Jason Betzing
Words by Jason Betzing
Have you ever wanted to learn how to get free travel and cash back using credit card rewards? It is easier than you think. By using credit cards for all our spending to get the bonuses, always paying off the balance on them, and never paying interest, my wife and I have used credit cards to our advantage - instead of the credit card company's.
We earn enough rewards points and miles to travel internationally for (almost) free once a year. The term for this is "Travel Hacking" and I only use this term in case you want to do further research. While we are not experts, we have learned from the best, and wanted to share the basics of how we "credit hack." Utilizing travel rewards can pay off big, (several thousand dollars per year in free travel or cash back).
Actionable Steps
- Identify your specific goal for travel rewards
- Identify which credit cards will help you achieve those goals
- Look at annual fees and if the card benefits make these fees worth it
- Can you meet the minimum spend amount within the timeframe?
- Apply for cards and once the accounts are open, it is VERY important to set up the cards to auto-pay the balance monthly in case you’re too busy on a beach somewhere to worry about it!
Is Travel Hacking Right for You?
Before we go any further, my conscience demands I say this - if there is even a chance you won't be able to pay off the balance in full and on time, this is not a path for you. The money you'll pay in interest by only making minimum payments will quickly erase any benefits you get from using credit cards. This strategy is meant to bring joy and to optimize our lives, not cause stress or drive you further into debt. This doesn't mean it will never be a path for you. Once your finances are in order (low consumer debt, emergency fund, retirement savings), revisit this strategy.
Credit Scores
Before we get too deep into the strategies, let's talk about credit scores. The bottom line is, you need a good credit score to get the best cards. If you are young or have never had credit cards or haven’t borrowed money in the last 6 years, your score will be low or zero.
You can check out your credit file and credit scores for free. Companies like Borrowell, Mogo, Ratehub and my favourite, Credit Karma all give you free credit scores and credit reports. You are looking for accuracy; by some estimates, up to 30% of credit files contain errors. If things are wrong or look suspicious, you'll want to contact them to correct it and be sure no one has stolen your identity.
If your score is simply too low and you need to build credit, you can start by getting a secured credit card, in which you pay a deposit as collateral. However, the payments are reported on your credit file, which helps your score. You may also qualify for some low limit no rewards cards, like a card with no rewards and a $500 limit. These will help build your credit score, but it takes time, (up to a year or more).
What’s Your Goal?
Now, if you think this may be a good game to get into, (and it truly is fun), you’ll want to identify your goal. Don’t have a specific travel goal? You’ll still want to decide whether to go after travel rewards or cash back since rewards credit cards usually offer one or the other. Either way, the sweet spots are the introductory or welcome bonuses for meeting the minimum spend on each card. This is why we cycle cards.
Jason Betzing
Cash Back Strategy
Cash back is an easier strategy, but you’ll usually get less redemption value than travel rewards. RVers who only travel with their RV will get the most value out of this strategy. Find the card with the highest percentage cash back, a cash back bonus for minimum spend, and no annual fee. The offer may look like this: Spend $1,000 in the first month and earn $150 cash back, with 1% cash back plus 2% bonus cash back in the gas stations, grocery stores and dining out categories with no annual fee. Once you get the minimum spend and the cash back bonus, you can level up and get another card, getting another cash back bonus. You'll see that different cards multiply their rewards for different purchases. One card may offer extra cash back on fuel while another card may offer a higher percentage of cash back for groceries or restaurants. To optimize, get all three at separate times and get the bonuses. Once you have the bonus, only use them for their highest categories, (one for fuel, one for groceries, one for dining out).
Travel Rewards Strategy
If you want to occasionally travel without the RV or have a special trip or destination in mind, you'll probably want to follow a points and miles strategy. If it's a Disney trip with the kids or grandkids, (search "Disney travel hacking"), there are specific Disney credit cards and there are even specific strategies others have written about to get to Disney nearly free. Likewise for other popular destinations such as Hawaii. If you have a specific trip, whether it's Italy or an African Safari, you'll want to see which airlines fly there and which card gives you air miles or points you can use. You can also use points for hotels and rental cars. If you Google "Travel hacking + Location", (Travel hacking Rome), someone has likely already detailed the trip using reward travel.
What We Do
For the last two years, our goal has been to travel to Micronesia and Japan. Our strategy looks like this: we carry one card that earns reward points, which are very versatile and can be used for rental cars, hotel stays and our choice, transferred to United air miles. We carry another card, which also earns us air miles. We also carry a card which covers our hotel stays. We chose Hyatt because there is a Hyatt Place at our usual airport hub. We stay there for free with points the night before flying out and the day we get back. Hyatt Place also offers reasonably priced long-term auto parking so we park there while traveling and use our Hyatt card to pay, earning us 9x points on parking we would pay for either way. We have already booked our upcoming travel for a 6 week trip in December, and still have enough miles to travel roundtrip anywhere in the world and 11 free hotel nights!
Understand the Value of Your Rights
Don’t overestimate the value of your points, which average about 1 cent per point, (although we get 1.5-2 cents per point for travel). So a 50,000 point bonus is worth roughly $500 in travel.
Don’t swipe if the business charges you. Some businesses are charging 2 or 3% when you choose to use plastic instead of cash. Be wary of swiping at these businesses, it may cost more than the bonus earned.
Don’t overspend to buy things you wouldn’t normally buy just to get rewards. If you need to spend on the card to meet a minimum spend, you can pay ahead on some monthly bills such as cell phone, insurance, etc. Or, you can load money into an Amazon account, or even purchase a few gift cards.
Don’t transfer balances or get cash advances. These transactions normally don’t count toward minimum spends, they don’t count for points, and the fees are insanely high, making it a useless, expensive exercise.
Strategies
Large Spend Strategy
If you know you have a large purchase coming up, you can get a credit card right before the purchase and use the card to make the purchase then pay it off with cash. This will get you to the minimum spend much quicker, or meet the minimum spend with one swipe! My mother-in-law made two large purchases in one year and used two different credit cards. She earned enough points to fly with us round trip to Guam, paying only $15 in fees.
Two Player Mode
A two-person strategy works best if you both live in the same household or if two people are planning a trip together. You get a referral bonus when you refer someone and they get the card you have. For example, you get a 50,000 points bonus for your minimum spend, then refer Player 2, (your significant other or BFF) and they get the card. For referring, you get 10,000-15,000 point bonus, then your partner meets the minimum spend for another 50,000 points, totaling 110,000 or 115,000 bonus points!
Cycling card.
If you are out to earn as many points as possible for travel, you will probably want to open new cards and either downgrade or rarely use the cards you've already gotten the bonus for. You'll want to research a bit on how many cards each company will let you have at once or if you can get multiple bonuses from the same companies. For instance, Chase has a 5/24 rule where they limit you to five total cards in 24 months. They look at all cards, not just Chase. Also with Chase, if you get a bonus on one of their Sapphire cards, you cannot get another Sapphire card and get the bonus. Other card companies limit the bonus rewards, one every 15 months for example.
Jason Betzing
Terms to understand
- Minimum Spend. the amount you have to spend in a certain amount of time to get the bonus reward
- Annual Fee. Most companies charge an annual fee to hold their card. If you can use the cardholder benefits to the fullest, it may pay for itself.
- Cardholder Benefits. Credit card perks for holding a card, may include free checked bags with airlines, airport lounge access, free annual hotel nights, or even cell phone insurance
- Statement Balance. Also known as monthly balance, this is the total amount due every month
- Redemption Value. This is what your points would be worth in cash, usually between 1 and 2% and it varies with each type of redemption
- Manufactured Spending. This is a technique some use where they use a credit card to buy Visa or other gift cards, then redeem them for cash, never actually spending money. If the credit card companies catch you, you can be blacklisted. It also raises red flags with the authorities because that is how some criminals launder money.
- Cycling Credit cards. Moving from one credit card to another to earn credit card rewards.
- 2 player mode. Referring a partner to get a referral bonus plus have partner earn rewards, usually to travel together.
- Inactivity. Some card issuers will close your account if you don't use your card at least once per year. To avoid this, you can set up an Amazon allowance to add a few dollars to your account every month.
Ways to Win
- Pay off in full every month
- Funnel all spending into one card at a time until you are comfortable
- Take it slow and learn the process, it’s not a race
- Do not increase spending or buy things you normally wouldn’t
- Get the best redemptions or cash back by finding the cards that fit your strategy (Disney cards, airline cards, hotel cards) and avoid the rest.
- Take full advantage of cardholder benefits. Free checked bags, lounge access, and free anniversary hotel nights can quickly cover the card's annual fee.
I mentioned optimization earlier. Whenever we do anything to save money, we look at the time required versus the amount we save. For us, things like couponing to save a few dollars a week aren't worth the time we'd have to spend. For the credit hack strategy there's an initial investment of time to learn, but after that, only an hour or so when you get a new card to shift all of your spending. With the right credit card strategy, travel rewards can translate to significant cash back on costs, free travel or some of both.