Travel Hacking 101: A Starter Guide to Getting Away on a Budget
This is it, y’all. This is where we introduce to you how we’ve done most of our traveling for free, or at least waaay below market value, for the past few years. The secret sauce to this lifestyle is travel hacking, or maximizing rewards from credit cards. I know it doesn’t sound very sexy, but once you make your first redemption and take that trip, you’ll understand just how much free money is out there ready to be claimed. However, it’s worth mentioning that these strategies work best for those with good credit scores and the ability to responsibly manage credit cards. I don’t say this to scare you, I just care about you and don’t want you to end up in a financial hole. Also, this is not financial advice. I’m not a financial advisor and nothing I say should be taken as recommendations from a professional. Rather, these are simply strategies that have worked for us and it’s up to you to decide if you want to try them for yourself.
Before we get started I just want to go over the rules of this game.
First, we are spending money that we would already be spending every month, we’re just putting it on a credit card instead of using our debit cards or cash. Let me say that again: we are not spending any extra money by doing this. This is not an excuse to go out and splurge on something you don’t need just because you have the credit limit to do so. Instead, we’re buying groceries, putting gas in our vehicles, and paying any bills that we can with our credit cards, but we’re never spending more than we can pay off every single month.
Which brings me to point number two: pay off your credit card bill every month. The whole point of this exercise is to maximize the amount of rewards we earn, and paying interest on credit card bills can seriously diminish the value we’re getting.
Don’t be afraid of hard pulls on your credit report. These occur when a lender checks your credit score when you submit an application for a credit card. They only minimally reduce your score (usually just a couple points) and go away after a short time, so unless you’re planning on applying for a mortgage or any other large loan in the near future, hard pulls are totally fine and are part of playing this game.
Lastly, having several credit cards is actually good for your credit score (as long as you aren’t carrying a balance). Your credit score is determined by a bunch of different factors, and one of these is the number of accounts that you have. The more accounts, the higher your score typically is (again, as long as you aren’t carrying a balance). It shows lenders that other financial institutions trust you with a credit limit, and therefore makes them more likely to extend credit to you as well.
With all that out of the way, let’s dive right in!
Step 1: Determine your Goals and Choose a Card that Complements Them
Whether you’re trying to go to a specific destination or just start accumulating points to be ready to leave at a moment’s notice, there are cards out there to help meet your needs. This is also the time to determine whether your credit score is high enough to apply for a premium card like the Chase Sapphire Reserve, or if you need to start with introductory cards to help build your credit profile. The easiest way to do this is to use a free tool like CreditKarma or Nerdwallet which will give you personalized approval odds for every credit card based on your credit report. The good news here is that plenty of introductory cards integrate seamlessly with their premium counterparts (for example, the Chase Freedom Unlimited earns Chase’s Ultimate Rewards points, which is the same currency we use to get incredible value from our Chase Sapphire Reserve). There are limitations on how the lower tier cards can use these points, and these limitations typically exclude travel redemptions, but fortunately you can simply bank your points until you get the premium card, and then you can combine all your points into the premium card to use them to their fullest potential.
Here are some things to consider when choosing your first card:
Good travel cards will have an annual fee of anywhere between $90 to $695, but if you’re maximizing your rewards and benefits, you’ll get exponentially more value out of your card membership. So don’t be afraid of the cards that have annual fees.
No credit card is perfect. They all have pros and cons and you need to consider them when thinking about how you want to achieve your travel goals.
If you’re choosing to start with a premium card, find one that has a lower annual fee until you get the hang of making redemptions and utilizing benefits. Also make sure it offers no foreign transaction fees so that you can use it while you’re abroad.
Make sure you can hit the minimum spend to earn the signup bonus.
Remember that in order to get the most value from credit card rewards and make travel hacking worthwhile, you have to pay off your bill every month to avoid paying interest. I know I sound like a broken record, but if you get in the habit of paying off your bills every month you’ll be maximizing your rewards to the fullest, not to mention that it helps contribute to your overall financial health.
The ideal first card should have:
a generous signup bonus (SUB) 🤑 - this right here is the meat and potatoes of travel hacking and accounts for a huge percentage of the points that we earn. These SUBs are going to prime our accounts with a huge amount of points, getting us ever closer to meeting our travel goals. The best travel cards usually offer anywhere between 40,000-100,000 points as a signup bonus, which is why they can be such a big deal. For doing a little bit of work we can walk away with tens of thousands of points which represents hundreds or even thousands of dollars in travel.
a lower minimum spend requirement 💵 - this is the other side of the signup bonus coin. In order to earn those huge SUBs, we have to spend a certain amount of money in a certain amount of time. This can be as little as $500, and you usually have between three and six months to meet it. Especially when you’re starting out, you’ll want to stick to a card whose minimum spend you can meet with just your normal, day-to-day expenses. This is important, as once you’re approved for any particular card, it’s rather difficult, sometimes impossible, to qualify to receive the bonus a second time, so make sure you’re able to get it the first time around. It’s also a good idea to work on completing one signup bonus at a time. I know once you get into this hobby you can get caught up wanting to do as much as possible, but not only will applying for one card at a time help you keep track of completing signup bonuses, it will also help keep you in the good graces of the banks, which view applying for a lot of credit in a short amount of time as risky behavior.
increased earning in certain categories 💰 - in addition to huge signup bonuses, rewards cards give you points on the spend you make every day. Pretty much every card will give you one point per dollar on everything, but different cards will offer more points per dollar on different categories like travel, gas, and groceries. This is a good way to continue earning points on things you buy every day, even after you’ve met the SUB on the card.
travel perks ✈️ - every travel card offers special perks that really sweeten the pot when it comes to choosing a card, and these are things that can make traveling a lot easier. Some cards offer airline or hotel loyalty status, some offer free rental car insurance, and some even offer a credit to pay for a TSA Precheck or Global Entry membership. There’s really no shortage to what kind of perks any given card may offer. My favorite perk, offered by several premium travel cards, is a membership to Priority Pass. Priority Pass is an airport lounge network, and with this benefit we can go to any lounge in their network for free to relax, have a drink and a snack, and get away from the hustle and bustle of the main airport before getting on our flight.
no foreign transaction fees 🌏 - spending money abroad is easier now than it ever has been thanks to global payment networks like Visa and Mastercard. But here’s the thing, if you try to use your basic credit card that doesn’t waive foreign transaction fees, then your bank is going to charge you anywhere between 1-3% of the total every time you swipe your card just for the privilege of using your own money. By using a travel card that doesn’t charge these fees, you can take advantage of the ideal exchange rate offered by banks without an added surcharge, which could end up saving you a ton of money over time.
If at this point you’re a little lost and don’t know where to start, these options from Chase are great first steps to take on your travel hacking journey. Unless you have a specific goal or redemption in mind, we recommend everyone start with cards from Chase. This is because Chase has an internal application rule known as 5/24 which, put in simple terms, means that if you have been approved for 5 credit cards from any lender in the past 24 months, your application won’t be approved. Starting here means that you can take advantage of Chase’s flexible and valuable points currency while you’re still under 5/24 before you move on to other banks that aren’t as sensitive to new accounts.
Disclaimer: many of the following links are referrals that give us a small benefit if you apply for a card with them. You should always look around to make sure you’re getting the best offer, but otherwise these are a great way to help us out that won’t cost you anything extra.
Chase Freedom Unlimited - This is an easy-breezy no annual fee cashback card that earns 5x (5 points per dollar spent) back on travel purchases booked through Chase, 3x back on dining and drugstore purchases, and 1.5x back on everything else. This card is currently offering a 20,000 point signup bonus for spending $500 in the first three months. This is marketed as a cashback card, but cashback is rewarded in Ultimate Rewards points, which is Chase’s flexible currency also used by their premium travel cards. This is a great place to start if you have a lower credit score or want to test the waters before you jump into the deep end of travel hacking.
Chase Freedom Flex - This is another one of Chase’s simple no annual fee “cashback” cards that earns 5x back on travel booked through Chase and 3x back on dining and drugstore purchases. The major thing that differentiates this card from the first recommendation is that the Freedom Flex earns 5x back in rotating categories that change every quarter (the current cashback categories can be viewed here). Historically these categories have been very easy to maximize, and this is a great way to earn a lot of points on things you buy every day. This card is also currently offering a 20,000 point signup bonus for spending $500 in the first three months.
Chase Sapphire Preferred - this is the mid-tier travel rewards card from Chase. For a $95 annual fee you get a card that offers no foreign transaction fees, a $50 credit per year for hotel stays booked through Chase, and earns 5x back on travel booked through Chase, 3x back on dining, online grocery, and streaming service purchases, and 2x back on all other travel purchases. If you’re interested in a premium credit card that offers increased spending bonuses, more credits, and (my favorite) free airport lounge access, look into the Chase Sapphire Reserve with an annual fee of $550. Both of these cards are currently offering a 60,000 point signup bonus for spending $4,000 in the first three months.
These three cards are known in the travel hacking community as the “Chase Trifecta,” since once you get all three you should be covered for pretty wide variety of day-to-day spending categories, and anything that isn’t covered can at least earn 1.5x back on the Freedom Unlimited.
Step 2: Meet the Minimum Spend to Earn the Signup Bonus
As we mentioned previously, this is where the bulk of our points are coming from so it’s important that you complete this step. Just as a quick reminder, this is the requirement that you spend some amount of money within a certain time period (typically three months) in order to earn the signup bonus. The potential here can be huge; some of these bonuses can be big enough for one or more flights or several nights in a hotel, just on their own! It would be crazy to pass up the opportunity for free flights, so make sure you can hit the spend requirement before you apply. If it turns out that your organic spending isn’t enough, it doesn’t make sense to get the card. This might mean you’ll have to wait for a large purchase to come up, like a new refrigerator or home repair project, or waiting until a gift-giving holiday or other similar time when your spending will naturally be higher. There are certainly other ways to boost the spending you put on a card over your average, but those are more advanced topics that we’ll cover in the future. Just remember, no matter what, we are never spending more than we can pay off every billing cycle.
Step 3: Maximize Bonus Categories
Earlier we talked about how different cards will earn more points in different spending categories. This can be anything from restaurants to gas stations, and even Amazon and Paypal! What this means is that there is a lot of potential to earn a bunch of points at places you go to all the time. And what’s really cool is that you earn points in spending categories while you’re working on your minimum spend for the sign up bonus. Let’s look at an example to illustrate this:
Let’s say you just received your brand new Chase Sapphire Reserve card, and it just so happens the vacation your family has been planning is going to cost exactly $4,000. By putting all of the trip-related expenses on this card, you hit the minimum spend requirement which means you’re getting 60,000 Chase points! Hooray! But wait! That also means you spent $4,000 in travel categories, and the Sapphire Reserve earns 3 points per dollar on travel expenses. This means that your four grand also earned you 12,000 points in category spending, which brings the total number of points you earned to 72,000. At a bare minimum, Chase points are worth at the very least 1.5 cents per point (CPP) when we redeem them with the Sapphire Reserve (we’ll get more in depth with redemptions very soon), which would make your points worth $1,080. That’s a 27% return on your $4,000!! Where else are you going to find that kind of return on your investment?
Hopefully you’re starting to see how this all works together and how powerful travel hacking can be.
Step 4: Redeem those Points!
The time has come to enjoy the fruits of your labors, even if there was very little actual labor involved in this process. The easiest way to redeem your points is through the bank’s travel portal. Here your points are worth a set amount of money, and it’s simply a matter of selecting a flight or hotel and paying the applicable amount of points. This is well and good, and it’s a great way to redeem your points if you aren’t trying to do too much extra work. But once you get more comfortable with this process and are ready to extract the most value possible from your points, you’re gonna want to transfer your points to the bank’s travel transfer partners. Using this method can require a little bit of work to find availability, but doing so can see you get incredibly outsized value for your points. One of the most prominent examples of this is through Virgin Atlantic’s partnership with All Nippon Airways. For just 95,000 Virgin Atlantic points (which can be transferred from Chase at a 1:1 ratio) you can book a roundtrip ticket to Tokyo on ANA from the eastern United States, a ticket that usually costs at least $10,000. You read that right: for the amount of points you earn from just two of the signup bonus listed above, you can take a 14 hour flight in ANA business class (widely considered one of the nicest business class products in the industry) on the way to AND from Japan. This makes your points worth about 10.5 CPP, or around 700% of what they’re worth if you book with Chase! There are plenty of other sweet spots when it comes to transferring and redeeming points, but that’s gonna have to wait for another day. 😀
Travel hacking can be intimidating to get into, but once you start to understand it you realize it’s mostly about being smart with your money and being strategic about how you spend it. At this point in your journey, that’s as complicated as it gets. Just like any hobby, there’s the opportunity to get really into it and obsess over every aspect (ask me how I know), but at least by getting obsessed with this I’m able to travel and explore the world with the person I love most in ways that we could never imagine.