I’ve been an advocate of letting Credit Card companies pay me to use their cards rather than the other way around for years. Why pay interest on credit cards when you can have the credit cards pay you “interest” in the form of points and miles for the things you spend money on anyway?
I’ve used cash back rewards cards for the past 10 years to earn a few hundred dollars a year. With the low interest rates being offered in savings accounts lately, the “interest” that I’ve earned by using my credit cards for everyday purchases has far exceeded what I’m earning in my savings accounts.
Until recently I didn’t dive into the world of Travel rewards card because I thought it was too complicated. I thought you had to jump through hoops to use the rewards because of airline “blackout dates” and such, but I’m learning that this isn’t always the case. The thousands of dollars you can save if you do this right are totally worth the little bit of extra effort to maximize the value of your rewards.
Smart Wealth Hacks is all about helping you get your financial shit together so you can stop worrying about your money & start living your life. I’m here to help you fix past financial mistakes, get out of debt, and provide smart “hacks” to increase your wealth. This post is more in line with the living your life part of the equation, so I feel obligated to issue a warning…
Warning: Do not get into this game if you have credit card debt. Travel hacking is a dangerous game to play if you don’t have your financial shit together. Credit card companies are in this business to make money, but they are willing to fork over huge sign up bonuses because they are betting that they will make much more from you in interest when you get yourself into trouble. Don’t fall victim to credit card companies!
Ok, now that that’s out of the way, on to the fun stuff.
There are some really extreme travel hackers out there, taking trips in the range of $20 – $30,000 or more for pennies on the dollar. Like this 35K+ honeymoon trip to Thialand for less than $1000 (shout out to my buddy Bryce Conway @ 10xtravel.com for turning me on to this new hobby), but for my first trip I wanted to keep it simple. A weekend trip to Boston for my birthday and to celebrate my fiancé finishing her first semester in the PTA program.
How I booked a $700 weekend trip to Boston for $22.53
Flights – Citi Preferred Rewards Card
I’ve had my Citi Preferred rewards card since 2007 when I was shopping around for the lowest interest rate card I could find right out of college (that was before I learned that interest rates really don’t matter if you never pay interest). I was also just racking up a few hundred $s for each cash back sign up bonus. There’s nothing like using your good credit to make you money!
I’ve used this card for every day spending for years and mostly used the reward points for statement credits (really low value) or gift cards to cover planned spending or the occasional treat for myself. A few years ago I cashed in my rewards for Cabela’s gift certificates to buy kayaks. Something I’ve been wanting, but was too cheap to buy for myself.
When I started getting interested in the world of travel hacking I had about a year’s worth of points racked up from everyday spending on this card. A little over 39,000 points with this particular card = about $390 in travel rewards at a $.01 per point value (pretty common value for many rewards cards, but far from the best value available).
I booked 2 round trip Jet Blue flights for $21.53 by cashing in my total point value for the flights. This was surprisingly easy compared to my preconceived idea of how difficult it was to use travel rewards.
Accommodations – Chase Sapphire Reserve (Currently THE ultimate travel reward card)
The Chase Sapphire Reserve (CSR) card just became available a few months ago, and it’s has taken the travel hacking scene by storm because of its hefty 100,000 point sign up bonus (conservatively valued at $1,500 in travel rewards if booked through the Chase portal) and $300 annual travel credit among many other perks.
I’ve become a huge fan of Airbnb rather than hotels. That may change now that I’ve gotten into this travel hacking game, but we’ve used Airbnb in the past and loved it for the value and for seeing a city from a different perspective. I’m banking my 100,000 point sign up bonus for a massive trip later, but I used my $300 travel credit to pay for our Airbnb for the weekend.
Our cute, 1 bedroom apartment was $301.00 for the weekend.
I charged both the $21.53 for my flight & the $301 for our Airbnb using my CSR & received the travel credits automatically as soon as the charges cleared. After the $300 credit and flights paid for with points, the total cost of our trip was $22.53
There is one major drawback to the CSR card, it comes with a serious annual fee of $450 which is not waived the first year like many other cards. Most of the good travel reward cards out there charge an annual fee, but the beauty of this game is that many of the cards offer sign up bonuses once you meet a certain minimum spending amount and waive the annual fee for the first year. So you can get your sign up bonus & cancel the card before the annual fee hits.
Now, I HATE fees with a passion, but here is why this makes sense if you can afford to come out of pocket $450 up front for this card. The CSR offeres a $300.00 Annual travel credit like I showed you above. As soon as you spend any money on travel related expeses (rental cars, flights, trains, Ubers, taxies, etc.) whether it’s $5 or $500, if it codes to travel, your credit will appear in your account as soon as the transaction clears automatically (up to a maximum of $300 per year). Easy, you don’t have to call to ask for the credit.
So the travel credit works on a calendar year basis. I signed up for the card in October so I had to use my travel credit for 2016 by the closing date of my December statement. Done!
But the Annual Fee is charged on your first statement & then again on the anniversary date of your card opening date each year (not by calendar year). So before your next $450 annual fee hits you have the opportunity to use another $300 travel credit for the next year.
Here’s how the math works out in my case.
Just make sure to cancel the card before the second annual fee hits for a total value of at least $1,650 in travel rewards (100K sign up ~ $1500 value + $600 in travel credits – $450 annual fee = $1,650 in value). This is a conservative estimate because the Chase Ultimate reward points can also be transferred directly to many airlines for an even better points valuation, but that is beyond my current level of knowledge.
Debt = Bad (Absolutely True!) – BUT – Using Your Good Credit to Make (or Save) you Money without taking on Debt = Awesome!
This is a personal finance site, so why would I be encouraging you to use Credit Cards? I sincerely want you to “live within your means” and avoid debt at all cost, but there are instances when having good credit and using it responsibly can pay huge dividends.
Many personal finance enthusiasts swear off credit cards for good, but they can actually be a great way to hack your wealth.
I’ve seen many hard core debt free advocates shout from the rooftops to never use a credit card. “Credit cards are evil!” they say. “You don’t need a good credit score if you vow to never take on debt,” but the reality is that good credit is important and swearing off credit cards is not the answer.
Many employers require a credit check for employment, getting a lease on an apartment requires a credit check, and chances are you will need to lean on your good credit history at some point in the future. Most people don’t buy houses with cash, and you may have paid off your current mortgage, but what if you have to move for a job opportunity or have to opportunity to invest in real estate? Circumstances, and financial goals change. Credit cards can be a great tool to maintain or improve your credit score when used properly over time.
This knee jerk reaction is typically because they’ve been burned by credit cards in the past and swear to never go down that path again.
Let’s be clear, I am not advocating for you to take on debt to earn rewards for travel. If you currently have any credit card debt, personal loans, or have struggled with keeping your finances on track, don’t get involved with this hobby.
Only use a credit card for expenses you would have paid for with your debit card anyway, and always pay your entire statement balance off before the due date to avoid interest charges. If you can’t afford to pay off your entire balance each month, you can’t afford to play this game.
If you are interested in learning more about travel rewards and how to get started, head over to 10xtravel.com and sign up for the email list to get your free intro to free flights ebook.
If you have any questions on how to get started, have your own story to share, or need help getting out of debt or improving your credit score, shoot me an email Ashley@smartwealthhacks.com