Unless you’re already an expert in the travel-hacking world, you likely fall into one of two categories:
You’ve heard a ton about how people get “free travel” using credit card reward points and frequent flyer miles.
You thought all credit card rewards were just ways to get cashback and you forgot that frequent flyer miles existed until the previous sentence.
As cynical as it may sound, claiming that one can “travel for free” using credit card points and frequent flyer miles is a bit disingenuous. Depending on your life situation, you may be able to earn tons of points and miles without breaking a sweat, but there are taxes, fees, opportunity costs, and real world expenditures to consider. Many award flights (flights you pay for using points/miles) still come with taxes and surcharges (some in the $Hundreds). Using those points for flights means you’re not cashing them out to pay your bills, and traveling somewhere often means that you’re spending money you wouldn’t have otherwise spent.
Having said that, travel can still be pretty darn cheap. The trick is knowing the best ways to earn and use your points/miles. The world of award travel can be complicated and overwhelming if you’re starting from scratch. My goal is to help simplify this world for you.
What’s the big idea?
The general process is: Sign up for a credit card that offers X bonus as long as you spend $Y in Z amount of time.
The average bonus is equivalent to $400-500 in cash (ex. 50,000 Chase Ultimate Rewards points can pay for $500 of anything you can put on your credit card).
However, when you transfer the points to an airline and use them to purchase a ticket, your value for what would be $500 of cashback can hit in the $Thousands (no joke). Usual required spend amount is between $2,000-$4,000 and the required amount of time to hit that spending goal is almost always 3 months.
What’s the catch?
To start earning bonuses you will need a decent credit score to jump right in. If your score is sub-650, you may have to start slower and work yourself to 700+ for the better deals.
Also, like many things, using your points/miles in the best way possible can require effort ranging from barely-any to quite-a-bit. Most airlines only release a limited number of seats that can be booked with miles, so knowing where and how to look is important. This blog will teach you how to do all of this yourself, but I do offer a service that will do the dirty work for you.
Won’t getting a bunch of credit cards hurt my credit?
It MAY temporarily ding your credit by a few points (mine only went up when I started). However, it’s like exercising. You’re sore for a while, then ultimately you’re in better shape than when you started. The ding starts wearing off after 6 months and by 12 months, you’ll be higher than when you started. The process is net-positive for your credit score. This is all assuming you pay your bills on time and don’t buy more than you can afford.
What if I don’t normally spend enough money to earn a sign-up bonus?
There are MANY ways to hit the minimum-spend goal if you wouldn’t normally spend enough naturally. Almost anything you pay for with cash can be paid for with a credit card, even if it requires a check-mailing service (which typically charge around a 2.5% fee) to pay your bills (rent/mortgage, car payment, etc.). Credit card companies are perfectly fine with using services like this to earn your bonus.
You may also be able to use peer-payment services, such as Venmo, to send money to someone you trust, who then gives the money back to you. Services like this are usually more costly (Venmo charges 3% to use a credit card). Credit card companies are less fine with using services like this to earn your bonus and, in rare instances, will close your account if you’re super obvious about just trying to game the system.
Why would credit card companies do this?
Simply, marketing. They want to get you in the door. Sure, you plan to get the bonus and quit, but maybe you put a big purchase on the card and can’t pay it all off at once. Maybe you put some unexpected bills on the card and have to pay interest on your balance for a while.
Credit card companies are willing to make the gamble that they’ll get more out of you than you get out of them. Sometimes they win – sometimes they lose. Obviously, they win more than they lose. Most customers are normal, interest-accumulating, annual-fee paying customers. Obviously, you do not want to be one of those customers.
Personal financial accountability is important in making sure that you’re making this system works for you and not the other way around.
This sounds complicated.
If you read more about this, you’ll find that most credit card companies have airline partners, who have their own airline partners, and all of them have different transfer rates, transfer times, redemption rates (cost in points/miles), etc. However, there are “best practices” and “sweet spots” for how to use your points.
Using my guidelines, it can be decently simple. The rest of the complications will come from how complicated your own travel life is.