Travel Hackers Share Rewards Card-Milking Tips
By Allie Johnson
March 20, 2013
Travel hacking sounds pretty good: Sign up for a bunch of airline credit cards with hefty sign-up bonuses, use the plastic to pay your bills and then cash in your miles to jet around the world on the cheap.
This tactic has worked well for some travelers, but travel hackers say it's not for everyone, and personal finance experts warn consumers to consider the pitfalls before jumping onboard.
Travel hacking 101
Blogger Clint Johnston, who runs the website Triphackr.com is a poster person for travel hacking: He says he's used the technique to travel to more than 50 countries. Thanks to hacking, he's played polo in Argentina, met a Voodoo doctor in Haiti and snapped photos of lions in Tanzania.
“I wanted to be able to travel freely and on a budget,” says Johnston, who started finding ways to travel on the cheap years ago, after he graduated from college.
So, what exactly is travel hacking? It's loosely defined as strategizing to maximize your travel dollar, often by opening and using multiple rewards cards to rack up as many airline miles and points as possible. But Johnston extends the definition beyond points and miles and includes tactics such as knowing the best time to book flights, how to search for the best deals and how to find cheap accommodations.
Want to become a travel hacker? Here's how to get started:
1) Apply for one or more cards. If you have excellent credit and don't carry a balance on your cards, apply for a travel rewards card that has a sign-up bonus. Many offer 10,000 to 40,000 miles for opening the card. For example, the Capital One Venture card has a sign-up bonus of 10,000 miles and offers 2 miles for every dollar spent on the card. Johnston likes the Chase Sapphire Preferred, which offers a 40,000-point sign-up bonus (each point can get you 1 airline mile), 2 points for each dollar spent on restaurants and travel and 1 point for other purchases.
2) Spend to get the bonus. Most of the cards offering sign-up bonuses require you to charge a certain amount on the card within a specified time period to get the bonus. The typical spend ranges from $500 to $3,000 in the first one to three months. This is where things can get complicated for travelers who open several cards at once. In forums on Flyertalk.com, some extreme travel hackers have posted about buying and then selling gift cards, or using their credit cards to make loans on Kiva.org to achieve their “spend.” But travel blogger Jeremy Jones, of Living the Dream, a site that focuses on long-term travel, says opening too many cards can be overwhelming. He recommends using your cards only for purchases you'd make anyway.
3) Pay with plastic. Earn as many miles as you can by using your rewards card to pay your bills and regular expenses such as groceries, meals at restaurants and incidental purchases.
“Every mile adds up, so be sure to use a card that is always working for you and earning you miles,” Johnston says.
But the key is to use the card only for items you'd pay for anyway, he says. Don't spend more just to get miles or points.
4) Strategize. Don't just accrue miles and points willy-nilly, Jones says. Instead, think ahead and be strategic. For example, Jones concentrates on accumulating points in two major points networks, United and Hilton, that fit with the airlines and hotels he uses most often. For planning help, Johnston recommends using resources such as MileWise.com, a site that allows you to search flights and will give you prices in dollars, miles and points. He also likes AwardWallet.com for keeping track of rewards.
5) Find other ways to earn points. Remember, there are plenty of ways to earn points and miles, aside from opening more cards, Johnston says. For example, you can use online shopping portals that offer points for purchases. If you're planning to buy a new iPod and you usually fly Delta, you can head to Delta's shopping portal, browse for the retailer offering the most miles and get redirected to that store's website to make your purchase, Johnston says.
“Every airline has partners where you can earn miles without ever leaving the ground,” he says.
6) Do the math. Don't automatically close cards to avoid paying the annual fees. Instead, crunch the numbers to see how much keeping that card open will benefit you in relation to how much it costs per year to keep it open. If you pay $300 in annual fees, but save thousands of dollars a year in flight and hotel costs, it might be worth it to keep the cards open and pay the fees, Jones says. Also, read the fine print, he says: With some cards, you lose your points if you close the card.
Hack at your own risk
Opening lots of cards for their sign-up bonuses, closing them and repeating — a practice known as “churning” — may sound like a quick way to rack up points. But it's risky, says Greg Meyer, a community relations manager at Meriwest Credit Union. Here's why:
- Credit overload. Having too much available credit can prevent you from getting a mortgage, car loan or home equity loan, Meyer says. For example, one client of his wanted a $100,000 loan for a major kitchen remodel, but had seven credit cards open, each with a $20,000 limit. The loan underwriters decided the client was too big a risk, but he was eventually able to get the loan by closing five cards, Meyer says.
- Card confusion. Having too many open cards can be overwhelming and make it hard to keep track of your accounts, Jones says. It's very important to keep track of your accounts to make sure you make all payments on time, keep cards active and check for any unauthorized or suspicious activity on an account, Meyer says. If you do have multiple cards, Meyer recommends using online banking and setting up alerts to remind you to check your accounts.
- A hit to your score. Many travel hackers open multiple cards, later close them and still maintain excellent credit, Johnston says, noting that it's key to pay all bills on time and work hard to build your credit score. But Meyer says that closing cards can cause a hit to your score by lowering your total available credit and thus altering your balance-to-limit ratio. Plus, he says, if you don't use a card for six months or longer, the issuer might close it due to inactivity.
Finally, remember that travel hacking also is about staying informed and hunting down great deals.
“Don't obsess over earning miles and points,” Johnston says. “They are a great way to get you to an amazing new city, but there are many other ways to save money.”