Somehow it’s been drilled into our heads that credit cards are the absolute worst and should be avoided at all costs. And for some, the thought of having more than one credit card is like opening up Pandora’s Box.
I realized just how powerful this narrative is last December when my husband and I met up with some friends in New Zealand. Our friends were asking about our flight when my husband mentioned how we applied for credit cards with huge sign-on bonuses and then used those points for our plane tickets.
Then it got kind of quiet.
One friend looked around and ventured, “Yeah, but…doesn’t opening credit cards trash your credit score?”
These friends work in finance and went to fancy colleges. Super educated and savvy about almost everything. Except for them, travel hacking might as well have been another language.
That’s when I realized that travel hacking is not nearly as mainstream as I thought. No matter how many times people post about their latest almost-free trip, travel hacking is still super confusing. So if you’ve ever felt like travel hacking is something you should just understand, don’t feel bad at all. Those of us who do it have spent time flipping back and forth reading various resources and connecting the dots. But lots of times, when you hear about someone’s amazing trip, they don’t explain the basic mechanics, nor do they address people’s main barriers–their fears and questions.
Because credit cards are scary. When everyone and your mom tells you how bad they are, how are you supposed to then magically see credit cards as tools that can help you?
Last fall, I asked Twitter friends to tell me why they don’t travel hack if they’re interested in traveling. Today I’ve compiled all those reasons and questions in a myth-busting, Q&A format. And yes, it’s taken me months to get to this because I am an artiste, OK?
If you like to travel, then travel hacking is a strategy that can help you afford those dream vacations for way less. Imagine paying just $150 to fly business class to Australia! I’m all about making your money work for you, whether it’s through investing, creating your own discounts on expensive jackets, or going on luxe travel experiences. Strategic spending, all day every day.
People mean different things when they say ‘travel hacking,’ so to be clear, I’m talking about leveraging credit card points to pay next to nothing for flights and hotels. Not mistake fares or sites for finding the cheapest flights. In case you missed them, here’s my general overview of my style of travel hacking, a detailed post on how to redeem points for Hawaii, and my recent trip recap for New Zealand.
OK, so let’s dive in.
“Doesn’t signing up for credit cards kill your credit score?”
This is the #1 question everyone always asks.
I have eight credit cards. Anecdotally, in the five years I’ve been doing this, my credit score has stayed steady in the high 700s-low 800s, which is considered to be a very good score.
When you apply for a new credit card, your score could go down a few points as a “hard inquiry,” but it should naturally rebound as you continue to use your cards responsibly.
But talk is cheap.
Let’s see exactly what happened to my score last year, when I signed up for two credit cards: one in November of 2017 and the other in January 2018. *Actually, after I uploaded this image I realized I forgot to mark a third card I opened in April, so it’s really three cards I opened within the past year.
Here’s how opening those two accounts affected my credit score:
Do you think my credit got trashed? Comparing November to February, it’s a difference of three points. Whoop-de-doo. Sure, my score once went down by 11 points, but it also recovered a few months later without me doing anything out of the ordinary.
But maybe I’m an outlier. After all, I have a long credit history, as I’ve had a credit card since I was 18, and I only open one card at a time.
So Google ‘travel hacking ruins credit’ and see if any horror stories come up. They don’t, because I checked. I know when something is unknown, it’s easy to assume the worst, but really, the idea that opening up multiple cards kills your credit score is one of the biggest myths out there. Yes, opening cards can have a temporary effect on your score, but it should naturally rebound with responsible use.
“Is there anyone who SHOULDN’T try travel hacking?”
I can’t write about travel hacking without going over the risks, as it’s not for everyone. Especially if:
- You’ll be applying for mortgages or some other kind of loan soon. For loan application scenarios, this is one case where you DO care about your credit score, as it will dictate the interest rate you’ll receive. Typically, if your score is in the highest range, you’ll pay less interest.
- You’ve struggled with credit cards in the past. If you have had issues paying your credit card bills in full every month, then opening another credit card might not be the best idea for you. The credit card interest you pay can put a huge damper in any rewards you rack up. So annihilate your credit card debt, then come back and read this post.
- You don’t want to do any work. There is some work involved in terms of tracking and finding awards to redeem. If you’re someone who has zero patience, then this is not for you.
“What’s the catch? Why would credit cards offer you amazing signup bonuses for free? Sounds like a scam!”
I know, it sounds shady. There’s no such thing as a free lunch, right? But you have to think about how credit card companies work. They’ll buy the points from airlines at a discount so they can offer you lucrative sign-up bonuses, often 25,000 to 60,000 points after spending a certain amount of money within a specific timeline. Their hope is that you won’t pay your credit card bills in full and they’ll make money since you’ll end up paying interest. Sad, but true. But if you pay off your credit card bills in full and on time, you should be fine.
“I live in [insert non-US country]. Are these credit card offers available to me?”
Whenever I mention travel hacking, I’m referring to opportunities based in the US, because I live here and that’s all I know. From what I’ve heard, credit card signup bonuses are basically a cornucopia here versus everywhere else in the world.
So, if you don’t live in the states, I totally understand if you want to skip over this article. In that case, come back later when there will be content for everyone.
Or if you’re in Canada or in the UK, here are a couple country-specific resources just for you:
- My Canadian friend Barry likes PointsNerd. Another friend, Gen Y Money, likes Canadian Travel Hacking.
- If you’re in the UK, you can check out Head for Points.
“I’m too lazy and disorganized to keep tabs on cards.”
All the things you need to track can feel overwhelming: when you opened the credit card, how much and by when you need to meet the minimum spend, how many points you already have.
I’m too lazy to keep tabs, too, so create a system for yourself so tracking is easier.
My idea: if you read this blog, you probably have some kind of budget spreadsheet, so just add a new tab to that same sheet to track your credit cards. Here’s an example of the columns I use in mine.
Then I open up my calendar and set up a bunch of reminders to track these dates for each card:
- When the annual fee is due
- Two weeks before I need to meet the minimum spend
You also have to track how much you spend so you can get the bonus points. I’m too lazy to tally everything up, so I send a message through my credit card portal and ask a customer service person to do it for me 🙂
And then you’ll want a way to track the points. I use an Excel spreadsheet that I only update when I’m looking to book a flight. If you don’t want to track points yourself, you can also use a service like Award Wallet.
“But I don’t spend enough to earn the bonuses (AKA how do frugal people earn points???)”
I totally hear this one, because I’ve been there, too. To earn the bonuses you’ll often have to spend about $3,000-$5,000 within the first three months. Back in the day I was a single, frugal person who only naturally spent about $600 per month. That was on everything besides my rent–food, shopping, going out to bars, etc. I used to get jealous (and still do) of couples and families that can pool their expenses. Let’s face it, as a single person, you most likely won’t have big ticket expenses like:
- Sending kids to summer camp
- Renovating the house
- Paying car insurance
- Paying school tuition
For frugal people, timing is everything for you. The easiest way to make the minimum spends is by timing your credit card applications for when you have big expenses. Think:
- Buying a new laptop
- Moving to a new apartment and needing furniture
- Being in a friend’s wedding
- If your company allows it, putting work travel on your card, then getting reimbursed for it later
If I don’t have any upcoming expenses, I sometimes pre-pay for expenses:
- Gift cards to our local grocery store, since we’re buying food all the time, anyway.
- Amazon gift cards since that’s where we buy most of our household supplies.
- eBay gift cards since I buy clothes from there.
- Airbnb and hotel gift cards for future travel.
Those are just a few thought starters, but you get the idea.
If you don’t have expenses like these, then look around at your network. Do you know anyone who has big expenses? If you trust them, you can have them use your card and then reimburse you later.
Once upon a time I had to spend $5,000 within three months to get the much-coveted Starwood Preferred Guest card. Well, with my natural spending habits, that wasn’t going to happen. So I asked a friend to buy his new furniture with my card and then write me a check later. I would have never been able to get those points by myself.
And guys, if you’re planning a wedding and not earning some kind of reward points, then I’m gonna be super mad at you 🙂
“I don’t want to apply for tons of cards.”
I have never signed up for more than one card at a time, and I’ve been able to cover 2-3 trips per year with points. It’s daunting when you see people signing for 6-7 cards in a year, spending $20,000 to earn points. You don’t have to do that. I only sign up for one card at a time, because that aligns best with my natural spending. I’m always earning points, even if I don’t have a destination in mind. Then I see what I can do with the points later. To me, this is the least stressful strategy. But the basic idea is, you get to decide how hardcore you want to go. For me, just applying for one card at a time gets me what I want.
“I can’t plan that far ahead. Why should I earn points if all the award seats get booked up, anyway?”
Travel hacking is the easiest when you plan way in advance or at the last minute. But the reality is that many people have unpredictable schedules. I have a friend whose company assigns her specific times when she can go on vacation. In that case, planning a year ahead isn’t going to fly. But that doesn’t mean there aren’t ways she can’t get still deals on her trip.
If you don’t want to be tied to redeeming points for flights, then there are good credit cards options that offer flexibility in how you redeem the points. The Chase Sapphire cards let you redeem the points for the cash price through their portal, and can offer as much as a 25% discount if you have the Chase Sapphire Reserve card. You can also redeem their points for a statement credit. And if you don’t want to be restricted to using points for flights, you can use them for literally any travel expense (Ubers, hotels, Airbnbs, etc.) with cards like the Barclays Arrival and Capital One Venture card.
All these ways allow you to have a lot more flexibility and can still get a respectable discount on your trip.
“What do I do after I get the bonus and the year is up? Do I keep the cards with annual fees or do I cancel them?”
It depends on how valuable the card is to you after the bonus. Most of them won’t do you much good after you get the bonus points. It’s worth knowing that canceling cards will most likely get a temporary ding in your credit score.
Instead of canceling, in some cases you can downgrade fee cards to no-fee counterparts by calling customer service. For example:
- Chase Sapphire Preferred → Chase Freedom
- American Express Everyday Preferred → American Express Everyday
- Citi Thank You Premier → Citi Thank You Preferred
I personally keep a few of my fee cards (like the Chase Sapphire Preferred) because I find them valuable them for other things, like avoiding foreign transaction fees, primary car rental insurance, and credit card return protection. Oh, and for earning more points! Some cards allow you to earn 3x points on travel or 2x points on dining, so I’m still able to rack up a decent amount points even after earning the bonus.
“Yeah, but I don’t want to be stuck flying with just one airline or staying at the same hotel chain.”
Me neither. I’ve never been loyal to any airline, and basically just picked whichever flight was the cheapest. When you use credit card points to redeem flights, there are actually lots of ways to fly different airlines with another airline’s points. How? One word: alliances. Remember those from the first Survivor show? Strength in numbers, people.
Let’s look.
Every airline is part of a partner alliance, which means you can use one airline’s points to fly another airline that’s part of the same alliance. For example, United and Asiana are both part of the Star Alliance.
So, if you redeem United points to go to Korea from NYC you can actually fly on Asiana. See? I’m on the United site but that is NOT a United plane (see highlighted).
Here’s an example for Delta. Delta and Virgin Australia are part of the same alliance, so you can use Delta points to fly Virgin Australia from Los Angeles to Sydney:
When it comes to hotels, if you don’t stick to a chain like me, there are cards with flexible redemptions you can use for any lodging.
“Yeah, but even if I pay for flights with points I still have to pay for hotels out of pocket.”
Not only can credit card points help pay for flights, but for accommodations, too. There are hotel-branded credit cards for Marriott, Hyatt, Starwood, etc., but if you don’t want to stick to a certain chain, there are cards that will defray costs for ANY travel expense, like Airbnbs, hostels or independent hotels. With the right credit card signup strategy, one can have a full vacation paying only a few hundred dollars in fees.
Question: So, should I write a step-by-step guide on how to get started?
I’ve been mulling over writing an ultimate guide for how you can get started earning points and booking amazing vacations. It would be super practical and cover things like:
- How Far Ahead Do I Need to Plan?
- What’s the Best Card to Start?
- Recommended Credit Card Strategies
- Mostly Domestic
- Go Big or Go Home
- Credit Card Minimalist
- My Personal Strategy
- Understanding Point Systems
- Understanding Transfer Partners
- Sweet Spots
- When Do I Use Points Versus Cash?
- The Pros and Cons of Different Types of Credit Cards
- Watch Outs
But I don’t want to write it if there isn’t a demand! If you’re interested, can you let me know below? If I see enough interest, I’ll go ahead and write it for you. Don’t worry about spam or anything, because I won’t email you about it at all until a guide is ready.
Enter your info in below if you want me to write an ultimate guide for travel hacking!
What questions did I miss? If travel hacking is scary for you, did any of this help? For those who are already travel hacking, do you think it’s worth it?
Image: Unsplash
