In the simplest of forms, travel hacking is basically earning credit card reward points in a very strategic way in order to use those points for travel. Points can be redeemed for not only flights but also hotel rooms and different experiences. It would stand to reason then, that the key to Travel Hacking is not only earning the points in a very smart way, but also redeeming them properly. Let’s get into some basics.
Basic Principles and Rules to Follow
As with anything involving a strategy, there are some rules or even safeguards that we should always keep in mind and follow to ensure we are doing it properly.
First and foremost, the most important thing to keep in mind is that in order Travel Hack effectively, you must absolutely not pay any interest on your credit cards. This may be a little obvious, but it’s crucial that you do not spend more than you have in order to earn points. Interest paid, especially on reward credit cards, are pretty high, and therefore will cancel out any points you’ve earned within the month. Never pay interest or go into debt!
Secondly, once you have your credit card setup (more on that later), make sure to put any purchase you can through the appropriate cards, as they are how you earn the points. Even if you aren’t the biggest spender, overtime every purchase counts and will make a difference.
Third, never transfer points out somewhere unless you have a redemption in mind. Once you transfer points, you’ll either be stuck, not able to transfer them back, or, if you can, it’ll be for a much worse rate. Think of points as different currencies; some are worth more than others. Be sure to do your research to ensure you are getting value with each redemption.
Last but not least, don’t play stupid. Your ultimate goal is to keep a good relationship with the credit card companies so you can continue to go on these lavish trips. You can only burn so many bridges, and I would advise you don’t burn any. Be sure to be aware of the rules different credit card issuers have. Don’t apply for too many of these cards right away. Additionally, once you do get approved for the card, do your best to keep the card. If you’re being fishy, chances are that the issuer may end up canceling your card. That could ruin an entire setup! Be smart, but also tactful in what you do.
Earning Points (Setups, Sign Up Bonuses, Everyday Spend, Manufactured spend)
The bread and butter of travel hacking is earning points! Points are required to make any sort of redemption where you don’t pay cash. While you could spend a ton a time and money in one loyalty program to earn some points, there’s a better way, and that is through the use of credit cards. Many credit cards will reward you with certain points whenever you make a purchase on a card. Depending on the purchase itself, it could be worth a few points per dollar if it’s in the correct category. For example, the Chase Sapphire Reserve would earn 3 points per dollar spent on a food purchase, but only 1 point back at Target.
Below you will find some very effective card setups from the big credit card issuers:
|Sapphire Reserve (3x Travel/Dining)||Platinum (5x on Flights/Hotels)||Prestige (5x Dining/Flights, 3x Hotels/Cruise Lines)|
|Freedom (5x Rotating Category)||Gold (4x dining/groceries, 3x flights)||Premier (3x Travel/Gas, 2x Dining/Entertainment)|
|Freedom Unlimited (1.5x All Purchases)||Blue Business Preferred (2x All Purchases)||Double Cash (2x All Purchases)|
The basic principle here is that for every purchase you make, you’ll want to use the credit card to get the most value for that purchase. If you were running a Chase setup, then you’ll want to evaluate if the purchase you’re making falls into the Chase Freedom category. If it does, you’ve earned 5 points per dollar. If it doesn’t, you’ll want to take a look at the Sapphire Reserve. If it does, 3 points, if it doesn’t fall into either Freedom or Sapphire Reserve, then you can put the purchase on the Freedom Unlimited. Instead of earning 1 point back, you would be earning 1.5x back because of the earning structure on the Freedom Unlimited. Think of it as a flow chart.
While you can use cards from multiple setups, I’d advise against it, due to the split in your points, it makes it difficult to earn points at all if you’re switching between more than one program.
While this is all fine and dandy, it would take ages to earn the points needed to take some of these mega-lux trips. So how do you earn points quickly? Well, that would be through sign up bonuses. Whenever you sign up for a card, there will typically be a bonus for spending a certain amount of money in a certain amount of time. These sign up bonuses can really boost the amount of points you have to get started. As an example, the Sapphire Reserve has a 50,000 point sign up bonus for spending $4,000 within the first 3 months. Those 50,000 points, if valued at 2 cents per point, is worth $1,000! If you can get multiple sign up bonuses for different cards, then you would have earned a ton of points right off the bat.
From here, you can get into churning sign up bonuses. You see, most credit cards have terms for how long you have to wait to get another sign up bonus on the same credit card. You could apply for a card, get the sign up bonus, and within a certain time, cancel/product change to something else, and then reapply. If you’re approved, you could get the sign up bonus all over again. Of course, churning is something that is frowned upon by the banks, but it is in their own rulebook. If you choose to churn sign up bonuses, be sure that you don’t ruin your credit report by signing up and canceling too many cards; issuers take notice and eventually will no longer approve you for certain cards!
Finally, there is one other way to earn credit card points quickly, and that is through manufactured spending. Most people would view manufactured spending as one of two things; one of them is fine, the other is very sketchy and could get your accounts closed.
The first, and safe way to manufacture spend is to figure out a way to make every single purchase with a credit card. We are talking rent payments, tuition, mortgage, gift cards to certain places you’ll go to, etc. One way to pay for things you wouldn’t traditionally use a credit card for would be services like Plastiq, which allow you to pay just about any institution with a credit card. Depending on your monthly expenses, this could make quite the impact! Just be sure that the points you earn outweigh any fees you may pay. Some situations may only be helpful for meeting the spending requirement on a sign up bonus. After you hit that bonus, it may not be worth pursing the purchase anymore.
The second way of manufactured spending is the sketchy way, and something I don’t recommend. Remember, we are trying to keep these cards longterm so that we can use them overtime. This form of manufactured spending involves buying visa/MasterCard gift cards in high amounts. Points are earned through the purchase of these gift cards. These gift cards can then be unloaded a number of ways to at least most of your cash back, in essence, you got free points. Again, the credit card companies generally have an idea of what you’re up to, and if they see something sketchy, they wont hesitate to get rid of that risk (aka, you).
What to do with points (hotels, airplane tickets)
So you’ve gotten your sign up bonus, and you’ve been maximizing every purchase you make by using the correct credit card based on your setup. So now what? Well, it’s time to redeem those points!
When it comes to redemption, you’ve got a couple of options. The most common one is the worst way, and that involves redeeming the points for straight cash. Doing so will not get you the best value, and in fact, sometimes will return less than 1 cent per point. A terrible way to go with travel orientated credit cards.
The second way, which is a little bit better is by using the bank’s travel portal. With both Chase and Citi, there is a bonus whenever you use their travel portal to book flights. In both cases, you’re getting a 1.5x bonus. Because of this redemption I would always look for deals that give you at least 1.5x value on the points. If your planned redemption does not give you this much value, then it makes sense to use the travel portal, as you’re getting your value.
The final, and best way to redeem your points is by transferring the points out to a different program. Each credit card company has a list of companies that they partner with. You can redeem your points by transferring them to these transfer partners. Chase is notorious for having a 1 Chase Point to 1 Transfer partner ratio, or a 1:1 rate. Other companies usually have that ratio as well, but it can be different.
Regardless, once the points are transferred over, you can redeem them for either a hotel or airplane ticket in that program. Before transferring over any points, you’ll want to do the calculation to see just how much value the redemption you want to do is worth. For example, if a Hyatt hotel is going for 30,000 points, or $1,000, you’ll have to calculate how much the points are worth. 30,000 Chase points is worth about $450 if we redeemed them with the travel portal. That is a far cry from the $1,000 the hotel is charging. In this case, the points are worth $1,000/$450, or 2.2 cents per point. At just $300, the value become 3.3 cents per point! Compare this to the cash out rate of 1 cent per point, and you can see the real value here of using points. Would you rather pay $300 or $1,000 for the same room?
The same principle can be applied to airplane tickets as well.
*Bonus* Get Status/Perks for Free with Cards (Priority Pass, Status, Free Nights)
I’m not sure that people really consider this stuff travel hacking, but it’s worth mentioning nonetheless due to it being “free”. There are certain credit card perks that are available to the premiere travel credit cards that do give you free stuff. This includes Priority Pass, Status, and even free nights
Priority Pass is lounge access at different airports. The lounges typically charge people anywhere from $30-$100 a visit. The lounges offer a nice cozy place to wait for your plane to depart while giving you access to free food and drink. Sometimes they even get fancy and provide showers too. While the premium credit cards charge a premium price, they typically include lounge access as a perk. Not a bad way to fly, by getting free food and drink!
Next up is that depending on the credit card you get, it may include status or statuses at certain places. For example, the Hilton Aspire card gives you Diamond status. Diamond status is Hilton’s top status, and comes with a ton of different perks including early check in/late check out, hotel room upgrades, free breakfast, etc. Some programs even earn you more points by holding that status, a double win!
Finally, while we are on the topic of hotel credit cards, there are a few credit cards out there that offer free nights just by holding the card. While these cards will charge an annual fee, the room rate at the hotel will generally be more than the cost of the annual fee. As an example, The World of Hyatt credit card offers a free night, but charges a $95 annual fee. With the hotel rooms available with the free night in the range of $200-300, who cares? So long as you can use it every year you hold the card, why not grab the card anyway?
As you can see, there’s a TON of information involving travel hacking. It’s just human nature to get the most bang for our buck, and what better way to apply that principle than with traveling. Travel hacking and credit card really opens up the possibility to take luxurious vacation on a much smaller budget. Why not slowly save towards your next vacation with the next gas, grocery, or even utility bill?
What is your experience with travel hacking? Have you been able to get more than 2 cents per point in value? Let us know how in the comment section below!