November 9, 2018

How We Use Credit Cards to Score Free Travel

One of my goals as a young husband and father was to be able to take regular vacations with my family. I never wanted to be the kind of dad that looked up and realized that my kids were in high school and we had never taken the time to make memories together.

But while this was definitely one of my lifestyle goals, financially I didn’t how it was going to happen.

We were living off of one income – a pastor’s income at that. Our budget was stretched thin just paying our regular bills and keeping up with our sinking funds for maintenance, repairs, and gifts.

Where were we going to be able to find money in the budget to save $1,000-$2,000 a year for a family vacation?

The answer? We didn’t find it. It simply wasn’t there.

I remember laying in bed one night distraught over the fact that I had no way with our current income of making this dream a reality.

Not long after that night, I stumbled across an article on using credit cards rewards bonuses to score free travel. Now, as a conservative, personal finance nerd, you can imagine what my knee-jerk reaction was to this concept:

Credit cards are dangerous! This is NOT a good idea!

But the more I read about people who used these rewards to fund their travel at a fraction of the normal cost, I learned something interesting: most of these people were financial nerds too! And they were financial nerds who learned how to work this system to get LOTS of free money to use towards realizing their travel goals.

These people weren’t paying interest on their credit cards. They were just using their credit cards as debit cards and paying their statement balances off each month. My interest was piqued.

And thus began my journey down the world of credit cards rewards.

Years later, we’ve earned thousands of dollars of free travel, and have truly enjoyed many trips that we never would have been able to without using credit cards to our advantage.

Disclaimer

In case I wasn’t clear above, let me say it again. I do NOT recommend that anyone carry a credit card balance from month to month. As I discussed here, if you are paying interest on your purchases at 15-25%, this will far outweigh any rewards you earn. 

But…if you are disciplined enough to only buy things that are in your budget and then pay your card off every month, credit card rewards could really save you a ton of money.

If you’re interested in becoming a credit card reward hacker, here are 5 keys to being successful.

1. Convert Points Into Travel Instead of Cash Whenever Possible.

Most people are familiar with cash-back credit cards. The credit card companies push them pretty heavily so they, therefore, get a lot of airtime on primetime TV commercials.

And while cash is definitely nice because it can be used on anything, you can usually get way better value for your points by using them on travel instead of just cash back.

With cash back cards, you get 1 cent per point. So for instance, 50,000 points, would equal $500. 

But with travel cards, you can often get a much better return on your points! For instance, those same 50,000 points could very likely get you between $750 and $1,250 worth of air travel.

When we took advantage of a 50,000 sign-up bonus offer from Southwest, we were able to convert those points into 2 round trip tickets from Orlando to Dallas, PLUS we had left-over points to pay for our car rental, PLUS $120 worth of restaurant gift cards.

See what I mean?

The same principle is true for hotel cards. With our Hyatt credit card, we are able to book a night at any of their Category 1 hotels for only 5,000 points. We’ve yet to stay at one that would have cost us less than $100 a night.

Remember – with a cash back card those 5,000 points are only worth $50. So, in this example, we get a minimum extra $50 or more of value by using the points on hotel bookings instead.

Now if you’ve exhausted all the best travel card deals, there’s nothing wrong with getting a cash back card. We’ve applied for some that had $200 or $300 sign-up bonuses. And to make sure that money truly helped us with our vacation expenses, we would transfer it straight to our vacation fund after receiving it.

So the point isn’t to stay completely away from cash-back cards. You just want take advantage of the travel card deals first.

2. Give Yourself Enough Lead Time.

Most credit cards sign-up bonuses involve spending a certain amount of money within 3 months- $3,000 is the most popular number.  As we will discuss below, you never want to sign up for more cards at one time than you will be able to meet all their minimum spending requirements WITHOUT spending more than you would have anyway in your regular budget.

So, if it would normally take you around 3 months to meet the spending requirement, then realistically, you will only be able to earn four credit card sign-up bonuses within a year’s span.

This is why we apply for our first card about a YEAR before our planned vacation.

This enabled us to get enough points, cash back, and gift cards to travel all the way to San Antonio and back for $400 out of pocket!

We never would have been able to do that if we hadn’t planned ahead and started early.

3. Leverage Credit Card Travel Partnerships.

Most of the major credit card companies have a “premier” rewards card that gives you the unique ability to transfer points to other credit cards that are their travel partners.

These cards will be branded simply with the name of the bank itself, NOT a travel partner.  

For instance, with American Express this would include cards like the Amex Gold or Platinum cards. With Chase Bank, the Chase Sapphire Reserve or Preferred cards are examples. These cards do require excellent credit to qualify.

How do you know if the card you’re considering is one of the ones that will allow you to transfer points to travel partners?

  • With American Express, this would be any card that offers Amex Membership Rewards points.
  • For Chase Bank, this would be any of their cards that gives you Chase Ultimate Rewards points.

With these select cards, you are given a few different point-conversion options:

  • Redeem the points for cash or gift cards.
  • Use the points to book travel inside the card company’s travel portal.
  • Transfer the points to a travel partner.
These cards can be INCREDIBLY valuable because of the flexibility they offer.

We signed up for a Chase Sapphire card a few years ago during a time that they were offering a 50,000 point rewards bonus. Since we ALSO had a Hyatt and Southwest card (who both happen to be Chase travel partners) we had the option to transfer our points from the Sapphire card to either of them.

For us, we converted all 50,000 points into Hyatt points, which earned us 10 free nights of hotel stays!

Many people decide to use these premier cards as their daily-use cards when they are not pursuing any particular rewards bonus offer. My parents do this with their Chase Sapphire card. They’ve built up a massive amount of points through the years; so, whenever they want to travel, they just transfer some points from their Sapphire card over to Hyatt, and they use the points to book a free night.

Why wouldn’t they just use their Hyatt card? They could. But again, the flexibility of the Ultimate Rewards points is nice.

  • You can’t convert Hyatt points into cash. But with Ultimate Rewards points, you can.
  • You can’t move Hyatt points to another hotel or airline partner. But with Ultimate Rewards points, you can.

NOTE: While points can be transferred from your premier card to travel partners, you CAN’T transfer points the other way!

Using my Hyatt example again, once I’ve transferred points from Ultimate Rewards into my Hyatt account, I can’t ever move them back to Ultimate Rewards. Those points simply have to be used for a hotel booking.

The point? Be careful not to transfer more points to a travel partner than you will be able to actually use.

4. Don’t Increase Your Spending To Meet Minimum Spending Requirements.

Always remember: your goal is to SAVE money with credit card hacking, NOT spend more.

Some cards have enticing credit cards rewards bonuses, but they have a minimum spending requirement that may be more than you would usually spend in a 3-month span.

I’m going to keep this one very simple: if you can’t meet your minimum spending requirement with regular, planned spending, then DO NOT get the credit card.

That being said, if you have a pre-planned large, upcoming expense, then this would be a perfect time to sign up for a credit card with a rewards bonus that you normally wouldn’t be able to reach.

For instance, a couple of years ago, Kendall and I knew that we were going to be buying a new sofa. We knew it was going to be around a $1,000 expense, and we had saved up for it. The money was sitting in our savings account.

About a month before we planned to make the purchase, we signed up for a card that had an amazing rewards bonus.

  • So we got to enjoy the sofa, PLUS a lot of free travel from the points that it helped us earn.
  • And as soon as the bill came, we paid it off in full as always.

When I was in college, I didn’t have a credit card, but my parents did. We worked out a deal where they would pay for my tuition with their credit card, and I would immediately transfer the money into their bank account. So twice a year they had an opportunity to sign up for cards with incredible sign-up bonuses because they knew they would meet the minimum spending requirement with just that ONE expense.

So if you have a big purchase coming up, I’m all for you using it as an opportunity to score some serious points.

But the key is to never try to come up with expense ideas just so that you can meet a credit card’s minimum spending requirement.

That’s one of the cardinal sins of credit card hacking. Don’t ever let the enticement of the rewards points suck you in to buying things you don’t need and can’t afford. 

5. When All Else Fails, Turn Points Into Gift Cards.

Sometimes with travel cards (especially airline cards), you may use a large chunk of the points on airfare, but then have a certain amount left over. Often, it’s a substantial amount of points but not quite enough to get you another free flight.

This happened to us with our Southwest card. We ended up using about 35,000 points on airfare and our car rental, but we still had over 15,000 points left. Remember, most travel cards don’t offer a cash back option. So how could we make sure the rest of those points weren’t wasted?

Well, what we found is that while it’s true that Southwest didn’t offer cash back, they DID allow customers to convert points into gift cards.

  • Unfortunately, at the time, their points to gift cards conversions weren’t 1 to 1.
  • If I remember correctly, a $25 gift card cost 3,000 points.

As I mentioned earlier, my first choice would always be to convert points into travel and my second choice would be cash. But to keep points from going to waste, gift cards can be a nice little hack.

In our example, we were able to convert our 15,000 points into $125 worth of gift cards. We picked several of our favorite restaurants, and we saved the cards until vacation. And having so much of our food cost covered by gift cards freed up cash to be used on area attractions.

6. Be Careful of Annual Fees.

When you first sign up for a credit card, it’s very common that they will waive your annual fee for the first year.

This is nice, but unless you think the card is worth the annual fee, you need to plan to cancel the card before your card’s 1-year anniversary.

I know it might sound crazy, but if you become a big enough credit cards rewards junkie it can become difficult to keep track of when all of your cards’ annual fees are approaching. I recommend creating a document that lists the date of each card’s 1-year anniversary and the cost of its annual fee.

Check this document once a month to make sure you don’t forget to cancel any cards before the annual fee hits.

7. Plan With Your Spouse to “Double Up” on the Best Card Deals.

One of the things that Kendall and I didn’t realize when we first started becoming credit card hackers is that being an authorized user on a spouse’s card doesn’t prohibit someone from applying for the same card themselves.

To explain, pretend there’s a particularly amazing credit card deal that I sign up for in January and make Kendall an authorized user of. Together, we use the card until we reach the minimum spending requirement to get the rewards bonus.

THEN… let’s say, in April, for example, Kendall could apply for the exact same card and make me HER authorized user. So, yes, married people can receive virtually every credit card bonus TWICE.

Conclusion

I could go on and on, but I think this covers the basics for how to get started as a credit card hacker. However, if this has excited you and you want to learn more, I highly recommend that you check out MillionMileSecrets and ThePointsGuy.

Both of those sites have been incredibly insightful and helpful to Kendall and me. They have detailed breakdowns of literally every card on the market and show you how to get the most bang for your buck.

Good luck and happy travels!

About the author 

Clint Proctor

Hi, I'm Clint! I love writing about everything personal finance. In addition to this site, my work has been featured on several major publications including Business Insider, Forbes, Credit Karma, and U.S. News and World Report. My hope is that you'll be able to find plenty of helpful information and inspiration on this site to help you reach your financial goals. Thanks for visiting!

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