I must admit, I wasn’t always a big fan of travel hacking. I’m not very good at it because there is too much overhead. Life is already busy enough without having to track all these credit card sign-up bonuses. Oh, let’s back up a bit for those of you who don’t know about travel hacking.
Basically, travel hacking is using credit card rewards to pay for flights and/or hotel rooms. Travel hackers accumulate points through applying for credit cards with great sign-up bonuses and using them. I never liked travel hacking because I don’t like signing up for new credit cards and it’s hard for me to keep track of them all. Besides, we built our wealth through living modestly and investing as much as we can. Travel hacking means spending money to get rewards. It doesn’t quite agree with our core principles. That’s not the only reason why I didn’t like travel hacking either.
Why I didn’t like travel hacking
Here are a few more reasons why I didn’t like fooling around with new credit cards.
- It could lead to overspending. Most sign-up bonuses work like this. You need to spend $3,000 to $5,000 in the first 3 months to receive the reward bonus. Normally, we charge less than $1,000 per month on our credit cards so we’d have to stretch to meet the minimum amount. It goes against our frugal way to spend more than normal. This is probably my biggest stumbling block.
- I’d need to track my spending progress on each credit card. That’s just more work for me. I’m already busy and I don’t want to maintain another spreadsheet.
- To maximize travel hacking, RB40 needs to sign up for her own deals. She hates applying for anything so I don’t even want to broach the subject with her. She is very protective of her credit score.
- It could impact your credit score if you’re not careful. A large number of credit inquiries in a short period can lower your credit score temporarily. Every time you sign up for a new card, they will make a credit inquiry. This is a minor deal for me because my credit score is good.
- There are annual fees on these credit cards. If you’re like me and hate annual fees, then you’d need to close these accounts after one year. This could hurt your credit score because your credit limit will decrease. The way around this is to tell the company to transfer the credit limit to a different card with no annual fee.
These are just some of the reasons why I wasn’t a big fan of travel hacking. Also, I just haven’t had much success prior to 2017. We couldn’t accumulate enough points to pay to travel internationally. Those flights cost a ton of points.
Overcoming my hesitation
However, I kept reading about successful travel hacking stories and I want to give it a chance. I overcame my hesitation and signed up for a few cards in 2016 and was able to hack my way in to a few trips. It worked very well for the most part and now, I’m less hesitant to sign up for more credit cards. Let’s go through the reasons above and see what changed.
- Overspending was the biggest problem I faced. It’s not easy to spend $5,000 in 3 months when you’re frugal. I overcame this by timing the sign up with lumpy expenses. In 2016, I signed up for a new credit card and charged our trip to Thailand and San Diego. This got me most of the way to $5,000 and regular expenses took care of the rest. I believe you can buy gift cards and store cards to help overcome the limit too. That’s called manufactured spending. I haven’t done it yet.
- Tracking the spending progress wasn’t that difficult because I signed up for one new credit card at a time. Since I only had to keep track of just one deal at a time, I didn’t need to maintain a spreadsheet. I just called the credit card company and checked once in a while to see if I met the minimum.
- I convinced RB40 to sign up for one card last year. This gave us 4 free nights total at the luxurious Hyatt Ziva in Cancun. The prize was worth it this time. I think she can handle one new credit card per year.
- Signing up for new credit cards can lower your credit score by a few points, but it will bounce back. We don’t plan to buy a new car or house anytime soon so I don’t really care about the temporary fluctuation in the credit score. Besides, having more credit can also improve your score because it will lower your utilization ratio. That’s the ratio of credit card debt/credit limit. If your credit limit increases and debt stays the same, then it will help your credit score.
- I track our credit card spending in my monthly cash flow reports. When I see an annual fee, I’d call and cancel the card. The credit card company will refund the annual fee and close the account if you do it within 30 days. I also ask them to transfer the credit over to a free card so my credit utilization ratio stays the same.
With these simple strategies, I overcame my hesitation and got a few nice rewards this year.
Travel hacking worked out very well for us in 2017 and I’m all gung ho for it now. It saved us thousands of dollars and enabled us try a fantastic resort. Check out our wins this year.
Southern California trip – Mrs. RB40 paid for her flight and got a $99 companion fare for Junior. I used my Alaska Airlines points for my ticket.
Waikiki, HI – I used my reward points to pay for my and RB40Jr’s tickets. Mrs. RB40’s employer paid for her flight and hotel because this was a business trip for her.
Cancun – I used my reward points to pay for 3 tickets. We also got 4 nights free at a very nice resort.
Mrs. RB40’s upcoming Southern California trip – She used her Alaska Airlines points to pay for this upcoming flight. The boys are staying home this time.
It’s pretty amazing to see how much we benefited this year. $5,680 is a significant amount. It took us a couple years to get here, though. We have been accumulating all these reward points for a while.
We did pay some annual fees on these cards.
- Alaska Airlines: $100 annual fee. We are keeping this card because we use the companion fare every year.
- Mystery card: $450 annual fee. Surprisingly, I got $600 travel credit back so they actually paid us $150 to try this card. It worked out really well, but I canceled this card after the first year. The signup bonus was 100,000 points after spending $5,000 in 3 months. It was an extraordinary deal and I’m glad I got in on it.
- Hyatt card: $100 annual fee x2. I just canceled my card and Mrs. RB40 should cancel her soon.
All in all, we paid just $150 in annual fees. That’s a darn good trade, right?
Travel hacking continues
Unfortunately, the signup bonuses we received are no longer available. However, there are still some attractive deals out there. Many cards still offer 50,000+ points for their signup bonuses. I’ll have to take a short break, though. There has been too much activity recently and I probably need to lay low for a few months. Next year, I’ll sign up for a couple of cards and start accumulating reward points again. I still dislike signing up for a new card, but the rewards are too good to pass up.
What about you? Do you travel hack? If so, how did you do this year?
See my credit card page for instruction on how to travel hack and which card to signup for today.
For 2018, Joe plans to diversify his passive income by investing in US heartland real estate through RealtyShares. He has 3 rental units in Portland and he believes the local market is getting overpriced.
Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help every investor analyze their portfolio and plan for retirement.
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