…You tell everybody about the Travel Hacking club by posting your best picture of yourself on instagram with the hashtag #takemeback so that everybody and their mom can see how cool you are :).
In all seriousness, it is a cool and sexy club. And despite the terminology, it’s not illegal and it doesn’t involve any kind of wrongdoing whatsoever. Essentially, “travel hacking” is leveraging credit card rewards in order to get the most bang for your buck when you travel.
The Travel Hacking club
Ever wonder what it’s like to fly first class for almost free? Do you dream about staying in a 5 star resort with your own private infinity pool without spending a dime? Perhaps you simply want to take the entire family on an international trip without breaking the bank. In all of these scenarios, travel hacking can take you there. Join the club!
Who gets in?
You have to have certain credentials to join the club. First of all, you have to like traveling (duh!). Second, you have to enjoy finding deals (check). And lastly, you have to be financially responsible. This is an important one. The best deals in travel hacking often involve signing up for credit cards in order to to earn a lot of points. So if you have a bad credit score, drowning in credit card debt, and can’t remember to pay your credit card bills on time, then stop reading. The travel hacking club is not for you. Also, if you’re about to buy or refinance your home, hold off on travel hacking. Signing up for credit cards can have a short term negative impact on your credit score; get your mortgage established first.
If you are organized, financially responsible, and willing to put in the time and research then it’s a piece of cake. Really, anybody can do it.
And just so you know, I have no financial relationship with any hotel loyalty program, frequent flyer program, or bank credit card issuer. I also do not have affiliate links.
Welcome to the program(s)
After determining that travel hacking is for you, prepare to sign up for a bunch of hotel and airline loyalty programs. They work in similar fashion to other types of loyalty programs. Frequent customers earn points (or miles) which then accumulate and can be redeemed for rewards (i.e. free hotel stays or airfare tickets).
Hotel Loyalty Programs
Hotels are simple. So let’s start with them. There are four major hotel groups and their respective loyalty programs:
- Starwood Preferred Guest / Marriott Rewards (Sheraton, Westin, W Hotels, St. Regis, Le Meridien, Ritz-Carlton, JW Marriott, Courtyard, etc.)
- IHG Rewards Club (InterContinental, Crowne Plaza, Hotel Indigo, Holiday Inn, etc.)
- Hilton Honors (Conrad, Waldorf Astoria, Double Tree, Hilton, Curio Collection, Hampton Inn, Embassy Suites, etc.)
- World of Hyatt (Park Hyatt, Grand Hyatt, Hyatt Regency, Hyatt Place, Andaz, etc.)
Airline Frequent Flyer Programs
Airline loyalty programs are very complex because there are over fifty of them and each has its own rules. As a beginner, I would just focus on the two airlines you fly the most and understand their specific rules thoroughly. After getting the hang of it, branch off and explore other airline programs if you have a specific destination in mind. It’s also important to know that the major airlines of the world are primarily grouped into three alliances:
- One World (American Airlines, British Airways, Iberia Airlines, Cathay Pacific, Iberia, Qantas, Japan Airlines, etc.)
- Star Alliance (United Airlines, Air Canada, Lufthansa, Singapore Airlines, All Nippon Airways, Air New Zealand, Turkish Airlines, etc.)
- Sky Team (Delta Air Lines, Air France, KLM, Korean Air, China Airlines, etc.)
Highlighted in bold are the three major legacy carriers. These are likely the most useful airline programs for people living in the United States.
In general, you can redeem miles within the same airline alliance. For example, if you are a frequent flyer of American Airlines, you can redeem your AAdvantage miles for flights on British Airways because they are in the same alliance (One World).
Some airline programs do not belong to an alliance. The most notable are Southwest Rapid Rewards, Alaska Mileage Plan, and JetBlue TrueBlue.
All of the loyalty programs mentioned above are free to join. Sign up now or whenever you fly. Because if you don’t, you can be leaving miles (and money) on the table!
Co-Branded Credit Cards
Okay, if you’re still following me, great. Now let’s make things even more interesting. You don’t even have to stay in a hotel or fly an airplane to earn points or miles. Spending on a credit card can earn you points too. In fact, it’s the easiest way to earn points and miles rapidly. This is possible because the three major credit card issuers (Chase, American Express, and Citi) have business relationships with the major loyalty programs and offer co-branded credit cards with specific hotels and airlines.
So for instance, you can use a co-branded Citi AAdvantage credit card to rack up miles, then redeem those miles for a flight on Cathay Pacific to Asia, then stay at the Intercontinental Hong Kong by earning a free night by spending and earning points on the Chase IHG credit card.
Credit Card Points
Let’s take it a step further. Chase, Amex, and Citi have their own rewards program in which you can earn points that can the be transferred to specific hotel or airline loyalty programs. Below is a list of the transfer partners associated with each program as of today (they are subject to change).
- Chase Ultimate Rewards (UR):
- Transfer partners: Hyatt, IHG, Marriott, Ritz-Carlton, United, Southwest, Singapore Airlines, Air France KLM Flying Blue, British Airways, Korean Air, Virgin Atlantic, Aer Lingus, Iberia
- Amex Membership Rewards (MR):
- Transfer partners: Hilton Honors, Starwood SPG, Delta, British Airways, ANA, Air France KLM Flying Blue, Singapore Airlines, Air Canada, Etihad, Alitalia, Emirates, Eithad, Iberia, Virgin America
- Citi Thank You (TY):
- Transfer partners: JetBlue, Virgin Atlantic, Air France KLM Flying Blue, Singapore Airlines, Thai Airways, Qatar, Qantas, Malasia Airlines, Jet Airways, Garuda Indonesia, EVA Air, Etihad, Avianca, Cathay Pacific
These credit card points are often called “transferable points” currencies and are incredibly valuable because of their flexibility. In addition to transferring them to partner programs, you can also redeem them directly for travel, merchandise, or cash.
Starwood Preferred Guest (SPG) is another program worth mentioning. SPG points can be transferred to more than 30 frequent flyer programs. It’s also important to note that back in September 2016, Marriott International acquired Starwood Hotels. While you can still sign up for the Amex SPG credit card and the SPG program is still intact, nobody knows what will happen in the future.
Get initiated: earn your way
Now that you’ve joined the club and signed up for all your favorite programs, you have to get started. Time to rack up the points baby! As I mentioned earlier, the easiest way to earn points is to sign up for credit cards.
Sign up bonuses
To build your points and miles portfolio extremely fast, the best way is to sign up for credit cards with large signup bonuses. I’m talking huuuge. An example of a large bonus is 100,000 points for $4,000 of spend in 3 months. This was offered for the Chase Sapphire Reserve credit card more than a year ago (when it was brand new). American Express and Citi also had high bonus offers on their premium cards. While there are no great offers right now (at the time of publication), they usually come back in cycles. Once in awhile a bank will heavily market a new premium credit card and offer a huge sign up bonus just to entice consumers. Then, the other banks will follow suit to compete for your business. More fantastic offers will come in the future, and when they do, seize the opportunity.
Earning points on everyday spending
Whenever you can, try to use a credit card with every purchase. For starters, find a credit card with a decent sign up bonus and with a rewards structure that fits your lifestyle. If you like going out to eat, sign up for a credit card that earns bonus points when spending at restaurants. Commute by car a lot? Then sign up for a credit card that earns bonus points on gas. You get the idea. Maximize your returns every day.
Churning
A lot of travel hackers repeatedly sign up for a bunch of cards to earn multiple sign up bonuses then cancel them after a year when the annual fee is due. Then they repeat the process again. This practice is known as credit card churning and it was very rampant in the past. Thus, the credit card companies tightened up the rules and placed limits for signup bonuses. You should know these rules. A few notable rules:
- American Express limits you to having only four active credit cards. Additionally, the Amex application terms usually state: “Welcome bonus offers are not available to applicants who have or have had this product.” This is known as the “once in a life time” rule.
- Chase will not approve you if you’ve received 5 new cards in the last 24 months. This includes all credit cards, not just ones from Chase. And it applies to most Chase cards. This is known as the “5/24” rule.
- Citi does not have a limit to how many cards you can have. You can only apply for one Citi personal card every 8 days and you can apply for no more two Citi cards every 65 days.
Manufactured Spending
Let’s say you sign up for three credit cards. Each of the cards come with a bonus offer of earning 50,000 points after spending a whopping $5,000 in 3 months. So now you’re tasked to somehow spend $15,000 in 3 months. Yikes. This is not frugal and not necessarily what I would recommend. That is, unless you already had the cash to pay for it and you were going to charge a big purchase anyway (such as splurging on your wedding). Many travel hackers and point junkies will find creative ways to meet the minimum spend requirement by charging their credit cards then getting some of the money back in cash. This practice is referred to as “manufactured spending” or “MS” for short. The most common MS techniques include paying your taxes online, buying and reselling merchandise, or purchasing gift cards.
Next Steps
Congratulations. You now know some basic knowledge of travel hacking, how hotel and airline programs work, and how to earn points and miles using credit cards. Now what?
Stay financially responsible
In order to maintain excellent credit you have to remember to pay your credit card bills on time. One easy way to make sure you never forget is to automate your bill payments. It’s important to stay organized and financially responsible. Do not go overboard with your credit card spending just for the bonus points. Continue to live far below your means.
Track your accounts
Building a healthy portfolio with a lot of points and miles in different programs is not too difficult. But how do you keep track of all your accounts? I use Award Wallet. Think of it as a Personal Capital for points and miles. It’s available on desktop and mobile app. Award Wallet is great because not only does it track your reward balances, it also notifies you when points are about to expire and it automatically tracks your travel plans since they are linked to your hotel and frequent flyer accounts. You can also pay for an upgrade to Award Wallet Plus, which has a few more features. But I think the free version is sufficient, and that’s what I use.
Monitor your Credit Score
One common misconception is that signing up for credit cards severely hurts your credit score. It’s definitely true in the short term. This is because it results in a hard credit inquiry in which the card issuer checks your credit to decide whether or not to approve you. This is only 10% of your score. The breakdown is as follows:
- 10% New credit
- 10% Mix of credit types
- 15% Length of credit history
- 30% Credit utilization
- 35% Payment history
As you can see, most of your credit score is determined by your ability make payments in full and on time. Having more credit cards can actually improve your credit score in the long term by improving credit utilization. When you have more available credit, you utilize less of it. I have opened 20 credit cards in the past 5 years and I currently have 15 active accounts open. My score is 800+. I use Credit Karma to monitor my credit score. It’s available as a mobile app for convenience. In addition to checking my credit score, it also monitors and alerts me when there is a change in my credit report.
Using your points
Hopefully by now you realize that earning points and miles is easy. Using them effectively is a different story. There are so many types of points and many different loyalty programs. Airlines also have crazy rules for redeeming your miles. Often times award space is limited or not available. Then there are peak and off peak awards. And routing rules. On top of that, not all points are created equal. Some points are more valuable than others. When I first started, my head was spinning. Luckily, there are plenty of tools online to help us out. The most useful tool I have found is Award Maximizer by Travel Codex. Give it a try and play around with it!
Want to learn more?
There are many online resources, blogs, and forums that are helpful. Here are the ones I follow and use:
- Google flights – Perfect search engine for finding flights and comparing prices. You can save itineraries and be notified when prices drop
- Orbitz / Kayak / Booking.com – I use all of these sites for booking accommodations when I’m not booking with a major hotel chain. I usually just pick the cheapest one and go with it.
- Flyertalk – Online forum for frequent flyer and hotel loyalty programs.
- One Mile at a Time – Great points and miles blog. The author has flown first class more than any other blogger I follow.
- Frequent Miler – Good tips on creative ways to manufacture spend and much more.
- Travel Codex – Helpful award maximizer tool
There’s a lot of information out there and a lot to learn. Hopefully I’ve provided a basic knowledge of travel hacking that you can build on. Welcome to the club.
Sadly the credit cards in the UK are a lot less generous! Also the UK tax authority no longer allows payments by credit card. We are obviously such a small market compared to the US, that there is just not the competition!
We are planning a kitchen remodel this year, which means lots of credit card points! (Which also means we have the cash in the bank to pay them off immediately.) We also like to use credit cards for our medical bills, then pay ourselves back from our flexible spending account.