Travel the world for free
[ Guest post written by my hubby, Zack - aka @zambler ]
I love to travel. Whether for surfing, snowboarding, hiking or cultural immersion, I take multiple vacations every year and they usually involve long flights: Cape Town, Indonesia, Israel. Up until about 4 years ago, I paid for those flights out of pocket. It was expensive, but I felt it was a good use of my money. In the last 4 years, I haven't paid for a single international flight. Norway, Panama, Japan, Mexico, Buenos Aires -- all free. Yes, you heard me right: free, nada, zilch, nothing. I've done all of these trips on credit card points/miles and you can too. All you need is some common sense and a basic excel doc to track everything.
Now, there are some very detailed blogs out there about how folks game this system in unbelievable ways. I admire them, but I don't go that deep and I don't think you need to either to get 90% of the benefit. I just follow a few simple rules which I'll share with you below.
First, a few things to consider:
1.) Credit card companies make billions of dollars on transaction fees and interest charges. Their goal is to get you to sign up for credit cards. It is for this reason that they are constantly offering promotions for signing up: X amount of miles, X% cash back, X amount of hotel points, etc. The moral? Credit card companies will happily give you free miles/ points for signing up for their cards because it pays huge dividends to them. The only catch in this whole thing is that if you spend money you don't have, you'll end up paying a huge interest rate on your debt, and that defeats the entire purpose of this strategy.
2.) Assuming you don't open too many credit cards a year (we'll talk about that in a minute), it is actually a good thing for your credit. One of the key factors in a credit score is the credit utilization, which basically means how much of your total credit you use in any given month. For example, if your total credit across all cards is $100 and you spent $1, you would have a 1% utilization. The lower the utilization the better. Assuming you keep your same spending habits, additional credit cards increase your total credit line, therefore decreasing your utilization percent.
3.) What about closing cards when you're done with them? In my experience, it has had zero negative impact on my score. I monitor my credit monthly and have an excellent score. Closing a card does lower your credit utilization, and that is why when you close one it's good to open another.
4.) Finally, remember: this only works if you pay all of your bills in full each month. The goal in all of this is to leverage your normal spending habits to get free flights (and even boost your credit score) not to get yourself into a mountain of high interest debt.
Here are the rules I follow:
1.) Get a good "everyday" card. This is the card the you'll use most often and the one you'll keep going back to after your close your "promotional" cards. I have the Chase Reserve and it's great -- solid benefits, easy to transfer points, etc.
2.) After you have secured a good everyday card, begin to look for promotional offers from other cards where the signing bonus is greater than or equal to 50K miles/ credit card points. Anything less isn't worth it. I see offers all of the time for 70K, 90K even 100K points. If you book in advance, 100K miles will fly two people from SF to Europe and back. That's around $2K in airfare. You can find these offers on places like: www.flyertalk.com/ or www.thepointsguy.com. You'll also find that as you build your credit you'll get targeted offers in the mail -- those generally contain good deals.
3.) In some cases the promotional offer will waive the annual fee for the first year and in same cases it won't. Generally speaking, even a $200 annual fee is worth it because, as I showed you in the example above, you just got $2K in airfare. The point is you should pay attention to what that annual fee is and whether or not it is waived for the first year.
4.) Make sure you can meet the minimum spend requirements to obtain the bonus. Usually I see offers like - spend $3,000 in the first 3 months or $12,000 in 6.
5.) Some cards offer points (like the Chase Reserve) and some cards partner with airlines to offer miles (like the American Airlines Citi Card). In the case of the former, you can convert your Chase points to airline miles through their alliance program. In the case of the latter, you'll just get that airline's miles. I don't think too much about this because all I really care about is accruing points or miles. When it's time to travel, I search the internet for best ways to use, and how to transfer, my points.
6.) Once you have spent the minimum amount to receive the bonus, stop using the promotional credit card and go back to your everyday card. If the promotional card has an annual fee, make a note on your calendar to cancel the card right before year 2 starts. If the card doesn't have a fee, consider leaving it open as it will positively impact your credit utilization. In some cases, the benefits from a card (like free checked baggage, priority boarding, upgrades, etc.) will be more valuable than the annual cost of the card, and you'll choose to keep that card open.
7.) Keep track of everything in an Excel file. In the rows, note the credit cards. In the columns, note the points/ miles, annual fee, card anniversary, and expiration dates. One note on expiration dates: you'll want to look into this when you open a card. Every program is different. In my experience, when you open an airline card the miles are transferred directly into your frequent flier account for that airline. Those miles are then subject to the rules of that flyer program. And, for cards like Chase and AMEX, those points won't expire as long as you have at least one card within that program open. And, these programs generally have a card with no annual fee so it's easy to keep something open.
8.) I try to open 4 new cards every year. That's below the limit of acceptable (I have friends that do a lot more) but I don't want to manage anything beyond that. Plus, at an average of 50K points/ miles per card, that's 200K points/ year for basically doing nothing.
9.) Don't use points/ miles for domestic travel. You get way more bang for your buck on international.
10.) Check your credit score each month (easy to get for free) and ensure you're not trending the wrong way.
11.) Here are the promotional cards I've opened in the last two years.
- Chase Preferred - 50K points
- United Milage Plus - 50K points
- AAdvantage Citi - 50K miles
- Southwest Rapid Rewards - 50K miles
- Chase Reserve -100K points
- AMEX Premier Rewards - 75K points
- Virgin Atlantic Bank of America - 90K points
I hope you will see that it's not as intimidating as it may seem and you can easily leverage your normal spending habits to fly places for free. You must do a bit of work, but it's completely worth it for the experiences.