Credit card travel hacking 101

Credit card hacking takes discipline and strategy but for those that are willing to spend a bit of time making a plan the rewards can be surprisingly immense. Start with travel hacking 101 to learn about how you can get your credit cards to work for you.

Beginners guide to credit card travel hacking

Free flights, free hotels and free car rental are all a reality with this technique.

You might feel that you don’t spend enough to be able to earn significant points but you will be amazed at the number of ways you can earn points. Did you know that you can earn upwards of $500 worth of travel just by signing up to a new card? And that you can pay your taxes, utilities and insurance with credit card?

Many of the places you already shop and dine at may even offer bonus points – so put away your debit card or cash and start making your spending work for you!

A word of warning: this strategy only works if you pay off your credit card every month and avoid paying any interest. If this is not you, get your finances in line and then re-approach this strategy from a strong position.

Travel Hacking 101: The Basics

Credit card companies are constantly competing for new customers, consumer debt is at an all-time high and the credit card companies hear each ring of cash registers as profit in their pocket, in the form of interest payments. The good news is that it means they are always keen to offer you upfront benefits in the hope that you will end up paying interest. As long as you pay your credit card off in FULL each month you won’t pay any interest or penalties. Check the fine print for additional transaction fees.

Travel reward cards can be branded by a hotel chain, an airline, or more flexible Travel Points (like American Express Membership Rewards, or Chase Ultimate Reward Points). Depending on your objective, you can mix and match different cards to achieve your goals.

Travel Hacking 101: maximize your points earned:

The sign-up bonus:

The most important thing when trying to earn travel rewards on your credit card is the sign-up bonus. This is a lump sum of points for signing up for a new card. There is usually a minimum spend that you need to make before you will be credited these points. For example, we recently got 100,000 Hilton Honors points simply for spending $2,000 over three months that we were going to spend anyway.

The waiver of the yearly fee:

To keep this whole concept of free going you don’t want to be paying a fee for holding the credit card (unless there are big benefits in doing so like earning the Southwest Companion Pass). Look for a card that either has no annual fee or that will waive the annual fee for the first year. Then be sure to cancel the card before the annual fee invoice date comes around.

Bonus spending categories:

Most travel reward cards have bonus categories where you get an increased multiple of points for spending on certain things. For example, some cards provide bonuses for spending on groceries or fuel. Hotel branded cards will likely provide bonus points for spending on their hotels. And other cards offer targeted bonuses that you activate for spending at certain retailers.

Check out these travel sites to get the best deals on hotels and more

Other value adds:

Travel reward cards often come with extra benefits. For example, the American Express Gold Card comes with $10 cashback in the form of a statement credit for spending at certain stores each month.

Premium airline or hotel cards often come with loyalty program membership and perks associated with this.

How to know the value of a travel rewards point:

The value of each reward point when you are ready to spend is also another variable. When spending the miles you want to get as much value for them as possible. Various websites have attempted to value the points, such as The Points Guy

Be careful. You shouldn’t accrue points for the sake of it, so don’t be afraid to spend points if it works for you even if you aren’t getting the maximum value.

The best value is nearly always found in booking flights or other travel-related expenses like hotels and we recently booked our rental car Scotland. In the past, I have purchased store gift cards, which aren’t a good use of points, but now I know better, you live and learn right.

Will credit card travel hacking affect my credit score?

Credit card hacking may affect your credit score. Opening a new card will likely result in a short-term reduction and it is essential to understand the factors that make up your credit score.

A higher credit score will open up more credit card options, as issuers will be more interested in giving you a card if you are deemed lower risk.

There are techniques you can use to protect and increase your credit score. I encourage you to research this for yourself.

What are the worst things to do when Travel Reward hacking?

Not paying your credit card on time.

Once you start paying interest on your credit card you are out of the game, this is now costing you money and not saving you money. Pay off your balance and cut up your cards.

Living beyond your means.

Don’t make purchases you otherwise wouldn’t make. If you are a low earner or a low spender don’t up your spending to get points. The main thing is getting the sign-up bonus. If you are struggling to spend the minimum amount within the time frame use the card for all your everyday purchases groceries, fuel, insurance, electricity bill, pay your income or property tax or buy a store gift card for somewhere you regularly shop like your local supermarket.

Not having a plan.

You need to have a plan and know how many cards you can open and in what time period. You don’t want to miss out on some of the best cards because you rushed in and applied for too many cards in a short period of time. Read your country-specific guidelines and always read the fine print, terms and conditions can always change before a travel hacking website has time to update their recommendations.