If you’re reading this I’m hoping it’s because you’re interested in finding out what travel hacking is all about. Maybe you’ve heard of it and haven’t found the time or inclination to figure out how to get started. If you’re a veteran hacker you could probably teach me a thing or two, but what I want to do here is share some of the basics. Enough to get you excited about the idea, and to realize that it’s very simple to get started.
Travel hacking involves applying for new credit cards, meeting a ‘minimum spend’ within a certain period of time to collect a bonus, then moving on to the next card. The minimum spend is often in the region of $3000 in 3 months. These bonuses can provide many different types of ‘travel currencies’: airline miles, hotel points, or flexible points that can be converted to other travel currencies.
This process goes beyond simply picking a credit card for your favorite airline and building miles through day to day spending. It also goes beyond simply requesting cash back from accumulated points now and then. It does require a bit more planning and organizing, but the trade-off is that you can find yourself with enough points for free flights on many different airlines, and hotel points for free nights many different hotel chains. This creates a wonderful flexibility in your ability to plan your travel.
As far as I know, unfortunately travel hacking is pretty much a US phenomenon. There are many US credit card companies that offer a plethora of partnerships with airlines and hotels. This is not necessarily true around the globe, and options and bonuses may not be as generous in other countries.
There are a multitude of online resources available to learn more about travel hacking, so many so that if you hit the wrong site too soon you’ll likely be overwhelmed and put off. The details and even terminology can be like opening a floodgate of information. One of the sites that has been of most use to us in getting started is Travel Miles 101. They even offer a course by email that I highly recommend. I’ll be referring to this site several times, and I’ll include a list of other resources and sites for further reading at the end of this post.
So, is it worth the effort?
We discovered the power of travel hacking when we started to go through our annual budget with a view to understanding our expenses once we reach early retirement. We have always been happy to spend on travel fairly freely, as for us it falls into the bucket of spending money on experiences rather than stuff. We didn’t want that to change much in early retirement. If anything we felt we would want to travel more as we would have fewer constraints on our time. As such, we factored in a pretty generous annual allowance for travel and vacations.
We have dabbled in credit card rewards in the past, finding cards that have good cash back for daily use, and one that would boost the airline miles that Mr. PIE was already accumulating due to long distance travel for work. It was only when we realized that travel hacking had the potential to cover 60% to 80% of our predicted annual travel budget that we got seriously interested. Yes, you read that correctly, 60% to 80% of our annual budget!
If you’re intrigued, read on and I’ll lay out the details, but first here are some (hopefully very apparent) guiding principals and disclaimers.
ALWAYS pay off your full balance at the end of each month on every card. Carrying a balance and paying interest is not only foolish, but is one of the least frugal things you can do. And this is all about being frugal. If you pay interest you would also be paying for the points you’re trying to get. Again, this is all about getting free stuff! If you have credit card debt already that you are working on paying down, this would not be a good time for you to start travel hacking.
NEVER spend money on stuff you wouldn’t pay for or buy anyway in order to meet a minimum spend. If you do this, you are gaining nothing as well as busting your budget. Doesn’t make any financial sense. Having said that, there are probably many regular monthly expenses that you can pay with a credit card and several one off expenses that maybe you wouldn’t usually choose to pay by card. These expenses are all now fair game and I’ll talk about them in detail a little later.
One last thing to address before we get started, and that is the ever popular question “what about my credit rating?” It’s a fair question. While everyone’s situation is different, I would first recommend that if you’re in the market for getting a mortgage anytime soon, or any other loan or process that requires a great credit rating, then maybe this isn’t a great time to start hacking. That doesn’t mean that hacking destroys your credit rating – not at all, It could even improve your rating over time, but you really don’t want to put important stuff like that in jeopardy. If you no have to plans to actually need your credit rating, then off you go! If your rating takes a slight dip when you first start applying for cards, so what? What do you need it for? And the likelihood is that your rating will rebound when you start making those on time and in full payments each month. So, nothing to lose! Jeremy at Go Curry Cracker has an excellent article about why you really shouldn’t care about your credit rating. For full disclosure, my rating was excellent in April 2016, and is still excellent in June 2016 albeit 11 points lower. And I’m not worried about it at all!
Ok, that’s the preamble out of the way. Let’s get onto the fun stuff.
As I’ve already alluded to, the basic premise of travel hacking is gaining points from credit card sign up bonuses. But where to start? There are many products available to choose from and trying to figure out where to begin can be rather overwhelming. There are several lists available online. Travel Miles 101 keeps theirs regularly updated and The Points Guy also has a comprehensive list. Still a bit overwhelming? Here are my recommendations for getting started:
Chase Credit Cards.
Chase has arguably some of the best credit card products out there. However they recently implemented some guidelines that mean they won’t approve people who have had too many recent applications for credit cards. The number out there is 5/24. i.e., if you’ve had more than 5 applications in the last 24 months, your chances of getting approved by Chase are pretty low. I’m not sure anyone knows how hard and fast these guidelines are, but they have certainly tightened up on their approvals, so of course it makes sense to start with Chase before anyone else.
One of the most valuable cards from Chase is the Sapphire Preferred. With this you can accumulate what are known as transferable points. These can be transferred to many airline or hotel partners, turning them into air miles in your airline account or hotel points in your hotel account. They can also be transferred to family members’ travel accounts. For example, I had several thousand Chase Ultimate Rewards points points built up and was able to transfer them to Mr. PIE’s United Airlines frequent flyer account! That put all the miles he had earned and I had earned in the same place and we are able to use them for 4 free flights for our next ski vacation.
It’s worth knowing that other Chase cards such as the Chase Freedom don’t allow transfers to travel partners. However, if you have a Chase Sapphire Preferred, you can transfer your points there first, and then onto other airline and hotel partners. Sweet huh?!
OK, you got your Chase cards with transferable points under your belt. My next recommendation would be to review the other cards Chase offers and choose ones based on your travel desires. Personally, we have made use of the Fairmont card with its outrageously generous 2 free nights at any Fairmont hotel, and we’ll be hitting up Chase for British Airways cards too.
When I say we, of course I mean both Mr. And Mrs. PIE. This is a valuable addition to travel hacking, getting your spouse or significant other involved. With a Fairmont card for both of us we now have 4 free nights, and the wonderful people at Fairmont are happy to combine these for a reservation – before you have even earned them! Oh, and we each got $50 restaurant credit and automatic Presidents Club membership too. For the BA card, I have already confirmed that miles can be combined into one account.
So, see what works for you and your travel plans!
Once you’ve exhausted the Chase products, you’ll probably be pretty travel hacking savvy, but just a quick word about some other valuable types of cards that you should consider next.
American Express Cards
Amex have a number of cards with valuable transferable points, and as we have learned, flexibility in points is key. The Starwood Preferred Guest card is one example. While it does accumulate SPG points, these too are transferable to many partners. Guess where ours are going to be transferred? Yup, British Airways!
Fixed Value Cards
These are cards that allow to spend your points on any travel related expenses. For example, the Barclaycard Arrival Plus will allow you to accumulate 46,000 points from the minimum spend and sign up bonus combined. This is worth $460. To ‘spend’ these points you simply go ahead and make your purchase using the card, then use the points to provide a statement credit for the travel related expense. Simple. We plan on using this and other cards like it to cover all or part of hotel stay expenses that we have planned at independent hotels.
That really is all there is to it! These are the very basics you will need to get started. Once you have accumulated miles and points you can consider some of the best ways to redeem them. How you redeem them really depends on how flexible your travel is. If you have a specific destination and time frame in mind, you can investigate which airlines will be the best bet for your plans. This is where it is important to understand what fees each airline charges in addition to paying for seats with miles. These fees can be significant. For example I recently investigated what fees Virgin Atlantic charges to use miles to travel to the UK. The cost was pretty much the same price as an off season ticket. Needless to say we won’t be pursuing Virgin Atlantic Miles!
But what about those annual fees?
If you’ve clicked through to the credit card lists I linked to, you’ll have seen some annual fees listed for most cards. These are often in the $80-$90 range, and are often waived in the first year of your card holding. All fine and good you say, but what about the second year when the fee is due? The simple answer is to cancel the card before the fee becomes due.
Leaving the card cancellation as late as possible is to your best advantage. This allows you to use the card one last time for a small purchase. The upside of this is making the expiration date on your miles or points as late as possible, especially if you don’t intend to add to these miles or points accounts any other way. Be aware though. Points and miles that arrive in your airline or hotel account are always safe and will continue to exist after the card is cancelled. Points that reside only on the card account need to be moved or used before cancellation to avoid losing them.
This is becoming a lot to keep track of. Cards that need cancelling before a certain date, where your points are, and what the expiration dates are. The good news is that with a bit or organization none of this is too difficult. I’ll return to the topic of logistics soon.
Making the minimum spend
How many new cards you pursue over a period of time is really up to you. There are no hard and fast rules here other than you need to be able to make the minimum spend before moving on to your next card. Again, as with most of this it’s up to you how you approach it. Mr. PIE and I simply use our cards for daily expenses and make sure that most monthly recurring expenses are moved to the new card. This truly has to be one of the only times we appreciate child care bills!
We have found a few ways to make sure as many expenses as possible hit our credit cards. We have moved as many utility bills as possible to cards, not including those that charge fees for the pleasure. We have also recently found that we can charge our quarterly estimated tax payments to cards. There is a small fee for this but as this allows us to move through cards a little more rapidly and we feel it’s worth it. Other occasional expenses are now always charged to a card if possible. This includes medical bills and home improvement projects to name a couple. If a bill arrives without card payment details, I’ll often call to ask to make the payment by credit card. The best expense to charge to your card is one you know you will be reimbursed for such as business travel!
As you get into travel hacking you’ll probably come across the concept of ‘manufactured spending.’ This usually involves using credit cards to buy gift cards, then in turn buying money orders that go back into your bank account. This is a topic worthy of several blog posts, and I won’t be writing them! Mr. PIE and I are happy to keep things fairly simple at this point and have no desire to go down that rabbit hole!
Keeping it all straight
I’ve been promising that keeping this all straight isn’t too hard, and it’s not. Pick a tracking method that works for you and stick with it. I have an Excel spreadsheet (template courtesy of the Travel Miles 101 course), but a notebook, reminders on a calendar or any other method is fine. Here’s what I keep note of and set up each time I have a new card:
- Name of card, date opened and whose name the card is in
- What the bonus offer is and what date it was obtained
- Annual fee and date it is due
- Calendar reminder set to call and close card
- List of utilities and monthly charges to switch over to new card (takes 20-30 mins to visit all websites to complete this)
- Set up automatic statement payments on the credit card company’s web site (never miss a payment!)
- Make a note of any new frequent flyer / hotel account details
- I use Award Wallet to keep track of all our miles and points and expiration dates, but this can all be done with a spreadsheet.
- Add new card to Mint and Personal Capital.
And that’s really all there is to it. With a new card every one to three months, this isn’t too much of a significant time commitment, and keeps it all flowing nicely.
Other resources and further reading.
Do you travel hack? Are you ready to get started? Have you got any additional tips to share?