A lot of us love to travel. I know this because I’ve worked with hundreds of clients on hundreds of financial plans, and once we work through the hard numbers like assets and liabilities and expenses, we talk through the fun stuff, like goals and non-negotiables. Like me, a lot of my clients’ primary goal is to travel, and it’s a non-negotiable part of living the life we want.
Also like me, they like to travel more than they can afford to.
Luckily, there’s a tool for that, and it’s called Travel Hacking. Travel Hacking is the art of using airline and hotel loyalty programs to their full potential, often by using points and miles credit cards strategically. It allows you to earn points, miles, or cash back on your everyday purchases, which can be used to reduce or eliminate travel costs, or take advantage of fun perks you wouldn’t or couldn’t normally pay for.
I love travel hacking. It paid for some fun times that would have been way out of my budget any other way, like watching the US win the Women’s World Cup final in Lyon, staying in a $1,200 per night hotel in Paris for free, and spending a week at the beach in Nice in an AirBnB. But although these trips were easy on the wallet, it still takes some work to make the magic happen.
Since most of us don’t have thousands of dollars in reimbursable expenses per month, and we don’t want to spend money we don’t need to spend to get travel points (which has a terrible ROI), the biggest bang for your buck is to choose a card with a high sign on bonus to get started. These often include cards like the Chase Sapphire Reserve, Capital One Venture, or the Citi Premier. (You can find others by looking at this list.)
Lately I’ve noticed a lot of clients are resistant to funding their travel funds. With travel still a long way away from “normal,” and not a lot of trips on the horizon, it can seem like the money is better spent elsewhere on things you know you can enjoy now. While I understand where that thinking comes from, it’s off base. First of all, it takes time to save up money for a trip. If you’re putting $200, $300, even $500 a month into a travel fund to save for trips, it can take quite a while to save up for your goal and you’ll either need to find money elsewhere in your budget, rob one of your other goal funds, or worse yet, put it on a credit card and pay interest on that week long trip for years to come. Maintaining contributions to a travel fund allows us to say yes when opportunities come our way, without paying too high a price.
The same concept can be applied to the points and miles game.
Since I love travel hacking and all the amazing opportunities it’s given me, I’m often asked about the best way to get points and miles for trips. Unfortunately, most of the time I’m approached with this question, the trip is already in sight and it’s too late.
It takes months to let points add up. Even if you were to get the sweet 100,000 bonus on the Chase Sapphire Preferred earlier this year, you still have to wait until after you make the minimum spend AND wait for your statement to post before you get the points. And then you need to make sure there is award availability, depending on what you are booking. While I’ve certainly found some great last minute deals, particularly for award flights, more often you need to plan a bit to get the most out of your points.
Because of that, the time to start travel hacking is always now.*
In case you still need convincing, here are 3 good reasons to get started now if you want to start collecting points and miles that can help you travel for free:
If you sign up for a card now, your holiday shopping can help you get your bonus points. While rewards points are valuable, they aren’t so valuable that they negate the cost of interest on purchases or buying things you wouldn’t have otherwise bought to make a minimum spend. It’s helpful to time a card application for when you know you have a large purchase coming up, or that you will be spending more money than usual.
Getting a card in October means that your holiday shopping in November and December will count towards the minimum spend without you spending money on things that aren’t part of your budget.
Since accruing rewards, waiting for the points to post, and planning a trip take a few months, getting a nice bonus now will mean that you have points available for travel in 2022. It’s realistic to think that by January or February you’ll have access to your points, making them useful for reducing your costs for Spring and Summer trips.
Since you will use your new card for holiday shopping, you can maximize your earnings by using shopping portals.
Lots of people are familiar with Rakuten, which gives you cash back rebates or rewards points for purchases, and this can be a great way to get 2 or 3 or 10 times more points when you shop. There are also similar shopping portals connected to airline and hotel loyalty programs, as well as other banks, like Capital One, Chase, and Barclays. And what’s great is that you can use any card you want to when shopping in these portals, so you can stack the cashback and earn points for multiple types of rewards.
Like I said, travel hacking can go a long way towards making travel cheaper, or even free, but it takes a little planning, a little learning, and a little work. However, if you are like me, and a lot of our clients, the payoff is worth it!
*An important note: If you cannot afford to pay off your credit card bills in full each month, it is not the time for you to start travel hacking. You’ll pay more in interest than you earn in travel, and you run the risk of seriously throwing off your financial goals.
Why Now is the Perfect Time to Start Travel Hacking is written by Terri Bennett, A Certified Financial Trainer for financialgym.com