencies that you can transfer to more than 1 hotel or airline program. For example, Chase Ultimate Rewards can be transferred to 11 different partner programs at a 1:1 ratio. These include, but are not limited to, British Airways, Southwest, United, JetBlue, Hyatt, Intercontinental Hotel Group (think Holiday Inn, Crowne Plaza, etc.), and Marriott. Certainly, some programs are a better “value” than others, but all these programs and more are available options. Flexible points are available from Chase (Ultimate Rewards), American Express (Membership Rewards) and Citi (Thank You points).
A final group of rewards cards are effectively “travel erasers” whereby you can convert your accumulated points into statement credits on your bill for travel-related purchases. Capitol One Venture and Barclays Arrival+ are popular cards that fit this category. These are probably the easiest to redeem, with the lowest barrier to entry in terms of not needing to understanding partners, black-out dates, or point values, since these are worth a set amount (usually 1c per point) towards purchases made on the card.
Impact to credit score
A lot of beginners are afraid to get into travel cards because they have a misunderstanding about how credit scores are composed. The biggest component of your credit score (35%) is payment history. The next 30% is based on credit utilization, and we’ve already established in the disclaimer that this hobby is for folks who pay their cards in full and on-time every month, so 65% of the credit score will be in great shape. Next up, at 15% is age of credit. This is one component that is impacted by getting into the travel cards hobby, since you will be opening new cards. It is important to not close old cards since those are helping to keep the age of credit as high as possible. The 4th component is new credit, which makes up 10%. This can also hurt your credit score, but the impact fades over time. The final component is also 10% and that’s kind of a vague category of “credit mix.”
As long as you aren’t opening and closing cards frequently, most participants report a temporary decrease and then a long-term increase in their credit scores from travel hacking. When I apply for new cards, I typically see a 10-20 point drop after the new card is approved, and then within 3-4 months I’m back up to where I was beforehand.
I say all of this to dispel the rumors that opening a bunch of credit cards will trash your credit score. In fact, the opposite tends to happen, since we are responsible users of credit, paying off the bill in full and on-time every month.
Before you get started
Before applying for any cards, I recommend taking a step back to plan a few things, first.
- Have you opened other credit cards or store cards in the past 24 months (2 years)? Check your credit score to see if you can qualify for some of the premium cards that often offer the highest sign-up bonuses. CreditKarma is not a true FICO credit score but it is free and works well for this purpose.
- Have you planned out how you will spend X number of thousands of dollars within a few months to meet the requirements for earning a bonus? I usually try to time my credit card applications for just before I have a major purchase coming up, just to give myself a boost on meeting a $3k-5k requirement. Paying your car insurance in 6-month or 1-year terms can help, along with any recurring bills like utilities, groceries, gas, restaurant spending. I sometimes pre-pay my utility bills by a couple hundred extra, and then for the next few months I won’t have to pay any electric, water, or internet bills. Same goes for my pre-paid toll account, and I also pre-pay for 10 car washes so I can get a discount on the cost of washing my car, and it also helps me meet these spending requirements. In the examples of paying 6 months of car insurance and 10 car washes, I am saving money on the purchase AND it’s helping me meet the minimum spending requirement.
- Are you an organized person? It can be daunting to try and remember all of the details about the terms of the sign-up bonus, the date of card application, the date of approval, the date you must meet the minimum spending amount, when the points actually post to your account, any annual fees, login information, and the date to consider closing the card. I recommend setting up a spreadsheet in Excel or Google Sheets to keep track of this information. It will also help you keep track of how many cards you have been approved for in the past (the importance of this is coming up in the next section).
- Do you have travel plans for the next year or two? This can be a good place to start, so you’re able to search for the best cards or programs to help you offset your expected travel needs in the near future.
Getting started
When you are new to this hobby, it is important to start S L O W and make sure you do everything right on the first couple card applications. There is nothing worse than expecting to get a big sign-up bonus and missing one little detail and losing out on that chance, completely. Most of the time, this happens when the customer misses the deadline for the minimum spending requirement (90 days after card approval, not 90 after you activate the card). They might also incorrectly assume that an annual fee they pay is part of the minimum spending requirement (hint: it is NEVER included). The third common mistake is after reaching the threshold, they return some item and drop back below the minimum spending target, therefore missing out on the bonus. Meticulous record-keeping is an integral part of this hobby, but it doesn’t have to be complicated.
After organization, the next big tip to this hobby is that Chase is probably the most restrictive about issuing cards (and they seem to be getting even more restrictive lately). Chase has an internal “rule” that has become known as “5/24” meaning 5 cards in 24 months. This does not just include Chase cards, it includes all credit cards issued to you in the past 24 months. Due to 5/24, many people recommend starting with Chase and then moving on to other card issuers after you move beyond 5 cards in 24 months. This is also because Chase has some of the best cards and sign-up bonuses in the game, so Chase is a really great place to start for that reason, as well.
One thing to keep in mind about the Chase 5/24 “rule” is that Business credit cards are not included in their calculation of 5 cards in the past 24 months. But you do have to be below 5 cards to qualify for a business credit card with Chase, so that can be a bit confusing to beginners. You may be thinking, “Why does this matter? I don’t have a business!” but business credit cards can be issued for many things that you might not think is a business:
- Selling on eBay, crafts on etsy or gigs on fiverr
- Driving side hustles such as Uber/Lyft/Postmates/DoorDash
- Other side hustles like babysitting, dogsitting, Rover, etc.
- An actual small business like cutting hair or cutting lawns.
- Anything else that is an idea to make additional money, even if you haven’t launched the idea yet
Moral of the story on business cards: these aren’t just for big, established businesses or brick and mortar shops. Business cards can be useful for keeping your personal and “business” expenses separate – although you don’t have to do it that way!
Note: the banks have become more strict on issuing business cards during the pandemic. Not surprising, since many small businesses have and will fail during this crisis.
A sample strategy for openings up Chase cards:
- Chase Sapphire Preferred or Chase Sapphire Reserve – 50,000 Ultimate Rewards points
1a. Chase Ink (business card) Preferred – 80,000 Ultimate Rewards points
1b. Chase Ink Unlimited – 50,000 Ultimate Rewards points (no annual fee)
1c. Chase Ink Cash – 50,000 Ultimate Rewards points (no annual fee)
2. Chase Southwest Rapid Rewards (Plus, Premiere or Priority) – 40,000 or more RR points
2a. Chase Southwest business card – 40,000 or more RR points
(You get the point. A total of 6 cards have been opened, but Chase would only consider this to be 2 cards so far because 4 of them have been business cards).
Some Chase cards can be approved after 5/24, but these have traditionally only been co-branded hotel cards, and Chase has been getting stricter on approving anything after 5/24. For example, I applied for the Hyatt card as my 7th card in 24 months, and the IHG card as my 9th card. Both were approved without issues in 2017, but the only constant in this hobby is that things change.
Card approvals
Oftentimes, if you have a good credit score and do not have too much credit limit extended to you already, your card applications will be approved within seconds. But sometimes, a card application will return a message such as “We are considering your application and will let you know the result in 7-10 business days.” If this happens, you might want to call the bank for reconsideration whereby you talk to them and provide any additional information or clarification they might need to approve your request.
Sometimes, when you already have a card or several with one bank, you might already have the maximum amount of credit limit that the institution is willing to provide to you across all the accounts. When you get a denial letter, that isn’t a final determination. It is possible to call reconsideration and ask them to reallocate some of your available credit limit from other pre-existing cards to the new application to allow it to go through. I have done this on two occasions with Chase card applications to allow them to go through.
Annual fees
Many of you probably cringe at the thought of paying an annual fee for the privilege of holding one (or many) of these cards, especially when there are so many cards available on the market with 0 annual fee. That’s a very common misconception, because not all fees are created equal. For example, some hotel cards that carry an annual fee also award the cardholder a free night certificate to be used at a participating hotel each year after the first year. I have cards from Marriott, Hyatt and IHG that all offer these certificates (with certain restrictions) that provide a huge value for paying their respective $95, $75, and $49 fees. Note: New cards with these hotels have a bit higher annual fee. But, for example, in 2019 I paid $219 in annual fees on hotel cards, but I could book hotels in the $250-$300 range at all three of these hotel groups, saving me as much as $700 every year that I pay these fees and hang onto the cards.
Other cards carry annual fees but offset the fee by providing an annual credit on certain categories of spending. Chase Sapphire Reserve has a hefty $450 annual fee but comes with a $300 annual travel credit that is applied immediately when a travel purchase posts to your account. Last weekend, I took a flight for $249 (reimbursed by my travel credit) and when I got back home, I paid $22 for airport parking (also reimbursed by my travel credit). American Express Platinum (even higher $550 annual fee) provides different categories of annual credits, including $15/month of Uber credits ($35 in the month of December), and a $200 airline credit for incidentals like baggage fees or onboard purchases. Some people have figured out that you can purchase gift cards from the airline in $50 or $100 increments and it triggers the $200 airline incidental credit, but I have only read about this and do not hold this card.
Another bonus that often comes with the premium cards that charge high annual fees is access to airport lounges. American Express Platinum provides access to Centurion Lounges, which are not exactly prolific in number, but are very nice places to relax while waiting to board your flight. Chase Sapphire Reserve provides a Priority Pass Select membership, which gives you and a guest access to over 1,000 airport lounges and restaurants worldwide.
Tricks to earn more points/miles
Many people in this hobby talk about 1-player vs. 2-player mode, acting as though this is a video game. 1-player mode is fine, and there are plenty of rewards out there to be earned, but 2-layer mode is like playing your favorite video game with a cheat code! Essentially the difference is that Player 1 will apply for a certain credit card, and then send a referral to Player 2 to apply for the same card. Typically, this means Player 2 will get the standard offer from the bank, but Player 1 will be awarded a small extra bonus for referring a customer to the bank. But you aren’t limited to just referring your spouse or significant other – you could refer friends, parents, coworkers or neighbors! Many of the referrals are capped at a maximum of 5 per year, but if Player 1 refers five and Player 2 refers another 5, that’s ten referral bonuses on top of the two sign-up bonuses, or a lot of free travel points/miles.
Many of the hotel or airline programs now have dining programs and shopping portals. If you’re familiar with Ebates, the shopping portals work in much the same way: click through from the shopping portal to the store you want to shop, earn extra bonus miles for your online purchases. The dining programs require you to sign up ahead of time and register a card (it can be any card, not just the one that has that hotel/airline name on it!) When you pay your restaurant bill at participating restaurants, you will earn points or miles in that dining program PLUS the points or miles that you earn for every dollar spent on your credit card. These probably won’t earn you a lot of free flights or hotel nights, but sometimes every point matters and they all add up over time.
The shopping portals also might have limited-time bonuses like 1,500 points for buying flowers for your sweetheart on Valentine’s Day. Another option is to book a hotel through an airline shopping portal and earn airline miles for your hotel stay. Some people focus on earning airline miles because they prefer AirBNB stays over hotel stays, or they prefer to stay with friends or family when they travel, so this can be a great way to concentrate on earning more free flights.
United airlines has a smartphone app called United MileagePlus X (MPX for short). In this app, you essentially buy a gift card in the amount that you need when you are about to check-out at a store or restaurant, earning additional United miles and then using the gift card immediately to pay for your purchase. For example, I have earned 5 United miles per dollar at ColdStone Creamery and then paid for my ice cream with the digital giftcard. In that example, I earned Chase Ultimate Rewards points AND United miles on the same transaction. Again, not a whole lot of points, but they add up over time. My biggest problem is remembering to check the MPX app before swiping/dipping my traditional credit card.
Manufactured spending
One way that some travel hackers use to rack up big point balances is to manufacture spending. As the name implies, they are creating spending scenarios where they can recoup as much of the spending as possible so they are not losing much money to earn a bunch of points. A typical example is this:
Customer buys a $500 Visa gift card with their travel rewards credit card. Then they take the Visa gift card (a pre-paid debit card) to a different store and purchase a money order. Historically, Post Offices were great for this, but this is no longer possible, and Walmart has been cracking down as well. After purchasing a money order, the customer cashes the money order and putting the cash back in the bank to pay the credit card bill. This results in earning points on the $500 purchase, but they incur fees on the prepaid debit card ($5-6) and a fee for the money order ($3?) so you must be sure that the points you earn are worth losing $8-10 in this process. 2% points earning on $500 is just $10, so if you are spending $10 to earn $10 in travel rewards, you are spinning your wheels. But if this helps to meet a minimum spend requirement, the reward can be 2-3x larger than the fees.
Chase Ultimate Rewards
I have already mentioned the premium Chase Sapphire Preferred and Chase Sapphire Reserve cards, along with the three Chase Ink business credit cards, but there are 2 other Chase cards that earn Ultimate Rewards. Chase Freedom with Ultimate Rewards (Freedom, for short) earns 5% back on up to $1,500 spending in select categories of purchases every quarter, with no annual fee. For example in Quarter 1 of 2019, the categories were 5% back are Drugstores, Tolls and Gas Stations. Maybe you don’t buy $1,500 with of gas and prescriptions in a quarter, but gas stations and drugstores (CVS and Walgreens) sell gift cards to popular stores like Lowe’s, Kohl’s, many restaurants, Amazon gift cards, etc. So that quarter was a great time to stock up on gift cards to give, or gift cards to use yourself. Chase Freedom Unlimited is the second fee-free option, and its earning schedule is very easy to remember: it’s 1.5% back on every purchase, every time, without restrictions.
The Ultimate Rewards earned with Freedom and Freedom Unlimited can only be redeemed for cash (1c per point) UNLESS you have one of the premium cards like a Sapphire or Ink. Then those points can be combined into your premium card account, where they become transferrable to the partner airlines and hotels OR can be redeemed directly in the Chase Ultimate Rewards Travel Portal. The Portal is basically a Chase version of Expedia (and it runs on the Expedia platform), but you can pay with your accumulated Ultimate Rewards points. If you have the Sapphire Reserve card, your points are worth 1.5c per point in the travel portal, or if you have the Sapphire Preferred or Ink Preferred your points are worth 1.25c per point. This means that a 50,000-point bonus on the Sapphire Reserve is worth a minimum of $750, while the same bonus on the Sapphire Preferred is worth a minimum of $625. They can be worth far more if transferred to a partner airline or hotel (think 2c per point, or more).
Most people in this hobby try to redeem Chase Ultimate Rewards points for a minimum of 2c each. This often happens by transferring to partners and redeeming for first-class/business class international flights, or by booking Hyatt hotels with a high cash price but a low point requirement. In November 2018, I booked a high-end hotel (Park Hyatt) in NYC for 30,000 Hyatt points that I transferred from Chase Ultimate Rewards. If I had paid the cash price, it would have been $895 plus taxes and hotel fees, so that was a value of over 3c per point. As you can see, you usually avoid sales tax, bed tax and hotel/resort fees when booking with points. Some hotels still charge a resort fee and/or parking fees, so beware of those when you are looking to book a hotel.
Special offers for Active Duty military members
If you (or your spouse) are Active Duty in the United States military, most of the banks will waive the annual fees on their premium cards. For a card like the $450/year Chase Sapphire Reserve card, that comes with a $300 travel credit, is free to military members. In essence, they are paying you to hold and use their card! That is a sweet deal if you can take advantage of it. This offer is not available for business cards, though.
Point expiration
Every program is different, so be sure to check the rules of the various hotel and airline programs that you sign up with. For example, Delta SkyMiles never expire, and neither do JetBlue TrueBlue miles. But American Airlines AAdvantage miles and United MileagePlus miles expire after 18 months of no activity in the account.
But there are tricks to keep your points balance active, such as purchasing something small through that particular airline’s travel portal, or you can use 1,000 miles to buy a magazine subscription. You can also earn a few points in that airline’s dining program, which will reset the clock on your existing points balance. If you still have the credit card associated with that program, it can be as simple as buying a pack of gum or $1 in gas or reloading $1 onto your Amazon gift card.
Not all points are created equal
Don’t be fooled by huge numbers, automatically thinking they are better offers than others. American Express often has a 150,000 point bonus on the Hilton Honors Aspire card. This looks like 3 times bigger than the bonus that the Chase Sapphire Preferred card comes with, but Ultimate Rewards are worth ~2c as we’ve discussed, while Hilton Honors points are worth 0.4 to 0.5 cents a piece. That 150,000 point bonus is worth $600-750 on Hilton hotels, while the 50,000 Ultimate Rewards bonus could be worth over $1,000 at multiple airlines or Hyatt hotels. In this example, it seemed 3 times better, when it was actually 25-40% worse.
Getting the best bonus possible
The publicized offer for a credit card is not always the best available offer for that card. There are a few different tricks for getting the best possible bonus for the cards you are pursuing.
- Obsessively track the offers (not recommended)
- Use a website that does the tracking for you:
- The MadFientist put together a cool tool to help you chose: http://madfientist.cardratings.com/
- DoctorOfCredit keeps a running tab of the best cards and will tell you how the current offer ranks with the recent offers for the same card.
- Use a website called CardMatch.com to see if you are pre-qualified for a higher-than-usual offer.
- Another way that isn’t often talked about is doing an in-air application on an airline credit card. Sometimes the offer can be 50% better since you’re already proven to be one of their customers. Last year I saw an application for a JetBlue (no annual fee) card with a 15,000 point bonus while seated on a JetBlue flight, versus the standard offer of 10,000 points.
Southwest Airlines Companion Pass
This is one of the best deals in the travel game, if you have 2 people needing to fly somewhere where Southwest flies. The Southwest Companion Pass allows you to bring a companion with you on any flight you take with them for the rest of the year in which you earn the Companion Pass and ALL the following year. So, if you earn the Pass in March 2019, you would get the remainder of 2019 and all of 2020 to bring a free companion. The only thing you will pay for the second passenger is the $5.60 each way for the September 11th security fee.
So how does one go about earning the Southwest Companion Pass? There are two ways:
- Fly 100 one-way flights with Southwest in one calendar year. Unless you fly them a lot for business, this is not likely to be the fastest or cheapest way to earn the Companion Pass.
- Earn 110,000 Southwest Rapid Rewards points in 1 calendar year. When the personal and business cards from Chase are offering 50,000 points, it is possible to very nearly accomplish the Companion Pass just by opening 2 cards (only allowed one personal Southwest card, so you will need to open 1 personal and 1 business). After meeting the minimum spending requirements, you will have the 50,000 bonus, times two, plus 1 point per dollar spent, or around 104,000 points. You can continue to put spend on that card to earn the last 6,000 points needed to cross 110,000, or you can earn some points through referrals, through the shopping or dining programs, stay in a hotel booked through the Southwest portal, or some points earned on Southwest flights (Imagine that, actually earning airline miles with butt-in-seat time! But it’s often an overlooked tip).
Southwest Rapid Rewards points are worth about 1.5c a piece, and when booking with a free companion, it effectively doubles the value of those points (because of BOGO), so you are getting a ~3c value from those 110,000+ points, or nearly $3,300 in value. But you can also book cash tickets and the companion will fly free, so the value of the Companion Pass can be into the thousands if you fly a lot during those up-to-two years.
And then if you are playing in two-player mode as described above, Player 2 can then open a business and personal Southwest card and earn the Companion Pass for the following 2 years, allowing Player 1 to fly free. Rinse and repeat!
A top tip is to open the cards late in the year before you want to earn the Companion Pass, and then meet the minimum spending requirement just after the start of the credit card statement month that will close in January. This will mean the points post in January or early February and you will get most of the next 23-24 months for your Companion Pass. But do not accidentally earn the sign-up bonus in December, or you will fall short of the 110,000 points needed in one calendar year to earn the Companion Pass. I have seen this happen frequently by people who are really trying to maximize but get careless and lose track of their spending on the card.
Airline partner programs
The world of airline programs has shifted into three main camps or alliances: SkyTeam, One World and Star Alliance. Knowing these alliances can help you maximize your points and miles bookings, since it is possible to use miles in one program to book a flight in another program, if those airlines play nicely with each other.
For example, it is possible to use Delta SkyMiles to book a flight on Korean Air, or vice versa. You can use United MileagePlus miles to book a flight on Air Canada or Lufthansa. The graphic below is outdated, but you can see how the various Flexible point programs can be transferred into the three alliances, and which airlines are non-alliance airlines. Knowing these transfer partners and alliance partners can really help you maximize the value of your transferable point currencies.
Conclusion
There are many different websites about travel hacking on the internet these days. There are multiple podcasts, forums and Facebook groups. I recommend the ChooseFI.com/Travel free email course and Facebook group to learn from others who are more advanced in this hobby. There are too many rewards available to us these days to stay on the sidelines. I’d be happy to answer any questions you might have, or to send a referral your way 😉